Five cleaners, three companies, one question the Ombudsman got wrong
The Fair Work Ombudsman spent years building a sham contracting case against two directors of a small cleaning company. The Federal Court threw it out.
In a decision handed down on October 2, 2026, the court dismissed the Ombudsman's application in Fair Work Ombudsman v Chambers [2026] FCA 1452, finding the regulator had pursued the wrong entity entirely. The five migrant cleaners at the centre of the case were not employed by ProClean HQ. They were employed by Spotless Facility Services - the facilities arm of ASX-listed infrastructure group Downer EDI.
The case centred on night-shift cleaning at Sydney Trains' Auburn Maintenance Centre between February 2018 and April 2019. Downer, the majority shareholder of Spotless, held the head contract with Sydney Trains for maintenance, cleaning and security. Spotless subcontracted cleaning and security to iGuard Australia. iGuard, in turn, involved ProClean - a company run by the two directors - in managing payments to the cleaners.
The Ombudsman's case was straightforward on paper: ProClean had the workers sign written "contractor agreements," paid them via invoices, and assigned them identification numbers starting with "PHQ." That, the Ombudsman argued, made ProClean the engaging entity - and because the workers were really employees, not contractors, the company had engaged in sham contracting and underpaid them a total of $124,202.60.
The court saw it differently.
The evidence showed that Spotless had recruited and onboarded the cleaners. A Spotless state manager chaired the first meeting on February 15, 2018, welcoming the workers "to the Spotless team." Spotless personnel populated rosters, organised uniforms, ordered equipment, set pay rates and controlled site access. Internal emails between Spotless and Downer from January and February 2018 showed Spotless managing every detail of the recruitment process - the court observed that these emails read "as if Spotless treated Downer as its client."
One of the directors had been recruited by Spotless as its cleaning supervisor. He was introduced to Downer as a Spotless employee. Spotless set up his email account and registered him for rail safety training. He was given a Spotless credit card for purchasing supplies. The Spotless state manager had made clear that ProClean "did not exist" on site - only Spotless employees and iGuard were permitted at the maintenance centre.
So how did ProClean end up holding the written agreements?
According to the court's findings, it was a cashflow problem. Spotless was late paying iGuard, which could not cover wages. One of the directors agreed that ProClean would step in to pay the cleaners, with iGuard reimbursing it once Spotless paid up. He drafted the written agreements himself - amateurish documents, the court found, riddled with errors, stating that ProClean was "acting for iGuard and Spotless." The court accepted that the agreements related to payment arrangements, not employment.
None of the Ombudsman's witnesses helped its case. The court found all five workers unreliable - "internally inconsistent within their own evidence" who "contradicted one another." The lead worker was found to have attempted to "play both sides," at one point offering to negotiate a settlement directly with one of the directors outside the Ombudsman's process. He had sent WhatsApp messages instructing other cleaners on how to respond to the investigation.
The Ombudsman's own inspector was described as a "guarded witness" who could not explain why obvious witnesses from Spotless and Downer were never called. The court noted "very significant gaps" in the evidence and found that the regulator's submissions were "replete with assertions which were not supported by the evidence."
Applying the objective contractual approach from the NSW Court of Appeal's decision in Agrigrain Pty Ltd v Rindfleish [2024] NSWCA 295, the court asked what a reasonable person in the position of all parties would have understood about which entity was the employer. The answer, for each of the five workers, was Spotless.
That finding was fatal. The Ombudsman had conceded in oral submissions that if ProClean was not found to be the engaging entity, its case could not succeed. It did not.
For HR teams managing multi-layered subcontracting arrangements, the case is a pointed reminder that the entity signing the paperwork and processing the payments is not necessarily the entity employing the workers - and that the question of who actually controls, directs and recruits the workforce may matter more than whose name sits on the contract.
