Sham contracting rife in cleaning and call centres: Report

Sham contracting continues to plague cleaning, beauty and call-centre businesses, after a recent audit found almost a quarter are guilty of misclassifying employees as independent contractors.

Sham contracting occurs when an employer attempts to disguise an employment relationship as an independent contracting relationship, avoiding obligatory rates of pay and other entitlements.

The Fair Work Ombudsman today released the findings of its audits into sham contracting and the misclassification of workers in the cleaning, hair and beauty, and call centre industries.

The independent statutory organisation visited 102 enterprises operating in these industries, and found 21 had misclassified employees as independent contractors.

A third of those were deemed to have knowingly or recklessly done so, and so the matters are being considered for litigation. The employers also face liabilities in back-pay of entitlements.

The act stipulates that contractors must decide how to carry out the work and the expertise needed to do so, and bear the risk for making a profit or loss on each job.

Employees, on the other hand, work under the direction of an employer, which means they work to standard or set hours and bear no financial risk.

“It is difficult to see how a cleaner performing simple work for a single, principle contractor… can be defined as anything other than an employee,” the report said.

“Similarly… many call centre environments involve workers engaged in rigidly-organised shift work and strictly-enforced break periods.”

“It is difficult to see to see how workers in these circumstances exercise control over their own work and can be considered to be running their own business in an effort to make a profit.”

According to the report, the Fair Work Ombudsman has also received complaints regarding “rent a chair” contracting arrangements in hairdressing salons.

It has also received concerns about the legitimacy of contracted massage therapists in day spas.

“While these occupations may require specific training… the degree of control over the working arrangements can result in these workers being assessed as employees,” the report said.

The report expresses concern that some parties may be complicit in avoiding their workplace relations responsibilities, by entering into commercial arrangements with lowest-cost providers.

This results in the procurement of workers on below-award rates of pay.

“Turning a corporately-sanctioned blind eye to outsourced work, that is performed by another enterprise using contractors on below-award rates of pay, may expose enterprises… to liability,” the report said.

“All parties should undertake due diligence when outsourcing work to contracted workers, particularly to lowest-cost providers, to ensure lower costs are attributable to efficiencies in businesses and not due to the potential exploitation of workers on below-award rates.”