Quest South Perth Holdings Pty Ltd, the master franchisee which formerly operated the Quest on Arlington serviced apartments in South Perth, has been penalised $54,450 and the company’s former manager Ashvin Luchmaya $4290. The fine totalled $58,740 in the Federal Court.
The penalties are the result of FWO legal action commenced in 2011.
The FWO alleged that Quest South Perth Holdings contravened the sham arrangement provisions of workplace laws in 2009 when it purported to convert three employees – two housekeepers and a receptionist – at Quest on Arlington into independent contractors.
Quest South Perth Holdings dismissed the workers and immediately re-hired the two housekeepers as purported independent contractors to perform the same duties. The receptionist was not re-hired after Quest dismissed her.
The FWO alleged the purported contracting arrangement was a sham and the correct relationship for the three workers was as employees.
After part of the FWO’s case was dismissed by the Federal Court and the Full Court of the Federal Court, the FWO lodged its first ever High Court appeal.
The High Court unanimously upheld the appeal in December 2015, ruling that Quest South Perth Holdings’ conduct contravened sham contracting laws.
The matter was referred back to the Federal Court, where penalties have now been imposed against the company and Luchmaya by Justice John Gilmour.
Justice Gilmour found that the contraventions were the result of “Quest’s strategy and desire to engage the employees as independent contractors so their rights and entitlements would not be protected by industrial relations legislation”.
“The FWO submits correctly, in my opinion, that the impact of sham contracting contraventions is that workers believe that they are deprived from the wide ranging entitlements afforded to employees, including minimum rates of pay, annual leave, personal leave, long service leave, parental leave, superannuation, workers compensation, notice upon termination of employment and eligibility to access other protections such as unfair dismissal applications, general protections applications or an application for an order to stop bullying,” Justice Gilmour said.
Justice Gilmour said Quest’s contraventions involved “deliberate and conscious acts designed to circumvent industrial relations legislation and the protections they provide” and found that the impact on the three workers was significant.
After the purported conversion to independent contractors, the receptionist was offered no further shifts, while the two housekeepers were paid a flat rate that did not make provision for entitlements such as weekend and public holiday penalty rates or overtime.
Justice Gilmour found that the conversion of the receptionist “was implemented with the specific intent to allow Quest to terminate her employment without risk of unfair dismissal and to remove her other entitlements”.
David Ridgeway, general manager franchise operations at Quest said the brand is not a party to this action.
“Quest South Perth Holdings ceased to be the franchisee in 2009, and has no legal relationship or connection with Quest Apartment Hotels,” he said.
The company said it is most concerned to ensure this situation is an isolated incident.
“All Quest Apartment Hotels franchisees are required to participate in a new franchisee training programme which includes modules on HR compliance,” he added.
“Further, franchisee HR systems are audited by franchise relationship managers at least annually. We are confident that our training, auditing and operation systems are robust across the current network.”