Research company hit with $200k in penalties for sham contracts

The Fair Work Ombudsman (FWO) has secured $197,000 in court-ordered penalties against a Sydney health and wellness research company.

Doll House Training, which operated a business conducting research into robotics, coding, and artificial intelligence, invested in offering its employees contracts that were indicative of resulting in real employment.

Doll House Training breached the Fair Work Act after it terminated or threatened to terminate three workers’ employment in order to re-engage them as independent contractors to perform substantially the same work.

Along with this, the company also misinterpreted to the workers that they were or would be engaged as independent contractors when, in fact, they continued to be employees.

After numerous employees went to the FWO for assistance, an investigation was opened into the company.

In October 2020, Doll House Training emailed each worker a “new contract” titled “Independent Contractor Agreement” (ICA), which included a number of terms indicative of it being a legitimate contract of employment.

Doll House also represented to the workers that they had to provide Australian Business Numbers and submit invoices to be paid.

Justice Scott Goodman, who oversaw the case, stated in his judgment that the terms of the ICA were “terms of employment” because the “rights and obligations” suggested that the workers “were contracted to work for Doll House’s business rather than any business of their own”. Thus, eliminating them from being independent contractors.

Justice Goodman found that there was a “clear power balance” between Doll House Training and its employees. Especially for two of the workers who each signed the contract because they felt that they had “no alternative”.

The company also failed to pay the workers in full at least monthly during their employment and failed to comply with a Notice to Produce, issued by a Fair Work inspector that required the company to produce specific documents and records.

Justice Goodman described some of the workers as being “persons with disabilities, who had been searching for work and who were owed payments equivalent to the minimum wage”, and one worker’s evidence that “the non-payment caused her financial and other stress and that, as a result, she needed to borrow money from a short-term lender”.

The company’s failure to comply with the Notice to Produce directly hindered Fair Work’s ability to investigate its malpractice; this therefore, warranted more penalties.

“We treat sham contracting particularly seriously. We will pursue any employer who thinks they can take advantage of the power imbalance they have over workers, including those with disabilities as in this matter, some of whom felt that they had no alternative but to accept a sham contract or be jobless,” said Fair Work Ombudsman Anna Booth.

“Enforcing the Fair Work Act’s prohibitions on sham contracting helps to protect the fundamental rights of employees. If businesses unlawfully misclassify workers, it can lead to them not being paid the wages and entitlements the law provides to them as employees.”

The sham contracting in this situation was especially deplorable when you consider the overwhelming power imbalance between the company and those of its workers who have a disability.