Fair Work Ombudsman claims two companies labelled 10,000 workers as “sham contractors”

Two companies providing call centre services are set to face court after the Fair Work Ombudsman accused them of breaking “sham contracting” guidelines.

The Ombudsman accused Telco Services Australia Pty Ltd and Trimatic Contract Services Pty Ltd of numerous contraventions of workplace laws, including incorrectly labelling almost 10,000 salespeople as independent contractors instead of employees, leading to “massive underpayments”.

Telco Services Australia has had a contract with Telstra since 2004 to provide direct marketing and sales services. The workers’ primary role was to market the telco’s products and services, the Ombudsman says.

But TSA Telco Group has denied any wrongdoing, and says it has been co-operating with the office of the Fair Work Ombudsman during its investigation.

“TSA Telco Group has worked hard to build the company by looking after people, creating new job opportunities and retaining operations in Australia,” it told The Australian Financial Review.

The maximum penalty for each breach is $33,000. The case is scheduled to be heard in the Federal Court in Melbourne on June 24.

The Ombudsman defines sham contracting as an employer disguising or misrepresenting an employment relationship as an independent contracting arrangement, thereby avoiding employee entitlements such as minimum rates of pay and leave entitlements.

In a speech today at the Australian Industry Group’s workplace conference, Fair Work Ombudsman Nicholas Wilson says some of the people involved telemarketing services from the companies’ premises, and some were engaged in door-to-door sales.

While stressing that hiring independent contractors is not in itself illegal, Wilson says “if a party sets out to avoid its workplace relations responsibilities, and that avoidance takes the form of using the commercial processes to find a business partner who will undercut established minimum wage rates, then that may well be unlawful.”

“The pretence that commercial negotiations can procure below award wages or that the cover of an ABN can avoid an employment arrangement are merely that – pretences. And they are pretences that can have significant consequences,” Wilson says.

In March, the Ombudsman confirmed it was taking aim at sham contracting in the health and beauty, cleaning, and call centre industries.

The same month, a Brisbane call centre company and its director were fined $214,500 for sham contracting and underpayments.

The Construction, Forestry, Mining and Energy Union said earlier this year that there could be more than 168,000 people employed on sham contracts in the construction industry.

It also claimed that Bureau of Statistics data and independent tax consultant analysis show the arrangements cost the Government $2.45 billion in lost tax revenue.