Director, Fair Work Building Inspectorate v Linkhill Pty Ltd [2014] FCCA 1124 

Sham contracting has earned Linkhill Pty Ltd a record fine of $313,500 this month. The company had engaged workers to renovate its properties on Flinders Lane and Collins St in Melbourne. Representatives of Linkhill led the workers to understand that their contracts were for services, not of employment, and consequently avoided paying approximately $153,000 in entitlements to them. Judge O'Sullivan held that the relationship between Linkhill and those workers was in fact one of employment. As a result, Linkhill was found guilty of sham contracting and was ordered to pay a fine. The size of that fine came down to two factors. First, representatives from Linkhill demonstrated no contrition for the actions of the company. Second, Linkhill representatives failed to appreciate the effect of sham contracting on the employees themselves. 

Key Takeaways 

There are three key takeaways for employers. Despite the diminution of the union movement, the risk of complaints of sham contracting has not decreased. This is because the Fair Work Building and Construction Ombudsman now undertakes investigations into sham contracting on its own motion. Whether a relationship between company and worker is classified as a contract for services or one of employment is not dependent upon how the company itself classifies the arrangement. The size of the fine will be in some part determined by the attitude of the company to its conduct. Employers should not make the mistake of considering that the cost of sham contracting is less than the risk of punishment for it. 

 Andrew Berriman