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Australia - Business slammed over misclassification case

26 August 2013

A homeware business has been slammed with a massive AUD 161,000 (USD 145,123) fine from the Federal Court over a sham contracting case, after the workplace watchdog accused the company of having misclassified its employees.

The case is yet another example of how the government is continuing to crack down on employers who don’t recognise their obligations under Fair Work. The commission has flagged this as an ongoing area of investigation – and businesses need to remain vigilant.

Wollongong-based Metro Northern Enterprises has been fined AUD 161,000 in the Federal Circuit Court after the company’s employment arrangements led to underpayments of more than AUD 10,000 (USD 9.013). The four employees in question were classified as independent contractors and paid on commission, but they were wrongly classified.

The court found they should have been classified as employees, because they were required to attend work, and perform certain duties prescribed by the company. Judge Shenagh Barnes also ordered the company pay back the workers in full.

The misclassification resulted in the workers being underpaid minimum wages rates, overtime and other payments. In a statement, Fair Work Ombudsman Natalie James said this was yet another decision which shows sham contracting won’t be tolerated.

“There are serious consequences for business operators who recklessly or carelessly misclassify employees as contractors, leading to employees being denied basic workplace rights and entitlements.

“Successful legal actions such as this also help other employers who are complying with workplace laws by ensuring a level playing field.”

The Fair Work Ombudsman has been stringent in its pursuit of sham contracting cases, and has continually reminded businesses that ignorance is not an excuse.

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