Avoiding Sham Contracting In The Fitness Industry – Part 2
Contractor or employee? How do I know?
Determining whether a personal trainer is an employee or a contractor is a matter of looking at the circumstances holistically and determining whether the arrangement was in substance an employment or an independent contractor relationship.
There is no single factor or set of factors that will automatically make a personal trainer an employee or a contractor.
Sham contracting is the name given to a situation where an employer misrepresents an employment relationship as an independent contracting relationship. Sometimes this misrepresentation is by mistake. Other times the misrepresentation is made in an attempt to avoid certain legal entitlements that employees are entitled to (for example, minimum wages and leave entitlements).
Sham contracting, if proven, carries heavy legal penalties. These can be imposed against the employer, and/or particular individuals within the employer’s organisation who were involved in the sham contracting (such as HR managers and directors).
The Fair Work Act contains a number of provisions aimed at preventing sham contracting. Under the Fair Work Act, it is unlawful to:
- Misrepresent an employment relationship as an independent contracting arrangement;
- Dismiss an employee to re-engage them as an independent contractor; or
- Knowingly make a false statement to persuade or influence an employee to perform similar work for the employer as an independent contractor.
Organisations that contravene any of the above provisions may face significant legal penalties. The maximum penalty for a contravention of these provisions is $12,600 for individuals and $63,000 for corporations.
Burying your head in the sand about these issues is a dangerous approach.
A complaint from a personal trainer engaged as a contractor can open Pandora’s box, leading to significant costs.
It may be better that gym owners take a prudent and proactive approach to managing these issues instead of waiting for the Fair Work Ombudsman to open the box.
In this 2-part series, Solicitors Scott McKenzie and Adam Colquhoun explain how business can avoid the pitfalls of whether their personal trainers are employees or independent contractors. This has been reproduced with the permission of Australasian Leisure Management as it was an article in Issue 126, 2018.
Authors:
Scott McKenzie is a Director with Velocity Legal and can be contacted at E: scott@velocitylegal.com.au
Adam Colquhoun is Principal at WestmoreJacobs and can be contacted at E: acolquhoun@westmorejacobs.com.au
The views in this feature do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Readers should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.
As seen in Australasian Leisure Management
Justin is the Managing Director of Active Management, which he began January 2004. He offers coaching to businesses worldwide in everything from start up and design to marketing and sales systems. Justin also facilitates four Australian and New Zealand ‘fitness industry roundtables’ events, which allows him to see a huge cross section of business models.