A single mother of four was forced to borrow money from her parents to pay basic bills and sometimes went without food after the company she worked for underpaid her through an illegal sham contract.
The woman was one of four workers who were ripped off by two labour-hiring firms that were penalised more than $200,000 in the Federal Circuit Court this week.
Labour-hire firms, Easttrac Pty Ltd and Klemtrac Pty Ltd, provided workers to a company called Care Providers which offers in-home personal care and domestic assistance services to elderly and disabled people in Adelaide.
The company holds contracts with local councils, government agencies and non-government organisations.
Two of the ripped off workers performed cleaning and domestic duties, while the other two were personal care workers.
How the scam worked
Easttrac and Klemtrac deliberately misclassified the four workers as ‘independent contractors’, instead of ’employees’, which meant they weren’t paid their minimum lawful entitlements.
The workers missed out on allowances, superannuation, leave entitlements and penalty rates for overtime, weekend and public holiday work that they were entitled to.
In total, the four workers were underpaid $8,354 between February and September 2015.
Impact of the underpayments
Judge Timothy Heffernan said:
“Whilst the amounts of underpayment and non-payment do not appear at first blush to be large, the contraventions had a significant impact on the employees and occasioned them financial stress and worry.”
In the case of the single mother of four, the wage theft caused her to have difficulties in covering basic living expenses, like petrol.
She also felt the need to take out an expensive income protection insurance policy because she had pre-existing medical conditions.
“This made it especially difficult and stressful because she had four children living at home at the relevant time”, Judge Heffernan said.
“There were occasions when she only fed the children and not herself because of lack of money.
“There were times when she could not afford to pay utility bills and was forced to borrow money from her parents.”
The low rate of pay and lack of entitlements resulted in another worker, who had limited education, struggling to set enough money aside for tax purposes and incurring an unpaid tax bill of $5,000.
She was also unable to pay utility bills and went without basic household items.
A third worker said there were occasions when she did not take time off work when she was unwell because she believed that she had no entitlement to sick leave.
What the court found
Judge Heffernan found that the sham contracting activity by Easttrac and Klemtrac was the result of a “strategic decision made substantially for the purpose of saving money”.
Easttrac and Klemtrac were penalised $125,874 and $77,112 respectively.
Leo Welch, who is an owner-operator of Care Providers and was the sole director of Klemtrac at the time of the contraventions and sole director of Easttrac, has been penalised $7,711.
Peter Wallis, a consultant who was responsible for the engagement and management of the affected workers, has been penalised $5,783.
Judge Heffernan said the penalties imposed should deter others from similar conduct.
No excuse for wage theft
Miles Heffernan, Litigation Director at Industrial Relations Claims, said there was no excuse for wage theft.
“We hear from business groups all the time that wage theft is almost always accidental, or unintentional, well we say that is nonsense,” he said.
“This is yet another case where a greedy employer has deliberately set out to rip off their workers by employing them under sham contracts so they don’t have to pay what they’re legally required to do so.
“This is why we are calling for criminal penalties for wage theft, because this sort of thing will continue to happen until we start locking up dodgy bosses.”
If you are not being paid your correct wages and entitlements, or are considering legal action to recover stolen wages, we can help.
Please call our team at Industrial Relations Claims today on
1300 045 466