Alleged sham contracting lands call centre companies in court

The Fair Work Ombudsman has launched a prosecution against two companies for alleged sham contracting activity, affecting almost 10,000 call centre workers and door-to-door salespeople.

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

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.

Telco Services Australia has held a contract with Telstra since 2004 to provide direct marketing and sales services, with workers employed to promote Telstra products and services.

TSA Telco Group has denied any wrongdoing, saying it has co-operated with 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,” the company said in a statement.

But Fair Work Ombudsman executive director Michael Campbell said both companies will be taken to court.

“We are alleging the workers followed managers’ directions and had little or no freedom over fundamental matters such as their work hours and how they performed their duties,” Campbell said in a statement.

“Therefore, it is our position that these workers were clearly employees, not independent contractors.”

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.

Although hiring independent contractors is not illegal, Fair Work Ombudsman Nicholas 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 said.

In March, the Ombudsman confirmed it was cracking down on sham contracting in the health and beauty, cleaning, and call centre industries.

The latest prosecution comes after an extensive investigation, which included simultaneous unannounced inspections of call centres in Perth, Melbourne, Brisbane, Sydney and Adelaide.

Meanwhile, fast food franchise McDonald’s has partnered with the Ombudsman to ensure employee pay packets are accurate, setting up a self-audit process to review employees’ pay and correct any issues.

Wilson has congratulated the company’s pro-active approach.

“McDonald’s will be asking its franchise holders to pay careful attention to the minimum hourly rate for employees under 16 and meal allowances for overtime shifts,” he says.