Sham Contracting: The Fair Work Ombudsman now targeting advisers

By Margaret Miller • In Dispute Resolution, Employment LawComments Off on Sham Contracting: The Fair Work Ombudsman now targeting advisers

The Fair Work Ombudsman (FWO) has warned it will pursue anyone involved in sham contracting arrangements to ensure employees are paid. This includes the employer, Human Resources managers and other advisers.

In a recent speech by Natalie James, lawyers at the Law Institute of Victoria Workplace Relations Conference were told that the FWO is closely examining underpayments cases to sheet home responsibility if a corporate employer cannot be located or is no longer trading, will not co-operate or cannot pay.

That may mean action against lawyers, consultants, accountants and other related professionals.

Human resource staff, day-to-day managers, accountants, administrative staff and companies or individuals involved in a supply chain are all examples of accessories that have been found to have been involved in breaches of workplace laws… We will use every tool available to us, on the statute books and via the media, to right these wrongs.” Ms James said.

Ms James specifically warned employment and HR lawyers that legal professional privilege would not provide immunity, warning that,

I would caution against assuming that legal professional privilege will insulate you from culpability. You don’t own legal professional privilege – your client does… should we become involved in a matter where your advice has been relied upon to support a course of unlawful conduct, your client’s interests and your own might begin to separate.

Because at this point your client may be best served by providing the advice they relied upon to demonstrate they had reason to believe they were entitled to adopt the approach. There is always the risk that when things go wrong, your client may waive their privilege to save their own skin. The courts take a dim view of employers and their advisors that exploit otherwise legitimate employment structures to avoid paying employee entitlements.”

The courts have previously found that disguising an employee relationship as a contracting arrangement did not change its character and recent judgments have applied strong and specific deterrents, including substantial fines against the individuals involved in sham contracting.

For more information, please contact Margaret Miller, Partner in our Litigation and Dispute Resolution department.

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