NSW transport company Happy Cabby accused of sham contracting

The operators of a NSW transport business face substantial fines after the Fair Work Ombudsman launched a prosecution against them, alleging they were involved in sham contracting activity.

Happy Cabby Pty Ltd is a Newcastle-based company primarily engaged in transporting passengers to Sydney’s international and domestic airport terminals.

The company, and its sole director Graeme Thomas Paff, is facing court over allegations it was involved in sham contracting and the underpayment of seven workers by more than $43,000.

Paff was allegedly involved in Happy Cabby breaching the sham contracting provisions of workplace laws by knowingly misclassifying seven bus drivers as independent contractors.

The Fair Work Ombudsman alleges the correct classification for the drivers was as casual employees, for reasons including that Happy Cabby owned the buses they drove, had a high degree of control over their work, and determined how much they were paid.

Court documents allege that despite Happy Cabby requiring the drivers to have Australian Business Numbers (ABNs) the drivers were not conducting businesses in their own right.

Ken Phillips, executive director of Independent Contractors of Australia, says it’s important to remember an ABN is not a determinant of whether you’re running a business for yourself.

“An ABN is entirely an administrative tool used under the Tax Act to enable the Tax Office to track people in terms of their BAS and their GST payments. That’s all it was ever intended to do,” Phillips says.

“What some people have gone and done is mistakenly believe you can use the ABN to indicate that you’re self-employed. That’s not the case. It never has been the case.”

Sham contracting allegedly led to the Happy Cabby drivers being underpaid $43,812 in employee-related entitlements – including minimum wages and penalty rates for weekend, overtime, public holiday and early/late work – between January and November, 2011.

The largest alleged individual underpayment is $18,758. Workplace laws relating to keeping employment records and issuing pay slips were also allegedly contravened.

The Ombudsman alleges Paff was involved in Happy Cabby committing several breaches of workplace laws.

Paff faces maximum penalties of up to $6,600 per breach and the company faces maximum penalties of up to $33,000 per breach.

The Ombudsman is also seeking a Court Order for Happy Cabby to rectify the alleged underpayment of the workers.

A directions hearing is listed for July 27 in the Federal Magistrates Court in Sydney.

Phillips says while sham contracting is a comparatively contained problem, the fact that businesses are being investigated and prosecuted is positive.

However, he doesn’t believe it is any more prevalent in the transport sector than in other industries.

“It’s a matter of making sure you go in with your eyes open [in any sector],” he says.