2 min read

Huge penalties awarded to deter sham contracting arrangements

The Case

Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) (2017)

Grouped Property Services Pty Ltd (No 2) (GPS) engaged 51 workers in cleaning and clerical roles through a labour hire company called National Contractors Pty Ltd (NC). NC was registered at the GPS business address. GPS required workers to obtain ABNs and provide invoices for payment. The workers were paid at low flat rates that undercut the Award. This meant workers were underpaid by amounts ranging from $58 to $23,474.

The Fair Work Ombudsman (FWO) commenced proceedings against GPS for sham contracting and underpayment claims. The FWO was successful in seeking a freezing order to prevent GPS stripping the company of assets and placing it in liquidation, which would have frustrated any subsequent orders sought.

The Verdict

Justice Katzmann of the Federal Court found that the GPS workers were employees of GPS and that GPS was a shell set up to avoid paying employees minimum Award wages and other employment entitlements.

Severe penalties were imposed given most of the employees were foreign nationals on visas who had limited English and little knowledge of their entitlements, and had been exploited by GPS and its owners. Many workers had needed to borrow funds to survive and some needed to return home.

GPS and its owners were uncooperative with the FWO investigation and showed no contrition.

The Federal Court ordered:

  • GPS pay penalties of $370,000 and back-pay $223,244 in employee entitlements;
  • Rosario Pucci (the former owner-operator of GPS who was ‘intimately involved’ in the exploitation) pay penalties of $74,300; and
  • Enrico Pucci, GPS’s current owner and sole director, pay penalties of $3,000 for taking adverse action against employees who inquired about payment of wages.

Lessons for You

The FWO is clamping down on dubious labour hire arrangements entered into to try to avoid paying employees’ minimum employment entitlements. The FWO is also seeking freezing orders to prevent rogue companies winding up to avoid prosecution and backpay orders. In addition, the FWO is prosecuting any officers of the company and their advisors who are intimately involved in unlawful employment practices.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.

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