The fundraising company hired a 26-year-old British backpacker on a 417 working holiday visa as a charity collector, even though they treated him as an independent contractor.
This was despite them knowing the Fair Work Act required them to classify and pay him as an employee.
Australian Sales and Promotions has held contracts with charity and not-for-profit organisations to conduct fundraising activities on their behalf.
The company have now been penalised $100,000 in the Federal Circuit Court, while Ainsworth, the company’s sole director and part-owner, has been penalised a further $24,000.
The penalties are the result of legal action by the Fair Work Ombudsman
who said the action sends a message about the seriousness of sham contracting.
The backpacker ended up being underpaid $7853 in basic employment entitlements for four months of charity collecting work performed in 2013, mostly at Sydney shopping centres.
Australian Sales and Promotions and Ainsworth told the charity collector he was an independent contractor operating his own business and required him to obtain an Australian Business Number (ABN) and invoice another company operated by Ainsworth (PMA Unit Pty Ltd) to receive payment.
However, the charity collector had never operated a business before and had no sales experience – and the company exercised a high degree of direction, supervision and control over his duties.
The charity collector was paid on a commission basis, earning a daily rate as low as $50 to $67. As a casual employee, he was actually entitled to the minimum hourly rate and casual loadings.
The charity collector ended up lodging a complaint, with the Fair Work Ombudsman investigating.
However, the Fair Work Ombudsman commenced legal action because of the seriousness of the contraventions and because the company had clearly been put on notice not to misclassify employees as contractors.
Judge Robert Cameron found that the company and Ainsworth had deliberately contravened the Fair Work Act.
He added that it was their intention “to enjoy the financial benefit of paying (the charity collector) as an independent contractor while also enjoying the power and authority of an employer in the control it exercised over him in the course of his work”.
“Persons should understand that attempting to evade the minimum employment conditions provided by the Fair Work Act by contriving to make employees independent contractors can have serious financial consequences of an adverse kind,” said Judge Cameron.
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Australian Sales and Promotions and its director Paul Ainsworth have been found to have breached sham contracting laws.