Sham Contracting - Civil Contractors Federation
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Transcript Sham Contracting - Civil Contractors Federation
Sham Contracting
Cameron Dean - Partner
20 October 2011
Overview
Definition
Employees v Independent Contractors
Implications for employers
Recent cases
Getting it right
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What is sham contracting
Where an employer purports to engage a worker
as an independent contractor when, in reality,
they are employees
Lend Lease Project Management and Construction
(Australia) Pty Ltd v CFMEU [2011] FCA 912
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Outcome of sham contracting
Results in worker receiving less entitlements
than if they were an employee under:
NES
Award
Enterprise agreement
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Employees v Independent Contractors
Different definitions apply under laws about
employment
tax
workers’ compensation
superannuation
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Implications for employers
Fair Work Act 2009 (Cth)
sham contracting provisions
civil penalties
employer can also be liable for statements made by
employees about sham contracts
Independent Contractors Act 2006 (Cth)
‘unfair contracts’
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Office of the Australian Building and
Construction Commissioner
Currently three proceedings before the court and
50 investigations nationally relating to
allegations of sham contracting
Conducting inquiry into sham contracting in the
building and construction industry
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Office of the Australian Building and
Construction Commissioner
Conducting targeted audits of employment
records of various Brisbane building sites looking
for sham contracting issues
Initial focus on subcontractors engaged on
projects funded by the Queensland Government
that were affected by work stoppages in late May
2011
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CFMEU v Nubrick Pty Ltd [2009] FMCA
981
Terms offered to new workers
Independent Contractor Indicators
Needed ABNs
Invoiced Nubrick for work
Flat rate of $30.00 and required to pay own tax
No annual leave, paid sick leave or superannuation
Possibly told they could delegate work
Contract signed was headed 'Induction checklist for: Short
Term Contractors’
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CFMEU v Nubrick Pty Ltd [2009] FMCA
981
Terms offered to new workers
Employment Indicators
Fixed hours of work
Were told when to start and finish
Engaged to perform continuous work for Nubrick
Provided with some safety gear
Used Nubrick equipment
No special qualifications or skilled labour
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CFMEU v Nubrick Pty Ltd [2009] FMCA 981
Contract did not clearly indicate type of
arrangement
Court decided they were contracts of
employment
Defence applied to employer
manager did not know that contracts were for
employment (Test 1)
manager was not ‘reckless’ as to whether the contracts
would be for employment (Test 2)
Application dismissed
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Darlaston v Risetop Construction Pty
Ltd & Ors [2010] FMCA 220
Five employees told they were independent
contractors and the employer wanted to make
this clearer
Took steps to alter employment agreement
required employees to set up intervening companies
stopped paying superannuation and LSL entitlements
stopped paying workers’ compensation insurance and
advised workers they would need their own
increased workers’ pay ($35/hr $37/hr)
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Darlaston v Risetop Construction Pty
Ltd & Ors [2010] FMCA 220
Held that employer had misrepresented to
employees that they were contractors
Penalties imposed
company - $10,000
two Directors - $2,000 each
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FWO v Centennial Finance Services Pty
Ltd & Ors [2010] FMCA 863
Dismissed sales employees and re-engaged them
as ‘consultants’ under a contractor agreement
Duties prior to dismissal substantially the same
when re-engaged as contractors
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FWO v Centennial Finance Services Pty
Ltd & Ors [2010] FMCA 863
Prosecutions brought against the employing
company, its director and HR manager
True arrangement held to be employment
contract
Company, director and HR manager all
contravened statutory requirements
director fined $8,800
HR Manager fined $2,000
company not fined (in liquidation)
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ABCC v Rapid Formwork Constructions
Pty Ltd & Anor [2011] FMCA 649
Two construction industry workers were required
to enter contracts under which they were
paid an hourly rate
required to get ABNs
provided some protective work clothes
provided a lift to work
employed exclusively by Rapid Formwork
directed as to their tasks, hours of work and meal
breaks by Rapid Formwork
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ABCC v Rapid Formwork Constructions
Pty Ltd & Anor [2011] FMCA 649
The workers
did not pay superannuation contributions and none were
paid for them
did not have public liability insurance or accident or
sickness insurance
One of the workers
was not provided with annual or sick leave, nor public
holidays
was not registered for GST
had some tools provided by Rapid Formwork
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ABCC v Rapid Formwork Constructions
Pty Ltd & Anor [2011] FMCA 649
Company cooperated with investigation and
agreed to back pay a total of $6816 in unpaid
wages and entitlements
Company penalties
$21,000 (total) for two statutory breaches
$1500 for breaching the modern building and
construction industry award
$1500 for breaching ACT award
Director fined $1500
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Getting it right
Acting ABC Commissioner Brian Corney on 2
September 2011
‘Today's decision should give employers in the building
and construction industry cause to review their own
practices to ensure they are compliant with
Commonwealth workplace laws’
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Getting it right
Understand the differences between employees
and contractors – noting the different legal
definitions
Make your contractual arrangements clear avoid blurring the lines
Ensure compliance in practice
Avoid sham arrangements: if it looks like a
duck, swims like a duck and quacks like a duck
then it probably is a duck
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Contact details
Presenter:
Cameron Dean
Position:
Partner
Direct line: 07 3233 8619
Email:
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[email protected]
Personal Property Securities Act 2009
(Cth)
Kristen Podagiel - Partner
20 October 2011
Personal Property Securities Act 2009
overview
What is it?
Who does it apply to?
What will it affect?
What’s the big deal?
What do you need to do before January?
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What is the PPSA?
Heralded as the most significant change to the
law since the introduction of GST
Intention is to create a ‘one stop shop’ for
registering interests (security interests) in
personal property
Commencing in January 2012 (until we hear
otherwise...)
Will almost certainly affect your business
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Who does the PPSA apply to?
Basically, everyone.....
individuals
companies
Australian
foreign if the assets are located in Australia
partnerships
other legal entities
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What will the PPSA affect?
Security interests in personal property
A security interest is:
an interest in relation to personal property
provided for by a transaction
that, in substance, secures payment or performance of
an obligation
Some things are deemed to be security interests
e.g. retention of title
the great debate: does an owner have a security
interest that needs to be registered?
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What is personal property?
basically means all property other than land and
fixtures/things attached to land
Certain rights and licences (e.g. water rights and
mining tenements) are excluded
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What’s the big deal?
Some very grey areas.....what risk mitigation
strategy will your business adopt?
Legal ownership of PPSA property does not
necessarily win out
Wide range of interests that would not usually be
regarded as security interests have the potential
to be caught by the PPSA (and might need
registration)
registration has potential to result in sensitive
documents being disclosed
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Priorities
The PPSA has rules to determine priorities
between competing interests
The status of the security interest determines the
priority it has
In general, a perfected security interest will have
priority over an unperfected interest
registration / possession are key to perfection
Grey area: owner may lose priority if they don’t
perfect their interest in their own property
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Hierarchy of priorities
Control (limited application)
(controllable goods)
First in time perfection
(registration or possession)
Second in time perfection
(registration or possession)
Unperfected security interest
(e.g. written agreement only)
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Hire/loan of an asset
I own an asset and I lend it to you for a set term
I no longer have possession of the asset but I have an
interest in eventually getting my asset back at the end
of the term
but I don’t register my interest (unperfected)
You have secured finance with BankCo –
registered against you (perfected)
You go under. BankCo steps in.
Does BankCo has a greater right to my asset
than I do?
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Sale of an asset
I have entered into a contract to buy an asset
from you
The contract is not yet complete
I have paid a deposit
but you still possess and own the assets (title hasn’t yet
passed)
Should I register my interest in your assets?
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Key things to consider in preparation
If you don’t have the property in your
possession, consider if you have a security
interest you need to register (even for intragroup
arrangements)
review your standard suite of contracts for PPSA
issues
what systems can you implement to make this as
painless as possible?
what materiality threshold will you adopt?
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Summary
PPSA is a fundamental change in law
You need to work out how the PPSA affects your
business
What will you need to do differently to deal with
the PPSA – before January 2012?
There are still some grey areas to be clarified –
what risk are you prepared to wear?
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Contact details
Presenter:
Kristen Podagiel
Position:
Partner
Direct line: 07 3233 8757
Email:
[email protected]
This document covers legal and technical issues in a general way. It is not
designed to express opinions on specific cases. This document is intended
for information purposes only and should not be regarded as legal advice.
Further advice should be obtained before taking action on any issue dealt
with in this document.
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