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SME gets hit with $278K employment fine for “contractors”

SME gets hit with $278K employment fine for “contractors”

Being able to distinguish between what makes someone an employee or a contractor is extremely important. Here's what SME's need to know.

29th July 2013
Reading Time: 2 minutes

Happy Cabby Pty Limited was fined $286,000 by the Fair Work Ombudsman for underpaying 7 employees. (Un)Happy Cabby claimed the drivers were not employees but were contractors  and therefore not entitled to employment protections such as minimum wage, weekend rates, etc.

The Ombudsman looked past the “sham contracting” characterisation of the drivers and said they were employees and were entitled to receive the underpayment/entitlements. In addition, Happy Cabby was hit with the big fine.

It is one of the critical issues for SMEs to get right. Often business owners will have workers sign up to Contractor Agreements and then treat them as contractors not employees (ie not pay their entitlements, give leave, etc.). The law looks through these arrangements and looks at a number of issues to determine if it is a true contractor arrangement or it the person is entitled to employee benefits.

According to the Fair Work Australia site:

Most independent contractors:

  • Run their own business;
  • Control their own working times;
  • Decide how and where they undertake work.

Many independent contractors also advertise their business, provide their own tools and equipment and may pay others to carry out work on their behalf.

In contrast, employees are:

  • Typically subject to controls on how, where and when their work is performed;
  • Paid regularly;
  • Cannot pay someone else to do their work for them.

It is a big legal risk for SMEs, so it is important to get it right.

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Dominic Woolrych

Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.