Employers are being warned about a crackdown on employees being incorrectly classified as contractors, as the Fair Work Ombudsman launches legal action against a transport company over the matter.
“If employers misclassify employees as independent contractors and pay flat rates that undercut entitlements, they face serious consequences such as court action, hefty back-payment bills and penalties,” Ombudsman Sandra Parker said in a statement released on Monday (6 January).
“Businesses who need information on whether an employment relationship exists should contact us.”
Ms Parker’s comments came as the Fair Work Ombudsman (FWO) announced that it had begun legal action against Brisbane-based Boske Road Transport, alleging the company had underpaid four of its drivers to the tune of $63,803, by classifying them as independent contractors instead of as award-governed employees.
The regulator said that the four drivers worked for Boske for various periods between March 2016 and August 2018 and were engaged as independent contractors.
However, it has alleged that the drivers should have been classified as employees, as they drove company-owned vans, wore company uniforms and worked hours as stipulated by the company.
As a result of the alleged misclassification, the drivers were paid between $7,460 and $32,486 less than they would have been under the relevant industry awards, including through the omission of annual and sick leave entitlements as well as penalty rates.
One of the individuals was engaged as a long-distance driver, who the FWO alleged was also underpaid by not receiving a cents-per-kilometre entitlement.
It said the matter came to light during an investigation sparked by requests for assistance from workers.
The FWO is seeking full backpay, with interest and superannuation, on the amounts it claims were underpaid, in addition to penalties being applied against Boske. An initial hearing has been scheduled in the Federal Circuit Court for 22 May 2020.
However, the company has hit back at the ombudsman’s allegations.
Approached for its response to the FWO’s announcements, Boske Road Transport said via its law firm that it “denies the allegations in their entirety, and is vigorously defending these proceedings”.
It said that it would not comment further while the case is before the court.
According to its website, Boske Road Transport was established in 2009 and operates three sites in Queensland, with its head office in Brisbane and depots in Caboolture and Gladstone.
Employers seeking clarity, consistency
Unclear legal frameworks and common misconceptions among employers about the definition of a contractor have caused considerable confusion in the marketplace in recent years.
In 2017, fitness company KX Pilates told My Business that it had spent considerable money to bring trainers in-house rather than keep them as contractors, in a bid to avoid a perceived “grey area” in the rules governing contractors versus employees.
Dr Craig Latham, deputy ombudsman at the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), confirmed today that the office continues to receive “many calls” on the issue of contractors versus employees.
“The Australian Small Business and Family Ombudsman’s office has received many calls from small business operators seeking clarity around what constitutes a contractor versus an employee, since the day our office opened,” Dr Latham told My Business.
“It has been an ongoing issue and the recent media coverage has certainly continued to shine a spotlight on it.”
He said that the ombudsman has been pushing for a resolution to deliver employers and their workers clarity on exactly where the law stands when it comes to defining what a contractor is and is not.
“We have facilitated three meetings with an Inter-Departmental Committee comprised of ASBFEO, FWO, ATO, Business.gov.au and the Attorney General’s Department. These meetings achieved some greater clarity for small businesses dealing with this issue. However, those discussions are ongoing, as there is a need for more action in this space,” said Dr Latham.
“ASBFEO will continue to push for more transparency and clarity, to help small business owners understand their obligations. Now we are working with the respective departments on developing a single decision tool that small business can rely on.
“Ultimately, the focus needs to be on consistency between the various regulatory regimes.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.