EMPLOYERS WHO seek to cut costs by forcing workers to take up employment as an individual contractors were recently sent a warning, following a Federal Court decision against a cleaning company who advised employees to resign and resume work on contracts.
EMPLOYERS WHO seek to cut costs by forcing workers to take up employment as individual contractors were recently sent a warning, following a Federal Court decision against a cleaning company who advised employees to resign and resume work on contracts.
The full bench of the Federal Court ruled that Canberra cleaning company, Endoxos, had a continuing responsibility for its workers even after it shifted them onto individual contractors arrangements, because it “held the position of responsibility and wielded the power in the employment relationship”.
“This will help us to stop those bosses who think they can avoid Award obligations by forcing workers to resign their jobs but still continue working – as individual contractors,” said Liquor, Hospitality and Miscellaneous Workers Union (LHMU) national secretary Jeff Lawrence.
“A boss can’t turn workers into individual contractors, and then go on to sack the worker, hoping they’ve found the perfect way to avoid unfair dismissal charges.”
The ruling effectively closes a loophole allowing companies to force employees into individual self-employed contracts, thereby cutting wage bills and dodging entitlements such as sick pay and annual leave.
The ruling clears the way for LHMU member, Riste Damevski, to fight his unfair dismissal in the Australian Industrial Relations Commission.
It will also allow at least 75 other cleaners who were forced into the same situation, to recover money owing for underpayment of wages and for portable long service leave.
“A win for Endoxos in Canberra would have had a wave effect across the country,” Lawrence said. It is predicted that the ruling will have widespread implications for the cleaning industry, where it’s common practice to treat workers as individual contractors.
The decision overturned an earlier ruling by the Australian Industrial Relations Commission (AIRC), which had found that no employment relationship existed between Endoxos and Damevski.
HR professionals needed to be especially cautious about the nature of employment relationships with contractors following the decision, according to Michael Michalandos, an employment law partner with Baker & McKenzie.
“If at the end of the day you’ve got a contractor in your organisation who is performing the same work and conducts their business in the same way that a fellow employee does, or alternatively you had an employee and convert them to a contractor and there is no change in the relationship – you’ve got problems,” he said.
“The lesson to be learned here is that it doesn’t matter what structure you set up. If the employee reports to you, you control what the employee does, you provide the employee with the equipment and tools of the trade, you retain a right to hire and fire the employee, but effectively pay them through a different entity – then the court may still find that an employment relationship exists,” he said.
In overturning the AIRC’s ruling, the Court round that the commission had “shut its eyes to uncontested evidence which demonstrated the reality of what occurred” in the workplace and on the job.
Michalandos said the decision also meant that employers had be thorough about making sure employment relationships were consistent with documents, as there was very little evidence around Damevski’s job responsibilities in the finding against Endoxos.
He said courts would look at issues such as who manages the worker, details on their business card, who pays for their equipment or tools of trade, where they sit and any supervisory responsibilities over employees.
Endoxos, which has now been wound up, was owned by Canberra identity Lindsay Burke. Burke was probably best known for being the husband of prominent local Liberal ACT MP, Jacqui Burke – who was also at one time a director of the cleaning company.
At the time Burke was quoted in the local media saying he had found the perfect solution to cutting costs by ordering around 75 Endoxos workers to set themselves up as individual companies to whom he would then provide work.
