How to check if your cleaning provider is making you vulnerable to liability through sham contracting
It’s time to review your relationships with independent contractors and speak out about modern-day slavery, wage theft and unethical business practices.
What is Sham Contracting and is it in my Company?
Sham contracting is a concerning practice where businesses avoid hiring employees and instead engage contractors to bill for their services, often to cut costs and boost profits. These contractors are often vulnerable immigrants who speak little English or with qualifications that aren't recognised in Australia and may feel pressured to accept unfavourable working conditions just to earn a basic income.
This contravenes the Modern Slavery Act of 2018, which mandates that entities operating in or from Australia with an annual consolidation revenue exceeding $100 million must disclose the risks of modern slavery within their operations and supply chains, along with the measures taken to mitigate those risks.
In addition to deliberately underpaying these individuals, businesses may dictate low invoice rates, overwork them, and make them falsely appear as full-fledged employees of the cleaning company, often without clients' knowledge.
As highlighted in the "Lighting Up the Black Market" Report, a concerning 65% of audited cleaning job listings advertised wages below the minimum Award rate. It’s alarmingly more common than you would expect or hope.
Sham contracting is both unethical and illegal as it deceives people like you responsible for engaging a cleaning provider, deprives workers of their rights, and primarily benefits the cleaning company's director or owners.
There’s a high likelihood your current cleaning providers are sham contracting and you’re liable even if you’re ignorant of it.
Business Structure
In Australia Cleaning Providers tend to structure their business in 1 of 2 ways:
Employed Staff - Paid Award Rates, entitled to Sick Days, Holiday, Superannuation and Leave pay. The legal and ethical way.
Contracted Workers - Masqueraded to Clients as employed staff, but are actually individuals coerced into Invoicing below the Award Rate and are not entitled to leave, holiday, Super etc. This is known as a Sham Arrangement.
What are Award Rates?
Award Rates are the minimum standards for pay and conditions that employees should receive in various industries, and they are designed to protect workers' rights and ensure fair treatment in the workplace.
Why do some businesses want to avoid paying Award Rates?
Businesses may avoid paying Award Rates to save money, stay competitive, or protect profit margins. However, it's crucial to remember that illegal underpayment can lead to legal penalties and harm a business's reputation.
Complying with fair pay and labour laws is essential for ethical and sustainable business practices.
How to Determine if your Cleaners are Sham Contracting or Not
You can do this by asking the service provider a few simple questions:
Q. Are your cleaners employed and paid BY YOU or are you subcontracting?
If they answer YES and are employed that’s a great start, but don’t stop there.
Next ask: Q. Are you paying or being paid Award Rates and can you back up your claim with a Work Cover Summary or Cleaner’s Payslips? Typically Award Rates in our industry are $33 per hour with entitlements.
If they answer NO, they are using subcontractors, ask how much their contractors are being paid, and then you can check if that is in line with the minimum award amount.
Depending on the relationship you have with the cleaners on site, ask them:
Q. Are you being paid $33 per hour with entitlements?
If you need help to ascertain if your Cleaning providers are above board, we’re happy to help as best we can, you can also contact the Fair Work Ombudsman to report your concerns and seek assistance: 13 13 94 between 8am – 5.30pm Monday to Friday.
Could you be liable?
Claiming ignorance is now not a valid defence against liability for sham contracting. Businesses are expected to have a clear understanding of their legal obligations and responsibilities when it comes to employment arrangements and worker classification.
Ignorance of the law or unintentional misclassification is typically not considered a legitimate excuse.
The responsibility for holding sham contractors accountable in Australia primarily falls under the purview of the Fair Work Ombudsman (FWO), which is an independent agency responsible for promoting compliance with workplace laws, including issues related to employment status and sham contracting.
If a business is found guilty of sham contracting in Australia, there can be multiple parties held liable, including:
The Employer or Business: The primary entity accountable for orchestrating deceptive employment arrangements is the employer or business. They may face penalties, fines, and legal consequences for misclassifying employees as independent contractors to evade their legal obligations.
Company Directors and Officers: In certain instances, company directors and officers who played a direct role in sham contracting decisions may also face personal liability for their involvement.
Facilitators: Individuals or entities that actively supported or encouraged sham contracting arrangements can also be held liable for their participation in deceptive practices.
Failure to comply may lead to the Minister publicly identifying and revealing details of the non-compliant individual or entity, posing a substantial risk of global reputational harm.
What are the consequences if you’re found liable?
Courts have the authority to levy penalties for sham contracting, and these penalties have indeed been enforced.
The maximum fines are $13,320 per contravention for individuals and $66,600 per contravention for corporations.
In cases where businesses employ multiple sham contractors, the imposed penalties have reached hundreds of thousands of dollars for some companies.
Next Steps
It’s time to review your relationships with independent contractors and speak out about modern-day slavery, wage theft and unethical business practices.
Ensure you’re not liable and raise the bar for ethical employment in the Cleaning Industry.
We’ve been subjected to these appalling conditions, it’s what moved us to unite, stand up and form Fair Company. We stand for a fair dinkum deal for all, it’s the Aussie way.
When you engage our services you can have complete confidence in our ethical structure, our motives and the transparency of our practices.
FAIRER TO YOU
FAIRER TO OUR PEOPLE
FAIRER TO THE ENVIRONMENT
FAIRER TO YOU FAIRER TO OUR PEOPLE FAIRER TO THE ENVIRONMENT