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The former operators of a Perth accommodation business have been fined nearly $60,000 for sham contracting arrangements dating back to 2009.

The $58,740 penalty against Quest South Perth Holdings Pty Ltd, which previously operated the Quest on Arlington in South Perth, comes after the Fair Work Ombudsman’s initial legal action in 2011 was dismissed by the Federal Court, resulting in the workplace watchdog lodging its first ever High Court appeal.

The Fair Work Ombudsman alleged the company contravened the sham arrangement provisions of workplace laws in 2009 when it converted three employees – two housekeepers and a receptionist – into independent contractors.

Quest South Perth Holdings dismissed the workers and immediately rehired the two housekeepers as purported independent contractors to perform the same duties. The receptionist was not rehired.

The Fair Work Ombudsman alleged the purported contracting arrangement was a sham and the correct relationship for the three workers was as employees.

In 2015, the High Court unanimously upheld the appeal, ruling that Quest South Perth Holdings’ conduct contravened sham contracting laws. The matter was referred back to the Federal Court, where the court ordered penalties of $54,450 against the company and $4290 against its former manager, Ashvin Luchmaya.

Justice John Gilmour said Quest’s contraventions involved “deliberate and conscious acts designed to circumvent industrial relations legislation and the protections they provide” and found that the impact on the three workers was significant.

“Quest’s strategy and desire to engage the employees as independent contractors so their rights and entitlements would not be protected by industrial relations legislation,” Justice Gilmour said.

“The FWO submits correctly, in my opinion, that the impact of sham contracting contraventions is that workers believe that they are deprived from the wide ranging entitlements afforded to employees, including minimum rates of pay, annual leave, personal leave, long service leave, parental leave, superannuation, workers compensation, notice upon termination of employment and eligibility to access other protections such as unfair dismissal applications, general protections applications or an application for an order to stop bullying.”

Justice Gilmour found that the conversion of the receptionist “was implemented with the specific intent to allow Quest to terminate her employment without risk of unfair dismissal and to remove her other entitlements”.

Fair Work Ombudsman Natalie James said the “significant resources” the watchdog had committed to pursuing the matter for several years “reflect the seriousness with which we treat sham contracting behaviour”.

“These proceedings send a message to unscrupulous employers about the consequences of sham contracting behaviour,” Ms James said.

“The High Court ruling we secured in this matter was also important because it creates greater legal protection for employees in situations where employers attempt to avoid responsibility for providing employees’ lawful minimum wages and entitlements by claiming employees are independent contractors.”

Source: 13/6/2017