Myer rejects FWO assistance after ‘sham contracting’ claims

by Chloe Taylor19 Nov 2015
Aussie retail giant Myer has reportedly rejected an offer of assistance from the Fair Work Ombudsman (FWO) to ensure that it is meeting its obligations to pay employees.

The FWO approached Myer to offer a voluntary compliance deed last month, the ABC reported.

The offer came after a series of revelations about the company’s subcontractors underpaying their cleaners, and denying them entitlements.

Last month, the ABC’s 7.30 program conducted an investigation into allegations that Myer cleaners were being underpaid and denied entitlements.

Cleaners for the company told 7.30 that they were being paid below their award rate, were not receiving penalty rates and were having to pay their own tax, superannuation and insurance.

It was found that these practices were being facilitated by an illegal procedure known as sham contracting.

What is sham contracting?

The government defines a ‘sham contract’ as an arrangement where an employer deliberately disguises an employment relationship under the guise of an independent contracting arrangement, instead of engaging the worker as an employee.

This is usually done to avoid paying employee entitlements such as superannuation, workers’ compensation, leave, and certain taxes.

In other cases, employees are pressured to become independent contractors where they are threatened with being dismissed or are misled about the effect of changing their working arrangements.

The Fair Work Act prohibits genuine employees from being employed using sham independent contracting arrangements – the government makes it very clear that sham contracting arrangements are illegal.

“An employer cannot tell an employee that he or she is an independent contractor,” the government business website says.

“An employer cannot dismiss or threaten to dismiss an employee in order to engage them as an independent contractor to do the same (or mostly the same) work they performed as an employee and vice versa.

“An employer cannot mislead an employee (or former employee) in order to persuade them to perform the same (or mostly the same) work as an independent contractor.

“The Fair Work Ombudsman, Fair Work Building and Construction or a union can take action against an employer for behaving like this.”

“What we have not had is a commitment for [Myer] to sign up to an arrangement with us, where we might work together — work in cooperation to ensure their supply chain is compliant,” Fair Work Ombudsman Natalie James told the media.

“I’m not going to disclose the details of the conversations we have had with them, but we publish all of our undertakings on our website and you won't see Myer listed there are the moment.”

James added that investigations were ongoing into the allegations raised by workers during the program.

Myer contracts its cleaning services to the outsourcing giant Spotless, which hires cleaning subcontractors.

Spotless took over the cleaning contract last year from Pioneer.

The FWO found that last December, workers were put on independent contracts when they should have been engaged as employees.

The company was engaged by Pioneer, which was Myer's cleaning contractor before Spotless took over the contract in mid-2015.

Myer has since been obligated to reimburse four workers $12,000 for six weeks’ underpayments.

This was the second time in one year that the FWO took action against cleaning contractors for underpaying cleaners working in Myer stores.

A spokesperson for Myer told HC that the organisation engaged in conversations with the FWO about the situation.

"Myer has been in ongoing dialogue with the Fair Work Ombudsman (FWO) as we seek to ensure that all of our suppliers, and their subcontractors, are fully compliant with relevant workplace laws," the spokesperson said.

"This includes assisting the Ombudsman with its investigation of Pioneer Facilities Services.
"If information is provided to Myer that a supplier is not complying with its contractual obligations or relevant laws, we will investigate the matter and take appropriate action.  
"Pioneer was not able to satisfy Myer with information demonstrating its (and its subcontractors’) compliance with workplace laws. Subsequently, Myer made the decision to terminate its contract with Pioneer in June 2015. The FWO subsequently informed Myer that Pioneer had been in breach of workplace laws.
"The allegations in the 7.30 Report continue to be investigated by Spotless. As part of Myer’s commitment to a compliant workplace, we continue to work with Spotless to ensure its legal and contractual obligations are met."

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