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Massage business prosecuted for sham contracting

Too many employers still assume that as long as a person has an ABN, they can safely be engaged as an independent contractor. This is simply not the case. Another alleged sham contracting case involving Lu's Healthcare Pty Ltd is a timely reminder of the importance of correctly classifying each worker as either an employee or an independent contractor.  If found guilty, the business manager faces possible penalties of up to $10,200 per breach and the company faces maximum penalties of up to $51,000 per breach.

The Fair Work Ombudsman has commenced legal proceedings against Lu's Healthcare Pty Ltd, which operates massage centres in Melbourne's CBD, Richmond and Frankston, for sham contracting.

Also facing legal action is business manager Kun Wang, of Melbourne.

The Fair Work Ombudsman claims Lu's Healthcare and Ms Wang breached workplace law when they convinced two therapists to work under their own Australian Business Number (ABN).

The therapists were allegedly told that they would have to pay an "administrative fee" if they wanted to be employed using a Tax File Number (TFN).

The Fair Work Ombudsman says the two therapists should have been classified as employees and paid under the Health Professionals and Support Services Award 2010.

The two worked primarily at Lu's Healthcare Richmond at the Victoria Gardens shopping centre.

The Fair Work Ombudsman says neither was conducting their own business and Lu's Healthcare and Ms Wang exercised control over the way they performed their duties.

Court documents allege the workers should have been paid minimum hourly rates, a laundry allowance, casual loadings and penalty rates for overtime, shift, weekend and public holiday work.

It is further alleged that hundreds of dollars were unlawfully taken from their wages for being late for work - a breach of the business' formal 'Code of Conduct'.

The Code lists a range of transgressions for which certain amounts would be arbitrarily taken from their take-home pay.

Fines of up to $100 applied for being late to work or absent without notice.

For a 'lack of passion or good hospitality', therapists could be fined $50 - and for talking or speaking on the phone during a massage, they could lose their jobs.

Under a 'disturbance of the work environment' category, employees could be fined $20 for 'noise making or playing around' and sleeping or lying on massage tables.

The punishment for 'resistance to hard work' was being 'put back into apprenticeship again'. The Code also stated that 'employees with other problems will undergo serious punishment'.

The Fair Work Ombudsman discovered the Code of Conduct, as well as alleged underpayments, when it investigated complaints lodged by the two therapists.

The pair were allegedly underpaid a total of more than $54,000 between December, 2011 and June, 2013. Record-keeping and pay slip laws were allegedly also breached.

Ms Wang was allegedly involved in Lu's Healthcare committing several breaches of workplace laws. She faces possible penalties of up to $10,200 per breach. The company faces maximum penalties of up to $51,000 per breach.

Source: Fair Work Ombudsman Media Release 20 January 2015

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Read our earlier blog on  Independent contractor vs employee: you need to get it right

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