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The Fair Work Ombudsman has secured substantial penalties against a Gold Coast tour bus business that engaged in sham contracting and underpaid two drivers more than $43,000.

The Federal Circuit Court has ordered AVA Travel Pty Ltd to pay penalties of $164,475 and its sole director Chin Kuen Yung to pay penalties of $3,825.

AVA Travel admitted to sham contracting after sending three drivers a text message in September 2014 requiring them to provide an ABN. This message had the effect of converting the employees to independent contractors from 1 October 2014, and also advised that they would no longer receive superannuation.

Following an investigation by Fair Work Inspectors, AVA Travel admitted that these three workers remained in an employee relationship as they continued to perform work in the same manner and were paid the same flat hourly rate of $20.59.

Due to this flat rate, the Court found two drivers were underpaid $27,938.61 and $15,538.60 after the company failed to pay minimum rates for ordinary hours and other work, including weekend hours, public holiday hours and overtime that were owed under the Passenger Vehicle Transportation Award 2010.

Judge Michael Jarrett said these were “significant sums to workers earning relatively modest incomes”, and ordered AVA Travel to complete audits across multiple years of all employees (including the third driver) and others it engaged to complete work, and rectify any breaches found.

The Court found AVA Travel also breached other workplace laws, including record-keeping, pay slips and frequency of pay. Mr Yung was involved in the company’s sham contracting breaches.

Fair Work Ombudsman Sandra Parker said that there was no tolerance for sham contracting in Australian workplaces.

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