According to the Federal Circuit Court; Sham contracting arrangements enable employers to avoid legal obligations such as payment of payroll tax, workers compensation premiums, employee entitlements and superannuation contributions.
Linkhill Pty Ltd, a holding company of the Morgan Group, was found to have engaged in sham contracting and other contraventions of law.
This is the position of a director of that company, as set out on the Morgan Research website on 20 June 2014:
In an extraordinary decision today, Linkhill Pty Ltd was fined $313,500 in the Federal Circuit Court for supposedly ‘underpaying’ ten tradespeople and labourers, who were actually paid almost $300,000 more than the Award rates and benefits to which they were entitled during the periods of their engagement.
The ten tradespeople, ranging from an electrician and carpenters to several short term labourers, were all found by Federal Circuit Court Judge John O’Sullivan to be employees (rather than contractors) and were found to have been underpaid despite each receiving payment for their services that was substantially more than their full Award entitlements (including overtime, leave and redundancy payments)…..
The ten tradespeople, ranging from an electrician and carpenters to several short term labourers, were all found by Federal Circuit Court Judge John O’Sullivan to be employees (rather than contractors) and were found to have been underpaid despite each receiving payment for their services that was substantially more than their full Award entitlements (including overtime, leave and redundancy payments)…..
Excerpt from the court judgment in The Director of The Fair Work Building Industry Inspectorate v Linkhill Pty Ltd (No.7) [2013] FCCA 1097 (20 December 2013):
238. An examination of the totality of the relationships between each of the individual workers and Linkhill, the system and arrangements pursuant to which they worked and the work practices which regulated that work, clearly establishes by reference to the established indicia that each of those relationships were in the nature of employment and not independent contractor relationships. The limited indicia which suggest otherwise do not alter or detract from the central features of the relationships established. Those central features were the fact that the contracts in issue were contracts quintessentially in the nature of contracts of employment for the personal provision of each workers labour to Linkhill. Linkhill reserved to itself control over where, when and to what ends that labour was to be directed and it directed and supervised the performance of the work of each worker on a daily basis. In providing their labour in this way, none of the workers could be said as a matter of fact to have been conducting their own business but plainly did so in the furtherance of and as part of Linkhill’s business. The fact that the workers were required to supply an ABN and did not have taxation deducted from the payments they received from Linkhill and were paid pursuant to invoicing arrangements imposed by Linkhill does not alter these fundamental features of their engagement. The true character of those relations is likewise not altered by the fact that four of the workers concerned had previously entered into written contracts with Linkhill which describe those relations as contracts for services.
239. This conclusion is supported by the evidence summarised in Part 2 of these submissions relating to what occurred at the end of the relevant period of engagement of each of Walker, Darrigrand, Elliott, Najdoski and Lowery. Immediately following the termination of their respective contracts the characterisation of which is in issue in this proceeding, each of those workers entered into a contract of employment with Linkhill. Their evidence is that, under these contracts of employment, nothing changed in relation to the work they had previously performed for Linkhill.[653] Linkhill’s preparedness to explicitly characterise the continuing engagement and work of these individuals as being in the nature of employment, reveals the true character of the previously existing relationships. It also shows that the representations previously made to the contrary by Linkhill, considered in the next Part of this submission, at best merely accorded with Linkhill’s own preferences as to the character of its relationships with the workers, or at worst were a deliberate façade constructed by it to disguise the true character of those relationships.”
Excerpt from The Director of the Fair Work Building Industry Inspectorate v Linkhill Pty Ltd (No.9) [2014] FCCA 1124 (20 June 2014):
ORDERS
(1) A combined penalty of $313,500 is imposed on the respondent for the contraventions declared in The Director of the Fair Work Building Industry Inspectorate v Linkhill Pty Ltd (No.8) [2014] FCCA 225 for the reasons set out in The Director of the Fair Work Building Industry Inspectorate v Linkhill Pty Ltd (No.7) [2013] FCCA 1097.
(2) The penalty referred to in paragraph (1) is to be paid into Consolidated Revenue within 30 days of the date of this order.
(2) The penalty referred to in paragraph (1) is to be paid into Consolidated Revenue within 30 days of the date of this order.
By complaining of the outcome on the Morgan Research website all Linkhill Pty Ltd and Morgan Research have achieved is to widen knowledge of the court judgement and cast doubts on the conduct of the entire Morgan Group.
