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Eureka! High Court Holds Third Parties to Account for Compliant Contracting

We have said it, time and time again: There is no place in modern-Australia for non-compliant, convoluted contracting arrangements. They are illegal, immoral and they ruin the reputation of an industry that otherwise provides individuals with the opportunity to establish their own enterprise and be the creators of their own success.

Last week, in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45, we saw the High Court extend Section 357 of the Sham Contracting provisions to third party engagement models. Certica® welcomes this extension, as we see far too many third parties that are misrepresenting their offerings to their clients. They claim that just by using their services, they are able to avoid or circumvent the statutes related to independent contractors.

The benefits to businesses and individuals that partake in compliant contracting arrangements are unparalleled: flexibility, result-based remuneration and autonomy, to name a few. However, there are still certain obligations that both parties may be required to meet, such as Workers’ Compensation, Superannuation and Payroll Tax. Simply engaging a third party provider does not negate your (or your contractors’ or any third party’s) legal obligations to these costs.

The facts of the Quest South Perth Pty Ltd (Quest) case are clear; this was a blatant misclassification of workers.

Issues

Quest, in partnership with Contracting Solutions Pty Ltd:

  • Attempted to “convert” existing employees into independent contractors (a direct contravention of section 357 of the Fair Work Act);
  • Dismissed employees, re-engaged them as independent contractors and failed to make payment of proper employee termination entitlements; and
  • Offered exactly the same conditions under the contracting arrangement. There was no difference in the provision of services between Employee and Contractor roles. All indicia lead to that of an Employment relationship.

What Quest and Contracting Solutions attempted to do in this case was to convert an already employed workforce into contractors, with little to no significant changes to the overall working relationship. It’s not a matter of waving a magic wand and converting a workforce into contractors – we do not believe in that alchemy.

Contractors and employees providing the same services, in the same manner, cannot be distinguished as one or the other based on your preference. There are significant differences in the way that a contractor may provide services to your business, including, but not limited to:

  • responsibility for tools and equipment;
  • control over how and when the services are performed;
  • ability to delegate work;
  • ability to work for others;
  • risk and reward (i.e., who bears commercial risk in the relationship); and
  • provision of relevant insurances.

Contracting is not illegal. In fact, it has enabled many entrepreneurial businesses to start-up and grow to large multi-national companies. But, to be successful in contracting, you must be compliant. Where the law states that contractors must be covered for particular insurances or meet certain tax obligations, it is your duty (or the duty of the third party that you engage) to meet those obligations. Rogue third party operators, who claim to circumvent these obligations, should be shut down and we applaud the High Court for their recent extension of s357 in this manner.

At Certica®, we are the champions of compliant contracting. We have helped over 150,000 contractors compliantly contract their services nationally for over 15 years. If you engage in legitimate contractor relationships, we are ready to support you and provide you with the Certainty that you need in your arrangements.

Call us on 1300 301 401 for more information.

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