Fair Work Act Liability and Sham Contracting

This assignment involves analyzing a scenario where an employee Athena is threatened by her employer Joanne to sign a contract that changes her employment status from employee to independent contractor. The scenario highlights the application of the Fair Work Act 2009 and Workplace Relations Act 1996, with emphasis on liability and penalties for sham contracting. Relevant case laws such as Colonial Mutual Life Assurance Society Limited v Producers & Citizens Co-operative Assurance Co of Australia Limited (1931) 46 CLR 41, Hollis v Vabu Pty Limited (2001) 207 CLR 21, NSW v Lepore (2003) 212 CLR 511, and Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889 are discussed to illustrate the principles of liability for employers in such cases.

Running head: LAW OF BUSINESS ORGANISATION
Q & A on Business Law
Name of the student:
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Author note

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Table of Contents
Answer to question (a):..............................................................................................................2
Issue:.......................................................................................................................................2
Rules:......................................................................................................................................2
Application:............................................................................................................................3
Conclusion:.............................................................................................................................3
Answer to question (b):..............................................................................................................3
Issue:.......................................................................................................................................3
Rules:......................................................................................................................................3
Application:............................................................................................................................4
Conclusion:.............................................................................................................................5
Answer to question (c):..............................................................................................................5
Issue:.......................................................................................................................................5
Rules:......................................................................................................................................5
Application:............................................................................................................................6
Conclusion:.............................................................................................................................6
Reference:..................................................................................................................................7

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Answer to question (a):
Issue:
The main issue of the case is to determine whether Athena could able to be a party of valid
contract of employment or not.
Rules:
The subject matter of the case is based on valid contractual terms of employment and sham
contracting. In certain situation when an employer states the employee that the official status
of the employee is an independent contractor and asked for making an agreement on that, the
agreement could be treated as the sham contracting. It is to be noted that the term
independent contractor is different from the term employee. An independent contractor is
getting appointed by way of verbal contract and could not claim for the facilities like an
employee (Willis & Mills, 2017). The contract of independent contractor is dealt by the law
of agency. However, in Fair Work Ombudsman Vs Centennial Financial Services (2010) it
has been observed by the Court that an employer is restricted to held an employee to be
treated as independent contractor under sham contracting arrangement. Under section 901
and section 902 of the Workplace Relation Act 1996, any misrepresentation regarding
employment relationship is being prohibited and it has also been observed that an employer
could not threatened an employee to sign the sham arrangement or could not pressurised the
employee to do so (Mathews & Roufeil, 2017). The same principle has been followed in the
case of Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889 where the
court has stated that an employer is bound to maintain all the policies that has been stated
under the agreement and any agreement should be treated as sham agreement if it is sham in
nature. In Fair Work Ombudsman v Happy Cabby Pty Ltd & Anor [2013] FCCA 397, it has
been observed the alleged company has treated its driver as independent contractor in lieu of

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employee with an intention to avoid the hourly rate of payment and casual loading and
therefore, the announcement of the company has been held as sham contract and it has been
noted that the company has misrepresented the facts regarding employment (Knox, 2015).
Application:
In the given case, it has been held that Athena was employed in a restaurant as an employee
on full time basis. However, it has been held that the HR Manager of the restaurant has
forced her to resign from her post with the threat that she will not get any job on future event.
Therefore, the Manager had failed to meet all the requirements under the Workplace Relation
Act 1996 and will be held guilty under section 901 and section 902 of the Act. Further, it has
been held that the contract that was signed by her on subsequent event is sham in nature and
attracts the provision of section 357 and section 358 of the Fair Work Act and the validity of
the contract should be terminated and Athena should be regarded as an employee.
Conclusion:
It can therefore be stated that Athena has all the good grounds to be treated as an employee
and can be a party to valid contract of employment.
Answer to question (b):
Issue:
After studying the case study, the main issue that has been come into the light is that whether
Athena could be treated as an employee after her resign from the post or not.
Rules:
The general rule is that an employee could not hold the post after giving resignation from the
post. However, there is an exception to the rule which has been mentioned under section 357,
section 358 and section 359 of the Fair Work act. According to section 358 of the Fair Work

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Act, an employer is restricted to dismiss or threat an employee with an intention to make him
or her independent contractor (Farbenblum & Berg, 2017). In Fair Work Ombudsman v Quest
South Perth Holdings Pty Ltd [2015] HCA 45, it has been held by the court that an employer
must not misrepresented the employee regarding the contract of employment (Sutherland &
Riley, 2016). In Qantas Airways Limited v Christie [1998] HCA 18 it has been held that an
employer could not terminate or even forced an employee to give resignation from his post
on the basis of an unethical ground. Distinction has been made between an employee and
independent contractor in Sweeney v Boylan Nominees (2006). The court has given
concentration on the nature of employment in this case. In Fair Work Ombudsman v
Northern Enterprises Pty Ltd [2013] FCCA 216, it has been observed by the learned Judge
that a sham contract is at all level should be treated as void and the status of an employee
should not be changed on the basis of the contract and he must not be deprived from the
facilities of an employee (Floyd et al., 2017). Further, the parties should abide by all the
policies mentioned under the employment contract. The Fair Work Act 2009 protects the
interest of an employee in case of a sham contract and it has been mentioned under the Act an
employer is restricted to state an employee that he will be treated as independent contractor
now on or an employer could not misrepresent the employee at any point of time (de
Flamingh & Bell, 2017).
Application:
In this case, it has been observed that Athena was worked as an employee and taken all the
benefit of employee. However, the HR Manager had made her resigned from the post by
threatened her and started to treat her as an independent contractor. However, according to
Northern Enterprises Pty Ltd’s case [2013] FCCA 216, an employer has no right to do all
these things and therefore, the contract that has been signed by Athena on later occasion
should be regarded as sham contract. According to the Fair Work Act 2009, sham contract is

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illegal and should be void in nature. The activities of the employer in this case had attracted
the provisions of section 358 of the Fair Work Act and therefore, should be set aside on the
basis of its illegality.
Conclusion:
Therefore, it can be stated that Athena should be treated as an employee though she had
resigned from her post as the contract is not valid and her employer had threatened her to do
so.
Answer to question (c):
Issue:
The fundamental issue that has been pointed out in this case is that whether the HR Manager
or the restaurant authority had made any breach any federal legislation regarding the contract
that has been signed by Athena or not.
Rules:
The dispute of this part is based on the provision of Workplace Relation Act 1996 and Fair
Work Act 2009. According to section 901 of the Workplace Relation Act 1996, an employer
is restricted to make an employee forced to sign a contract by which the post of the employee
will be changed and the employer is also restricted to misrepresent the employee at any cost
(Kavanagh & McRae, 2017). Further, under section 902 of the Act it has been stated that an
employer could not dismiss the terms of employment of an employee on the basis of any
unreasonable cause. He even could not threaten the employee (Regan & Lee, 2015). In case of
an employer threatened an employee regarding his post and forced him to sign any contract
on the basis, the contract will be regarded as sham contract and will attract the provisions of
the Fair Work Act. It has been stated under section 357 of the Fair Work Act 2009 that an

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employer could not represent an employee as an independent contractor (Capuano, 2016). In
addition, the employer could not able to dismiss an employee from his post without showing
any reasonable cause behind the termination under section 358 of the Fair Work Act 2009.
The employer must not make any false statement about the duties of the employee under
section 359 of the Fair Work Act 2009. In case of any breach to these sections, the alleged
parties will be liable to get penalised under section 536 of the FW Act 2009. Further, it has
been held in Colonial Mutual Life Assurance Society Limited v Producers & Citizens Co-
operative Assurance Co of Australia Limited (1931) 46 CLR 41 that the employer will be
liable for the acts of the employee or for the acts of the sub-contractor. The employer could
not deny this role. The principle has been followed in the case laws like Hollis v Vabu Pty
Limited (2001) 207 CLR 21 and NSW v Lepore (2003) 212 CLR 511. Additionally, in
Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889, court was of the
view that the employers are liable to make all the payments to the employee.
Application:
It has been observed in the case that Joanne had threatened Athena to sign a contract
otherwise it will be difficult for her to find any job on future events. It has also been stated by
Joanne that she will get all the other benefits and she will be treated as an independent
contractor now on. However, Joanne had not met the payment to her and therefore, attracts
the provisions of the Fair Work Act and Workplace Relation Act. Joanne could not show any
reason for changing Athena’s employment position and also threaten Athena by stating that
she will not be provided any further work. Joanne had forced Athena to sign the contract.
Conclusion:
Joanne will be held liable under the respective provisions of the Workplace Relation act 1996
and Fair Work Act 2009 as well.

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Reference:
Capuano, A. (2016). Giving Meaning to Social Origin in International Labour Organization (ILO)
Conventions, the Fair Work Act 2009 (CTH) and the Australian Human Rights Commission
Act 1986 (CTH): Class Discrimination and Its Relevance to the Australian
Context. UNSWLJ, 39, 84.
de Flamingh, J., & Bell, C. (2017). Employment law:'Corporate avoidance'of the'Fair work
Act'. LSJ: Law Society of NSW Journal, (39), 74.
Farbenblum, B., & Berg, L. (2017). Migrant workers’ access to remedy for exploitation in Australia:
the role of the national Fair Work Ombudsman. Australian Journal of Human Rights, 1-22.
Floyd, L., Steenson, W., Coulthard, A., Williams, D., & Pickering, A. C.
(2017). Employment, Labour and Industrial Law in Australia. Cambridge University
Press.
Kavanagh, M., & McRae, E. (2017). Employment law: Protecting vulnerable workers
amendment to fair work act. Governance Directions, 69(4), 241.
Knox, A. (2015). The temporary agency work industry and its regulatory environment:
Evidence from Australia (pp. 95-125). Farnham: Gower Publishing Limited.
Mathews, R., & Roufeil, L. (2017). If it quacks like a duck: Independent contractor or
employee?. InPsych: The Bulletin of the Australian Psychological Society Ltd, 39(2),
30.
Regan, L., & Lee, C. (2015). Workplace law: Review of the fair work act: What will
change?. Proctor, The, 35(4), 38.

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Stewart, A. (2016). Continuity and Change in Australian Labour Regulation: Work Choices, Fair
Work and the Role of the ‘Independent Umpire’.
Sutherland, C., & Riley, J. (2016). Major court and tribunal decisions in Australia in
2015. Journal of Industrial Relations, 58(3), 388-401.
Willis, E., & Mills, A. (2017). Lessons for employers in landmark sham contracting
case. Governance Directions, 69(7), 419.