$197,000 in Penalties Ordered Against Company for ‘Sham Contracting’

The Fair Work Ombudsman (the FWO) has secured $197,000 in court-ordered penalties against Doll House Training Pty Ltd (the Company), a Sydney-based health and wellness research company, for engaging in sham contracting involving workers with disabilities. The Federal Court found the company guilty of misrepresenting employment contracts as independent contractor agreements (ICAs) and failing to comply with the Fair Work Act 2009 (Cth) (the FW Act).

Background

The Company operated in the field of robotics, coding and artificial intelligence applications for health and wellness. Between August and October 2020, the Company engaged three workers with disabilities through an employment services provider (the Workers). In October 2020, the Company attempted to reclassify the Workers as independent contractors by issuing them ICAs, which contained terms indicative of employment contracts. This led to the FWO’s investigation following complaints by the Workers.

Summary of the Decision

Justice Scott Goodman ruled that the ICAs were effectively employment contracts for several reasons, including the nature of the “rights and obligations” which suggested that the Workers were contracted to work for the Company’s business rather on an independent basis. He found that there was a significant power imbalance, particularly for two of the Workers who felt they had no choice but to sign the ICAs to avoid unemployment.

The Court also noted that the Company failed to pay the Workers their full wages on a monthly basis, as required by law, and did not comply with a Notice to Produce issued by a Fair Work Inspector. This Notice demanded specific records and documents related to the terms of engagement and duties performed by the Workers, which the company failed to provide. Justice Goodman emphasised the adverse impact on the Workers, who were already vulnerable due to their disabilities and financial struggles, including one Worker who had to borrow money from a short-term lender due to the Company’s non-payment.

Furthermore, the Decision highlights the Company’s complete disregard for the legal process and lack of contrition, which aggravated the severity of the penalties. The imposed penalties aim to serve both as a specific deterrent to the Company and a general deterrent to other employers considering similar practices.

Fair Work Ombudsman, Anna Booth, reinforced that sham contracting is a serious offence that undermines employee rights and entitlements. Ms Booth emphasised that the FWO will continue to pursue employers who exploit their power over vulnerable workers, including the rectification of underpayments and protecting employees from unlawful employment practices. Ms Booth also encouraged employees and employers with concerns about their rights and obligations to seek assistance from the FWO.

If you have any questions about ICAs and what they could mean for you or your business, please do not hesitate to contact Nick Stevens, Josh Hoggett, Evelyn Rivera or Ayla Hutchison.