Fair Work Ombudsman to launch fresh crackdown on sham contracting

The Fair Work Ombudsman says it is taking aim at ‘sham contracting’ in the health and beauty, cleaning and call centre industries, in a special auditing campaign to be completed over April and May.

Ombudsman Nicholas Wilson says the watchdog is in the process of auditing a “number of industries to see what the threshold level of sham contracting might be”.

A FWO spokesman told SmartCompany it will release further details on the campaign in the coming weeks, and will “distribute tens of thousands of educational brochures on contracting arrangements nationally to workers who may be vulnerable to sham contracting arrangements and to the members of key industry groups.”

News the Ombudsman will focus on sham contracting – employers who incorrectly label employees ‘contractors’ to cut costs – follows a $214,500 fine this month for a Brisbane call centre company and its director for sham contracting and underpayments. Of this, more than $150,000 related to sham contracting.

Independent Contractors Australia executive director Ken Phillips said he supported any action to crackdown on sham contractors, but stressed FWO must act transparently and fairly, disclosing what they’re doing and why, and delivering a full report afterwards.

He believes FWO should be subject to similar transparency requirements as the Australian Taxation Office, adding the Government and Ombudsman had as much to prove as the companies they investigate.

“When they conduct an investigation, they have the power and might of government behind them,” Phillips said.

“They could intimidate companies who don’t have that power to fight for their rights.”

Phillips says most of the complaints received at Independent Contractors relate to unfair contracts, phoenix companies, and cash-economy payments, rather than sham contracting.

News of the crackdown comes as the Construction, Forestry, Mining and Energy Union released a report this morning claiming there could be more than 168,000 people employed on sham contracts in the construction industry.

The union claims that ABS data and independent tax consultant analysis suggests these sham arrangements are costing the government $2.45 billion in lost tax revenue and wants to see the problem fixed.

“Workers forced onto sham contracts lose their rights and entitlements, and the Government loses tax dollars,” CFMEU national secretary Dave Noonan said in a statement.

“The only winners are those employers who flout the law knowing they won’t be punished under the current system.”