Activewear fashion label Lorna Jane is under fire for allegedly breaching copyright laws with an Instagram user in Brisbane claiming a photo of her was used on the brand’s T-shirt range without permission.

Nineteen-year-old Lydia Jahnke told the Courier-Mail she was a big fan of the activewear brand and had been posting photos of herself wearing Lorna Jane apparel on her personal Instagram account.

The photo in question depicts Jahnke on top of a mountain wearing a Lorna Jane shirt and was originally posted to her Instagram account.

Jahnke claims the same image later appeared on a range of Lorna Jane T-shirts, which retail for $59.99, with the words: “The woman on top of the mountain did not fall there”.

She told the Courier-Mail she is seeking compensation from Lorna Jane because the company did not ask for permission use the photo, which she owns the copyright for.

“I was pretty excited until it was brought to my attention that what they did wasn’t legal… they never asked for my permission to use the photo,” Jahnke said.

Jahnke said she emailed the company to ask for a free T-shirt, which the company provided, before contacting her lawyer.

Her lawyer, Ian McDonald of Simpsons Solicitors, claims Lorna Jane has breached the Copyright Act. He believes his client will be entitled to damages, including the normal licence fee and profits from sales.

Jahnke is also alleging Lorna Jane lied by saying that she knew about the image prior to production and says the shirt was on sale for months before she found out about it.

A spokesperson for Lorna Jane told the Courier-Mail the matter is “currently being resolved between the parties” and the company will not be commenting further.

John MacPhail, director at NDA Law, told SmartCompany this morning under normal circumstances, copyright in a photo usually belongs to the person who took the photo.

“Clearly Lydia did not take that photo… it had to have been an assignment to her for that to happen,” he says.

MacPhail says if Jahnke is the copyright owner, the terms and conditions of Instagram are “quite clear”.

“You can’t take it (the image) out of the Instagram universe unless you have specific authorisation,” he says.

MacPhail says if this is the case, it would be an infringement of copyright and Jahnke would be entitled to damages.

One argument for the defence, however, could be that she has now taken a free shirt and waived her rights in accepting it, MacPhail says.

MacPhail says if there is a clear case of infringement and the shirts are still being sold, a court can award additional damages.

“That is an interesting aspect, if really trying to mitigate risk you would pull the line while this is going ahead,” he says.

“But I can understand why it wouldn’t want to pull the lines off the shelf; fashion is a fast-moving market, in a year’s time, there won’t be much call for the shirts.”

MacPhail says the case highlights the importance of asking permission when it comes to content and that one of the biggest lessons is once lawyers get involved, the money tends to go up “quite a bit”.

“If you don’t (ask), and it comes down to it, you might be up for a lot of money,” he says.

“If it’d (Lorna Jane) just got consent in the first place, it would have avoided all legal issues and lawyer costs.

“For small business, that’s quite a lesson there.”

SmartCompany contacted Lorna Jane and Ian McDonald at Simpsons Solicitors but did not receive a response prior to publication.

SmartCompany was unable to contact Lydia Jahnke prior to publication.

The Fair Work Commission has awarded a former Coles employee close to $4500 in compensation after she was dismissed over a verbal and physical altercation with two teenage girls suspected of theft.

Kellie Smith worked as a night-fill manager at the Coles St Claire store in South Australia from July 2014 until her dismissal in May this year.

She was sacked for being allegedly involved in serious misconduct, however, Smith claimed she only acted in self-defence and was provoked after being “assaulted and abused”.

Smith took the matter to the Fair Work Commission, arguing Coles’ decision to fire her was not proportionate to the events that took place and that she should be reinstated.

The former night-shift manager also claimed she had not received proper training from Coles on how to deal with shoplifters and, if she had, she would have likely handled the situation differently.

Meanwhile, Coles argued the dismissal was justified because Smith had breached the supermarket giant’s code of conduct and procedure for handling threatening situations and had received appropriate training.

Coles also claimed Smith escalated the situation, which ultimately led to her allegedly grabbing one of the customers by the collar and swearing at them.

The Fair Work Commission heard that during the course of the altercation with the two teenagers, Smith used words to the effect of “I will have you up for fucking assault” after one of the customers pushed her.

After this, Smith allegedly pushed the customer back and grabbed her by the collar.

After two other Coles employees intervened, the teenagers left the store but were arrested later that evening.

Police returned a bottle of soft drink to the store later that night.

Commissioner Peter Hampton ruled that while Smith was motivated by the need to protect the interests of Coles, the former night-fill manager’s actions were “inappropriate and had the effect of quickly and unnecessarily escalating the conflict”.

On this basis, Commissioner Hampton found there was a valid reason for Smith’s dismissal, but he said found the sacking was harsh due to a “lack of notice or pay in lieu”.

Because of this, Smith was awarded $4460 plus superannuation.

However, Smith was not reinstated.

Employment law specialist and partner at Swaab Attorneys, Warwick Ryan, told SmartCompany this case highlights how important staff training is.

“Policy is one thing, but I think staff training is important because what was obvious in this case was emotions got in the way,” Ryan says.

“I think training helps in that regard. The second thing I saw in this case was if you want to terminate someone abruptly for serious misconduct, then you’ve got to treat it seriously. You can’t let the person sit around in your workplace for the next week.”

SmartCompany contacted Coles for comment but did not receive a response prior to publication.

SmartCompany was unable to contact Kellie Smith for comment.

The former head of a business specialising in search engine optimisation has been found guilty of breaching his duties as a company director.

Oliver Wood, the former director of SEO Company Pty Ltd, was convicted by a jury in the Perth District Court earlier this month after withdrawing more than $29,000 from the company’s bank account for his personal use.

The eight-day trial resulted in Wood being convicted of three counts of using his position as director of SEO Company to dishonestly gain an advantage, according to a statement from the Australian Securities and Investments Commission.

The verdict comes after Wood pleaded guilty to four counts of making a false statement in a document lodged with ASIC.

Wood is currently on bail and will be sentenced later this week.

The Director of Public Prosecutions is prosecuting the matter.

This is not the first time this year an investigation by the corporate watchdog has led to a guilty verdict against a former company director.

ASIC regularly pursues action against company directors it believes have breached their duties or made false statements.

In July, the former director of a collapsed New South Wales beauty chain was jailed for two years.

The sentence was handed down after the man pleaded guilty to misappropriating $2.6 million from the business shortly before it was placed in liquidation.

Ursula Hogben, general counsel at LegalVision, told SmartCompany directors have a legal duty to a company as outlined in the Corporations Act.

“The key duties include to act in good faith, to avoid conflicts of interest, a duty not to make improper use of information or position and a duty to ensure the company keeps accurate financial records,” Hogben says.

“In this case, Mr Wood withdrew money from the company for his own personal use. This could be a breach of the duty not to make improper use of his position, and or could have caused detriment to the company by withdrawing the money for personal use to gain an advantage for himself.”

Hogben says founders and managers need to understand any payments made from a company needs to be for a proper use.

“For example, individuals can be paid salary, shareholders can be paid dividends, and – in certain circumstances – a company may make a loan to an individual,” she says.

“All transactions by a company need to withstand scrutiny that he purpose was a proper purpose, and the amounts were not in bad faith and or improper.”

SmartCompany was unable to contact Oliver Wood prior to publication.

Two former 7-Eleven franchisees will be asked to defend their pay practices in court, amid claims the store they ran underpaid a dozen workers, including international students, around $84,000.

The former owners of the store on Royal Parade in the Melbourne suburb of Parkville, Haiyao Xu and Yiran Gu, are being taken to court by the Ombudsman, along with their company, Hiyu Pty Ltd.

It is the latest 7-Eleven store to be caught up in the controversy surrounding underpayment claims since the franchise became the subject of a national inquiry into wage fraud last month.

According to Fair Work, 12 workers at the Royal Parade store were being paid flat rates of $11 an hour in some cases.

The alleged underpayments, which occurred between September 2013 and 2014, came to the attention of the Ombudsman last year following a series of audits.

The Ombudsman has also indicated that the pay practices of another Melbourne 7-Eleven store owned by the pair, located on the corner of Flinders and Spencer Streets, are under investigation.

Fair Work Ombudsman Natalie James said in a statement the franchisees had allegedly made false entries to head office to make it appear like the business had been paying employees award rates and staff had worked less than they had actually worked.

While the former workers have now been back-paid, the Ombudsman is still seeking court orders to ensure the business owners comply with workplace laws in future and notify the Ombudsman if they sell the other business or engage other workers in any other business.

Will Snow, senior associate at law firm Finlaysons, told SmartCompany this morning even though the business is no longer operating and the owners have sold the franchise, they are still facing Fair Work proceedings.

“They have already sold the business – that has not stopped Ombudsman continuing to investigate,” he says.

Snow says Fair Work is also still pursuing the case despite the workers have been back-paid to make sure the former franchisees comply with workplace laws in future.

“And also that it inform Ombudsman if it plan to sell other 7-Eleven store or engage workers in any other business,” he says.

“Although they have fixed the problem by paying back wages, it will still be involved in a court case which will create risk for their business and cost time and money and legal costs.

“So consequences here are employers fix up issue, make the payments, but notwithstanding it looks likely it (their business) will be involved in continued scrutiny with the Ombudsman into foreseeable future, depending on the orders the court makes.”

Snow says the ramifications of the ABC andFairfax investigation into 7-Eleven has affected both individual franchises as well as the parent company.

“There’s a question here about actual knowledge of all the parties involved, between franchisor franchises,” he says.

Snow says the lessons for other franchisees include having an open discussion with franchisors about responsibilities.

“You need to understand these are the responsibilities, if they are concerned about workplace laws or underpayments, they should discuss with franchisors,” he says.

“It’s good to know the Ombudsman can look back over historical arrangements, you may have sold business  a couple of years ago, but any underpayment issues can still be looked into from back then.”

SmartCompany contacted 7-Eleven but did not receive a response prior to publication.

SmartCompany was unable to contact Hiyu Pty Ltd or Haiyao Xu and Yiran Gu prior to publication.

A Swiss chocolate maker has been granted permission to trademark one of its malted chocolate products in Australia, despite competitor Mars Australia successfully objecting to the trademark bid last year.

Delphi Chocolate Manufacturing S.A. applied last year to register the trademark for its Maltitos product in Class 30, which covers confectionary, biscuits and chocolate.

But food giant Mars Australia objected to the trademark bid on the basis that is would be likely to deceive or cause confusion amongst shoppers with its popular chocolate brand Maltesers.

The Register of Trademarks agreed with Mars and in December 2014, the company successfully opposed Delphi’s bid.

However, Delphi appealed the decision and it was granted permission to register the trademark by Justice Christopher Jessup in the Federal Court on October 1.

In the case, Mars Australia argued the Maltitos mark would be “deceptively similar” to Maltesers if it was used on confectionery products, especially if this was done in similar lettering, font and colours.

However, Jessup said he was “unpersuaded” as a “lay person” that shoppers could confuse the two brands as there are “limited similarities” between the two trademarks.

Mars also put forward the argument that given its established reputation in the market, Delphi’s use of the Maltitos brand in Australia could deceive or cause confusion.

Jessup accepted that Maltesers “is strong embedded in the consciousness of many of those of average intelligence” and has “a very widespread, solid reputation in the area of packaged confectionary”.

But Jessup said this actually works against Mars’ argument.

As Caroline Ryan, special counsel at King & Wood Mallesons explains on IP Whiteboard, Jessup said Maltesers’ strong reputation would not make it more likely for consumers to think the two products come from the same source.

“In fact, the strength of Maltesers reputation actually meant consumers would be less likely to be deceived or confused,” Ryan said.

Gerald Chew, general counsel at Petra Foods, owner of Delfi Chocolate Manufacturing, told SmartCompany in a statement Petra Foods is "extremely pleased with the outcome". 

"The Federal Court has come to a fair decision after considering all aspects of the case objectively," Chew says. 

But in a statement issued to SmartCompany, a spokesperson for Mars Australia said the company thought it was important to pursue the case and "will not shy away from continuing to vigorously protect our brand assets in all their forms". 

"Mars invests heavily in its brands and trademarks, with some of our brands being among the most recognised in the world," the spokesperson says. 

"We have developed a strong reputation for Maltesers in Australia and, in buying this product, consumers have an expectation of quality, freshness and a particular taste. We are, therefore, naturally disappointed by the decision and are taking further legal advice."

NDA Law director and partner John MacPhail told SmartCompany this morning Mars was “unlucky” in this case.

MacPhail says while some trademark disputes come down to whether two marks are “substantially identical”, in this case Mars was arguing the two products would be “deceptively similar”.

“The test was not whether someone picking up the products would think these two are the same but that they are from the same trade source,” he says.

MacPhail says in the fast-moving consumer goods category, shoppers made quick decisions between products and for this reason, he says this could have strengthened Mars’ case.

MacPhail says the court’s finding is unusual as in trademark law, the first syllable of a word is usually given prominence. In this case, Maltesers share the same first syllable and the same number of syllables.

“What ultimately brought them down was Maltesers are so well-known and have such a strong reputation,” he says.

“They became a victim of their own success.”

*This article was updated at 5.17pm on October 12 to include comments from Mars Australia and Petra Foods, owner of Delphi Chocolate Manufacturing S.A.

Airbnb is one of two companies to enter enforceable undertakings after the corporate watchdog found the accommodation site may have breached Australian Consumer Law for “drip pricing”.

Drip pricing refers to a practice whereby businesses do not disclose the full price of a product or service initially but instead drip feed the consumer the overall price bit by bit.

The Australian Competition and Consumer Commission began a crackdown on “drip pricing” last year.

The ACCC said today it has accepted enforceable undertakings from Airbnb Ireland and a competitor, Vacaciones eDreams, for allegedly engaging in misleading and deceptive conduct by failing to disclose mandatory fees prominently on their platforms.

The watchdog believes both companies may be in breach of Australian Consumer Law because of the alleged conduct, which took place between November 2012 and November last year.

The breaches relate to occasions on both websites where service and cleaning fees were not displayed on certain pages of the website where they should have been.

ACCC chairman Rod Sims said in a statement the issue is a concerning one from both a competition and consumer perspective.

“Drip feeding consumers with information about charges can cause detriment to competition and result in consumers paying a higher price than the advertised price or spending more than they realise,” he said.

“The law does not prevent traders from charging fees. However, it does require that fees are disclosed clearly to avoid consumers being misled.”

Both companies have acknowledged the ACCC’s concerns and agreed to enter into consumer law compliance programs as a result of the undertakings.

“We’ve taken note of the ACCC’s concerns and we’ll be working to make sure our platform addresses those concerns,” a spokesperson for Airbnb told SmartCompany this morning.

Ian Ramsay, professor of commercial law at Melbourne University, told SmartCompany enforceable undertakings are a popular method by which the ACCC attempts to improve compliance.

“Rather than just to punish companies, we see methods to improve compliance to protect consumers,” he says.

“And indeed other regulators use this a lot.”

But Ramsay says the action will likely come as a surprise to the companies concerned.

He says the lesson for other businesses is to check how product pricing is displayed on their websites and to make sure they don’t engage in drip pricing.

“This is because enforcement action from the ACCC comes at a cost to the reputation of the company, even if an enforceable undertaking means there is no fine imposed by the regulator,” he says.

“It might also mean consumers heading to competitors who haven’t been the subject of enforcement action.”

SmartCompany was unable to contact Vacaciones eDreams prior to publication.

A Melbourne-based mortgage firm has been forced to change some of its print and online ads after the corporate watchdog found some of its claims, such as a “100% success rate”, were potentially misleading.

Elite Mortgage Brokers, a Chinese-language based firm in the Melbourne suburb of Blackburn, ran a series of online and print advertisements between October last year and March this year with claims including “100% success rate”, “pre-approvals within 15 minutes”, “Melbourne’s largest Chinese mortgage broker” and “matching of all banks’ interest rates”.               

The Australian Securities and Investment Commission is concerned the statements, in particular the claim of a “100% success rate”, are misleading because of the suggestion credit would be approved for all applicants.

ASIC deputy chairman Peter Kell said in a statement the corporate watchdog is also concerned other claims could also not be substantiated.

“All representations made in advertising of credit-related products, including representations regarding the size of a business or the nature of services provided, must be accurate and able to be substantiated to avoid consumers being misled,” he said.

“This extends to ensuring consumers from non-English speaking backgrounds are not misled or deceived by advertising in a foreign language.”

Priscilla Ng, lawyer at LegalVision, told SmartCompany this morning the phrase “100% success rate” could be held to be misleading and deceptive if found to be untrue, inaccurate, unable to be substantiated or subject to various limitations.

Catherine Logan, principal at LegalVision, also told SmartCompany businesses found guilty of providing false or misleading representations could be penalised substantially under Australian Consumer Law.

“The fines are of up to $1.1 million for corporations and $220,000 for individuals,” she says.

Small businesses should take care with the words used in their advertising, Logan says.

“Businesses should note that some of the words used as a hook in advertising which are dangerous and so powerful that they often create an impression that cannot be cured with fine print or disclaimers, no matter how prominent,” she says.

She says some other examples of these types of words include the word ‘free’, ‘cost price’, ‘cost plus $5’, ‘new’, ‘cheapest’, ‘sales and ‘discount’.

Logan says when considering the use of these words or phrases, businesses should consider what the word or phrase means, not just for the business but for the part of the community that will hear or see it.

SmartCompany contacted Elite Mortgage Brokers but did not receive a response prior to publication.

The store manager of a shoe store in Canberra has plead guilty to stealing $70,000 from her employer by creating almost 700 fraudulent receipts over a period of more than two years.

The ACT Supreme Court heard on Tuesday 58-year-old Donna Hogan stole the funds from the unnamed Civic-based shoe store in a total of 697 fake transactions over two-and-a-half years from December 2011, Fairfax reports.

Hogan, who is due to be sentenced next month, told the court she processed false refunds for shoes under the names of former high school friends and would take the cash out of the store’s register to buy things for herself, spending most of the money on clothes.

The court heard Hogan is undergoing counselling for post-traumatic stress disorder and other psychological issues, which her legal team argued drove her to steal the money.

Hogan has paid more than $61,000 back to the shoe company.

Brett Warfield, chief executive of Warfield and Associates, told SmartCompany this morning employee theft is one of the biggest risks for small businesses.

Warfield says voided transactions and refunds are two common ways employees steal from small businesses, with countless examples of “no one looking at refund reports”.

“The main thing is for businesses to understand their system and get regular reports on voids and refunds, that’s the biggest tip we give people,” he says.

Warfield says voids and refunds are similar because each allows an unrestricted person to take cash out of a till. His advice to business owners and managers is to look at their reports weekly.

“When you have multiple people using a till… it can be very hard for a business to identity which has done the transactions,” he says.

Sylvain Mansotte, chief executive of Fraudsec, told SmartCompany this morning all businesses suffer from fraud, citing recent research that suggests on average 5% of an organisation’s revenue goes to covering losses associated with fraud and corruption every year.

 “Whenever you go shopping, 5% is the cost of fraud. Anything in that can be done by business to reduce that will benefit the customer,” he says.

Mansotte says some of the red flags of fraudulent behaviour among staff include if a person is dramatically changing their lifestyle.

He says a small business can do a lot to offset the risk of fraud, especially by taking advantage of its best assets: other staff members.

“It might be hard for a small business to afford to put cameras everywhere, so it needs to rely on their own staff if someone is doing the wrong thing,” he says.

“It is highly likely others might have known what is going on with that person.”

Mansotte says combating fraud is also about putting mechanisms in place for people to report suspicious activity anonymously.

“It’s also important with stores with inventory to check it every now and then,” he says.

“Those returns should have been seen in the store somewhere.

“It’s really important to do your stocktake. It doesn’t cost a lot of money to do that.”

Mansotte says the same rules apply to businesses of all sizes and if a business does not have a great ethical culture, it can filter down.

 “If at the top there isn’t the right ethical culture, it’s highly likely at bottom of food chain people putting their fingers in the pie as well,” he says.

An online homeopathy store has been fined more than $100,000 after the Federal Court found it had made misleading representations about the effectiveness of whooping cough vaccinations and homeopathic alternatives to the vaccine.

Federal Court Justice Melissa Perry fined Homeopathy Plus! and its director Frances Sheffield $115,000 and $23,000 respectively after finding the business had breached Australian Consumer Law in a ruling handed down in December 2014.

The case involved a series of articles that were first published on the business’s website in 2012 that claimed whooping cough vaccine is “unreliable at best” and “largely ineffective” in preventing the condition, and that homeopathic remedies are a proven safe and effective alternative.

The Australian Competition and Consumer Commission ordered the articles be removed in April 2012, however Homeopathy Plus! reinstated the material in January 2013, which prompted the consumer watchdog to initiate legal proceedings.

In addition to the hefty fines, Perry has order the company to pull existing articles, stop publishing articles and be restrained from making references to whooping cough-related claims for a period of five years.

ACCC Commissioner Sarah Court said in a statement the potential consequences of making such statements were “extremely serious”.

“In this case, there was a real risk that consumers might be influenced by the representations not to use the whooping cough vaccine and instead to rely solely on homeopathic products for the prevention of whooping cough,” she said.

“This is against the advice of medical professionals and the Commonwealth Department of Health.”

Court said the onus is on businesses to make sure any statement or representation made about the effectiveness of a particular product is “accurate and supported by adequate scientific evidence”.

“It is no excuse that the person making false or misleading representations genuinely believes in a particular viewpoint and is a passionate advocate for a particular practice,” she said.

Alistair Little, partner at TressCox Lawyers, told SmartCompany this morning the heavy penalties handed down by the judge reflect concerns that such claims might encourage people not to take the current vaccine, exposing them to risk of contracting whooping cough.

Little says the judgment appears to have taken particular note of the public health issue arising from people not having immunity to whooping cough, which is a highly contagious disease.

“The public health issue seems to be the driving force behind the high penalties,” he says.

“I think there’s a particular risk for any business wishing to make claims regarding products that might have an impact on public health.

“Whether negative comments about existing treatments such as vaccines or positive claims about products that you sell, if there might be an impact on public health, that’s something the courts and ACCC will take dim view of.”

Little says the real message for other businesses is to not make claims about the efficacy of certain products or treatments “unless you have scientific proof”.

“You really should not make claims regarding health... in the absence of strong scientific evidence to support those claims. In absence of scientific proof, don’t make the claims,” he says.

Little says the ACCC has been determined to crack down on these sorts of claims in recent years, especially with regards to various weight-loss products and slimming teas.

SmartCompany contacted Homeopathy Plus but did not receive a response prior to publication.

SmartCompany was unable to contact with Frances Sheffield prior to publication.

A McCain Foods employee has won his job back after originally being sacked for fighting in the workplace.

Peter Bridges launched an unfair dismissal claim before the Fair Work Commission after he was fired in September for defending himself against an aggressive co-worker who started yelling at him in the lunchroom.

While Bridges did not strike his co-worker, the commission heard the electrician did have hold of the other man’s clothing.

Bridges argued he acted in self-defence and his actions did not justify a dismissal. The other employee also lost his job.

The commission ruled that while McCain had a valid reason for terminating Bridges’ employment, the manner in which it was done was harsh.

“The punishment of dismissal was clearly disproportionate to the misconduct of the applicant,” Commissioner John Ryan said in his ruling.

Because of this, McCain Foods has been ordered to reinstate Bridges.

However, the electrician was not awarded remuneration for the loss of about five weeks’ pay because Commissioner Ryan felt it was a sufficient penalty for being involved in the workplace scuffle.

Employment lawyer Peter Vitale told SmartCompany the manner in which the commission dealt with this particular case was “slightly unusual”.

“The commission held a hearing before the employee was dismissed in order to assist in resolving a dispute about the investigation by his employer into his conduct,” Vitale says.

“However, in the unfair dismissal case, the commission found that the employer had a valid reason for termination, based on the commission’s own earlier findings, but the dismissal was harsh.”

Vitale says reinstatements are a relatively rare remedy enforced by the Fair Work Commission.

“Even though the Fair Work Act designates reinstatement as the primary remedy in unfair dismissal cases, only a few percent of unfair dismissal cases result in reinstatement being ordered,” he says.

“In this case, the commission considered the employee’s lengthy, unblemished service, his age and the difficulties he might face finding other employment and the fact that he did not initiate the incident with the other employee as significant consideration supporting the order to reinstate.

“It is also worth noting that the commission did not award the employee five weeks’ wages lost between the termination and the hearing, on the basis that the loss of wages was a suitable ‘penalty’ for his conduct.”  

SmartCompany contacted McCain Foods but did not receive a response prior to publication.

SmartCompany was unable to contact Peter Bridges for comment. 

A former sales executive at an online travel agency who filed for unfair dismissal after she was not granted a request for flexible working arrangements following maternity leave has lost her case before the Fair Work Commission.

The Fair Work Commission heard how Catarina Reale worked for a subdivision of online travel agency Helloworld called Qantas Holidays and Viva! Holidays from February 2008 until June this year as a full-time sales executive.

In February 2011, Reale left for maternity leave and then took several sequential periods of leave to take care of her children.

While Reale planned on returning from maternity leave in June this year, the commission was told she sent an email to her employer in April indicating she wished to trial a temporary part-time role, with the goal of eventually returning to full-time work within 12 months.

Helloworld responded to Reale’s request by saying there were no part-time positions available, saying the business had undergone a downsizing period and had limited ability to offer part-time roles.

Reale argued her employment agreement included a provision that allowed an employee entitled to parental leave allowances to return from a period of leave on a part-time basis until the child reaches school age.

The employer again indicated it could not fulfil Reale’s request, but said she still had a full-time role to return to if she wanted it.

Reale ended up emailing them saying she felt she had been forced to resign and later submitted an unfair dismissal application to Fair Work.

Fair Work Commission senior deputy president Jonathan Hamberger noted the primary issue he needed to determine was whether Reale was dismissed by her employer or whether she had resigned.

In handing down his decision this week, Hamberger said he was satisfied Helloworld had “reasonable business grounds” for refusing Reale’s request for part time work.

“I can certainly sympathise with the applicant’s circumstances and I can readily appreciate that she felt she had no choice but to resign rather than return to work on a full-time basis,” he said.

“However, given my finding that the respondent had reasonable business grounds for its refusal to convert her employment to part-time, I am not satisfied that it was the action of the respondent – rather than her personal circumstances - that forced her to resign.”

Rachel Drew, partner at TressCox Lawyers, told SmartCompany this morning the case appears to hinge on the fact the worker did give her resignation.

“It found she was not forced to resign,” she says.

“The commission found she did have an option, which was to choose to return to full-time work”.

Drew says the case highlights that small businesses must be aware of obligations surrounding parental leave and flexible working arrangements.

She says employees have entitlements to time off work without pay and also to ask for changes to roles on returning, which can include retuning to work on a part-time basis.

“Employers need to carefully consider if it can accommodate part-time, including looking at the nature of the role and any genuine need for role to remain full-time,” she says.

Drew also says it is up to businesses to show “reasonable consultation” with employees in similar situations.

“The message for a small business is that it must maintains very open lines of communication with any employee trying to return from a period of parental leave and any employee attempting to negotiate flexible working arrangements,” she says.

Drew says the case is a good example of how difficult it can be for an employer to manage flexible working arrangements and highlight the importance of responding to requests in a careful way.

“It shows the Fair Work Commission will find in favour of an employer if it can show a reasonable response to an employee’s request,” she says.

SmartCompany contacted Helloworld but did not receive a response prior to publication.

SmartCompany was unable to contact Catarina Reale prior to publication.

How many contracts did you enter into today? The answer may surprise you. Though the prevalence of contracts in the world of commerce is taken as a given, the importance of contracts in everyday life is often overlooked. Almost everything individuals do - from buying a cup of coffee, to online shopping, to signing on to a phone plan - is regulated by the rules of contract law.

Despite this, coming to grips with contract law is no easy task. This is partly because the rules are not found in a single document. They are instead scattered across multiple sources. Many of the rules are found in judges decisions, some of which are centuries old. To understand, for example, the rules regulating the renegotiation of contracts, the starting point is an 1809 English decision about a ship’s crew who agreed to sail their vessel to its home port short-handed in exchange for extra pay.

Further rules are found in a miscellany of legislation. This means the answer to an apparently simple question often begins with an account of centuries-old English court decisions and ends with an explanation of modern legislation. It’s not surprising most laypeople feel ill-equipped to grapple with their own legal dilemmas.

Long history of planned reform

There have long been proposals to reform contract law to make it more accessible and modern. In 1992, the Law Reform Commission of Victoria published a proposal to sweep away the complex web of Australian contract law and replace it with a code which consisted of just 27 clauses. The proposed document was written in plain language, with broad principles which could be adapted to the huge variety of cases which come before the courts.

Though the 1992 proposal never gained momentum, the notion of a contracts code has had enduring appeal. In 2012, the Commonwealth Attorney General’s Department released a discussion paper which canvassed the possibility of introducing a code of Australian contract law. People debated the benefits and costs of such a reform.

Disappointingly, the impetus behind the 2012 paper appears to have disappeared with the change of government in 2013. This is despite support for the idea that a contracts code could significantly benefit both consumers and business, and the efforts of a group of academics from the University of Newcastle who have created a comprehensive draft code.

One benefit the discussion paper highlighted was the possibility of using codification to harmonise Australian law with the law of our major trading partners. This could reduce the barriers to trade and reduce the cost of legal advice for businesses which operate both in Australia and overseas.

The paper also raised the prospect of adjusting the law to take account of modern developments in e-commerce. The current law was developed in a world without the internet or email. It has struggled to adjust to a reality in which consumers regularly use online platforms to enter into contracts for everyday goods and services.

There are, of course, arguments against introducing a contracts code. It might be difficult to reach agreement on what the code should contain. The change would likely also make businesses nervous if it required the redrafting of existing standard forms.

There are also doubts as to whether codes are necessarily as easy to understand as their supporters often say. The experience of codification in other times and places has shown a code can end up being as complex and technical as the law it replaces. But the proposal deserves to be thoroughly explored. The importance of contract law means tailoring it to the needs and demands of the current world.

John Eldridge, PhD Candidate, Adelaide Law School

This article was originally published on The Conversation. Read the original article.

A former labourer and construction worker who resigned after being told of a significant reduction in his salary upon returning from injury leave has won his unfair dismissal case.

Kevin Fields, a former worker at Perth glass and construction company Penguin International, will receive $37,500 in compensation after the Fair Work Commission ruled last week he was effectively unfairly dismissed.

Fields resigned from his job in September after returning to work in August from a period of injury and discovering his pay had been reduced from $75,000 to $60,000.

Fields was employed with the business as a project administrator and had been on extended period of leave following an injury which occurred outside the workplace more than a year prior.

Fields told the commission on the day he returned to work, Fields received an email from Penguin International director Mark Moscou indicating "things have changed" and his salary would be based on a $60,000 package until further notice.

He had previously been paid an annual salary of $75,000.

"Your salary was negotiated on an escalating scale and I expect you to be back on top of all your work and more before you will be taking home your full package," the email read, according to Fields’ evidence.

In September Fields resigned, explaining to the commission he felt forced to accept the $15,000 drop in wages or quit.

Fields said on receiving notice of his resignation, Moscou responded in an email by saying the outcome was "disappointing" and "reducing your salary was purely a business decision to level your income to your output following a prolonged period of absence from work".

Penguin International told the commission the reduction in Fields’ salary was not harsh or unreasonable given Fields had been on a substantial amount of leave and "had to get back into the swing of the job".

The company also argued Fields had not been unfairly dismissed but had resigned from his position.

Fields, who was in Australia on a 457 visa at the time, has since returned to the UK. 

Fair Work Commission senior deputy vice president Lea Drake found Fields' salary was reduced by 20% and this constituted termination of Fields' employment without valid reason.

"I am satisfied that this was a significant reduction (in pay)," she said.

"Mr Fields had been unwell following a serious injury. There was no issue as to the bona fides of his application for paid and unpaid sick leave.

“He returned to work as soon as he had recovered. There was no matter of alleged misconduct. He was not provided with an opportunity to return to his pre-injury duties and have his capacity assessed.

“An assumption was made about his capacity to return to pre-injury duties and his salary was reduced in anticipation of reduced performance before any trial could be attempted."

Will Snow, senior associate at law firm Finlaysons, told SmartCompany this morning the compensation awarded to Fields is the equivalent of a full six months of pay.

“That is the maximum compensation that he could have been awarded,” he says.

Snow says despite the fact that Fields resigned, the commission found that the 20% was in effect a dismissal.

“The commission found that it was a dismissal in that he had no other choice but to resign,” he says.

“You can demote someone lawfully by reducing duties and pay but if that reduction is found to be ‘significant’, then a dismissal will be found to have occurred.

“Here it is a drop of 20% - which is absolutely significant.”

Snow says it is also likely Fields would have had to have left the country following his resignation.

 “There’ve been cases where the commission has found that employers need to be careful in managing the employment of visa holders because the consequence of termination can be so severe and disruptive to their lives,” he says.

“They in all likelihood will need to the leave country.”

Snow says while in some situations it can be appropriate for an employee to accept a new position - especially in the case of a difficult economic environment for the employer and if the worker is willing to accept less pay to stay employed – he doesn’t believe this was the reason in this case.

“(It was) because [the employee] had taken sick leave and his output had dropped that the employer decided there should be corresponding drop in pay,” he says.

Snow says the small businesses must be careful about proposing demotions to employees.

“You can reduce pay or duties but you need to be careful it’s not going to be significant,” he says.

“The other thing that it shouldn’t have been directly linked back to injury and sick leave.”

SmartCompany contacted Penguin International but did not receive a response prior to publication.

A newly constructed waste treatment plant in Melbourne that treats industrial waste and contaminated soil has gone into voluntary administration, owing secured creditors about $83 million. 

Renex Industries and its various subsidiaries entered voluntary administration on October 9, with administrators Rahul Goyal, Craig Shepard and Richard Tucker of KordaMentha appointed to manage the administration process.

The company’s treatment plant is based in Dandenong, in Melbourne’s outer suburbs, and is Australia’s first permanently located integrated waste treatment and resource recovery facility.

According to its website, Renex is a private company, with shareholders including the Cleantech Australia Fund, the Victorian Clean Technology Fund and Macquarie Bank.

It was established to accept and treat contaminated soils and other industrial waste that would otherwise have been headed for landfill.

Construction on the treatment plant began in September 2012 and stage two began in mid 2013.

The website claims the facility was expected to be fully operational by early 2015.

Administrator Rahul Goyal of KordaMentha said in a statement Renex would continue to trade as usual while the administrators look at options including selling the business.

“The facility is too important to walk away from because the technology is outstanding, it helps solve an important environmental problem and the underlying business is good,” he said.

Goyal said Renex Industries employed about 20 staff and they are being updated on developments as they arise.

Goyal told SmartCompany this afternoon while the company’s total turnover before its collapse is yet to be tallied up, its debts are in the tens of millions.

“About $83 million is owed to secured creditors across the board,” he says.

He says the debts had been incurred to build the facility, which has been completed but is in the final stages of commissioning.

“We’re still trying to work out a deal between secured creditors to take this forward,” he says.  

“This project does need additional working capital."

He says the next couple of weeks will be about working out the company’s future, whether it be a restructure or taking it to market and find a new owner.

“We are trying to work out a restructure between secured creditors and noteholders,” he says.

“We are trading on business as usual at this stage.”

The first meeting of creditors is scheduled to take place in Melbourne on Wednesday.

*This story was updated to include additional comments from administrator Rahul Goyal of KordaMentha at 2.39pm

Small businesses should not give in to legal threats from large companies, according to a SME owner from regional New South Wales who successfully fended off a legal letter from television giant HBO.

Adam Drummond, the founder of online streaming service WaggaWagga.TV, recently received a legal letter from HBO over his business’s tagline “It’s not TV. It’s dot TV”.

HBO has had a number of slogans over the years, including “It’s not TV. It’s HBO”.

According to Mumbrella, HBO got wind off Drummond’s slogan when he attempted to file for trademark protection for the advertising tagline.

HBO, which produces popular television series such as Game of Thrones and The Wire, reportedly told Drummond his branding was too similar to HBO’s and suggested some people may think WaggaWagga.TV was linked in some way to HBO.

Speaking to SmartCompany this morning, Drummond says while HBO has not yet pursued any further action, he could have easily backed down immediately after receiving the first legal letter.

“I got butterflies in the tummy when I saw it,” he says.

“Initially, I felt so rattled I said ‘no worries, I’ll change it’. But when I slept on it, I thought if anyone confuses HBO with WaggaWagga.TV they’ve got rocks in their head.”

“So I rang the solicitor straight back saying I changed my mind. I sent her a three page letter and within two hours she sent me an email saying her client, HBO, has decided not to pursue it. So a homemade legal letter seemed to work.”

Drummond officially launched his streaming service in May this year with the aim of giving local small to medium businesses an affordable advertising platform.

Many of the retailers he has approached in the last week to advertise on his service do not even have a website.

The streaming service now has around 14 shows and a total of 100 episodes.

Drummond says rather than dampening his spirits, the legal letter from HBO has only made him passionate about his streaming business.

“I believe so much in our new brand and what we’re doing that I believe we could have spent money on the legal battle and still won,” Drummond says.

“That was the reason why I did it. I thought, ‘what have we got to lose?’ We’re making all these productions on the back of an oily rag, we may as well go further and back ourselves.”

As for his advice for other business owners sent legal letters by international companies, Drummond says it is important to not back down.

“Stand up for yourself but understand the risks,” Drummond says.

“You need to get as much professional advice as possible before attempting to prove your point regardless of how much you believe you are right.

“Yes, stand up for your principles, but make sure you have the gumption to go the distance if you need to, even if it turns out worse than you expected.”

SmartCompany contacted HBO but did not receive a response prior to publication.

The operators of a fruit and vegetable stall at a market in western Melbourne is facing legal action over allegations they paid a man who came to Australia as an asylum seeker as little as $3.50 an hour.

Mhoney Pty Ltd, a company that ran a fruit and veggie stand at the Sunshine Fruit Market, will face the Federal Circuit Court over the underpayment allegations in November along with its director and part-owner, Abdulrahman Taleb.

According to the Fair Work Ombudsman, the male worker in his 20s originally came to Australia from Afghanistan as an asylum seeker and had spent time in detention before being granted Australian residency in 2010.

The alleged breaches of workplace law took place in 2012 and 2013 and involve significant underpayments of the award rate for such work, totalling an amount of about $25,000 in owed entitlements.

It is also alleged the worker was paid nothing at all over several weeks in 2012.

The company and director could face penalties of $33,000 and $6600 respectively if found guilty of the underpayments, according to the Fair Work Commission.

Fair Work Ombudsman Natalie James said in a statement the employee spoke little English and relied on an interpreter to contact the Ombudsman about his claims.

"The employee should have been paid a little over $17 an hour for normal hours, up to $35 on weekends and up to $43 on public holidays," she said.

Elizabeth Aitken, employment, industrial relations and workplace safety associate at TressCox Lawyers, told SmartCompany this morning the alleged underpayments in this case are significant.

“The employee was being paid well below their minimum entitlements,” she says.

“The employer in this case is liable for a significant underpayment claim in excess of $25,000.

“While the employment relationship continued for a period of around five months, at times it is alleged the employer paid the worker more than $13 below the appropriate hourly rate.”

Aitken says a crucial consideration for the Fair Work Ombudsman in reviewing such cases and considering whether to impose penalties is often the vulnerability of the worker.

“In this case, the Ombudsman has indicated it will be seeking penalties against the employer, and the worker’s status as a former asylum seeker with limited knowledge of English is likely to weigh heavily in favour of such an order,” she says.

Aitken says the case is a timely reminder for other small businesses to review minimum wage rates, determine whether any modern award applies to employees and ensure penalty rates such as overtime and work on weekends are appropriately paid.

“While some consideration may be given… to the limited resources and knowledge of small businesses, ultimately the business will be required to comply with minimum statutory and industrial standards,” she says.

SmartCompany was unable to contact Abdulrahman Taleb or Mhoney Pty Ltd prior to publication.

Government agencies should continue to devote resources to tackling phoenix activity, according to research from the University of Melbourne Law School that has attempted to quantify just how widespread the practice is.

Phoenix activity occurs when a company is liquidated and rises again in a way that avoids paying debts owed to creditors.

While not all phoenix activity is illegal, the latest report from the Phoenix Research Team, made up of researchers from both Melbourne and Monash University, highlights the difficulties in accurately estimating the cost to the Australian economy of phoenix operators.

Part of the reason why there are gaps and inconsistencies in the available data is because there is no specific offence for phoenix activity under Australian law.

 According to the researchers this means “there is not, nor can there be, any accurate quantification of the incidence, cost or enforcement of illegal phoenix activity in Australia”.

But the researchers said the data that is available shows phoenix activity is causing “considerable difficulties for creditors, regulators and competitors”.

“This justifies the commitment of government time and resources to attempt to minimise its impacts,” the team said.

What the data shows

The research paper collates what data is available from a number of government agencies to attempt to create a picture of Australian phoenix activity.

For the 2013-14 financial year, 9822 Australian companies entered into a form of external administration, according to data from the Australian Securities and Investments Commission.

This led the researchers to conclude no more than 9822 companies in that timeframe could have entered liquidation as a means of carrying of illegal phoenix activity.

Of this group, the industry with the most firms entering external administration, but not necessarily involved in illegal phoenix activity, was “business and personal services” with 3124 administrations.

This was followed by 1802 administrations in the construction industry and 819 companies entering external administration in the accommodation and food services sector.

However, the researchers note a “substantial number” of companies remain dormant without entering external administration and some of these firms could become “a haven” for illegal phoenix activity.

“The Phoenix Research Team believes that they outnumber liquidated companies 10 to one,” the researchers said.

While the researchers said the Australian Tax Office does not generally provide statistics about the prevalence of illegal phoenix activity, in its most recent annual report, the ATO said 6223 companies were identified in the top five risk industries “for the potential to conduct illegal phoenix activity”.

External administration reports can also give some indication of suspected misconduct, although this misconduct is not necessarily linked to phoenix activity.

Between 2011 and 2014, misconduct by company directors was alleged in 28,787 reports, totalling 52,644 possible breaches.

The ATO has previously estimated illegal phoenix activity could be costing the Australian economy as much as $3.2 billion a year in lost tax revenue, as well as money owed to creditors and employees.

According to the researchers, the ATO has also previously indicated it believes large numbers of phoenix companies operate in the micro market – firms with under $2 million in annual turnover – as well as in the SME market of businesses with between $2 million and $250 million in turnover.

As of August 2014, ATO data provided to the researchers indicates 19,714 candidate and confirmed phoenix groups could be operating in Australia, which is made up of 335,837 individual business entities.

These groups are mostly likely to come from the financial assets investing industry, following by the auxiliary finance and investment services industry.

How to protect your business from phoenix activity

Patrick Coghlan, commercial director at CreditorWatch told SmartCompany there are key steps a small business should do to protect itself against losing money to phoenix operators.

“Running a credit report is something you should be doing for any new customer you are dealing with,” Coghlan says.

Coghlan says this is particularly the case if the dealings with a particular customer represent a sizeable chunk of your business’ credit limit.

“If you can shoulder it, that’s fine, but if not you should really be doing your due diligence," he says. 

Once a credit report has been done, Coghlan recommends small business owners carefully consider the directors of the company and check to see if they have any cross directorships that may connect them with a failed company.

“Look at the age of the company and its registration date, especially if it is less than 12 months old. The younger a company, the more likely it is to default or go under.”

Coghlan says if the company has been operating for some time, it may also be possible to get trade references from within the industry. In some cases, accounts receivable personnel may also be able to speak to their counterparts at other firms if there are any concerns.

Other warning signs may be previous histories of defaults or court judgements against the company, Coghlan says.

A former BRW Rich Lister and IT company director has been found guilty in relation to charges of defrauding the National Australia Bank out of millions of dollars.

The former chief executive of former IT company S Central Group, Peter Mavridis, was found guilty in the County Court of Victoria this week on 33 charges including 23 counts of obtaining financial advantage through deception and 10 counts of providing false accounting, according to the Australian Securities and Investments Commission.

Mavridis, who will be sentenced next month, made the BRW Rich 200 list back in 2007 for his wealth, which was estimated to be about $74 million at the time.

The guilty verdict follows an investigation by ASIC, which alleged between January and September 2009 Mavridis had directed the company’s financial controller to submit duplicate invoices to NAB, which lead to credit of about $4.8 million being advanced to companies within the group.

ASIC said in a statement S Central Group is no longer operating.

Warfield and Associates chief executive Brett Warfield told SmartCompany the guilty verdict is not surprising and likened the behaviour to an attempt to “pull the wool over the bank’s eyes”

He says because the activity involved a significant amount being defrauded from a financial institution, it was always highly likely a conviction and custodial sentence were to follow.

Warfield said Mavridis’ behaviour had resulted in the “creation of false documents and resulted in banks provided finance based on false documents”.

“He also falsified supporting documents including end of month reconciliations,” he says.

Warfield says false invoicing is one of the most common types of fraud.

“One way that a business can obtain lots of money is by requesting finance from a bank based on assets of the business,” he says.

“This is not an unusual transaction and one that would have occurred in a lot of businesses.”

Warfield says in this case it is noteworthy to see two people working together.

“Two people providing evidence on behalf of company would have given NAB more assurance (everything was OK),” he says.

However, Warfield says some questions remain about the bank’s review process.

“What review and controls did the bank undertake?” he asks.

“What review did it do to be comfortable with the organisation they were lending millions of dollar to?”

SmartCompany contacted NAB and Mavridis but did not receive a response prior to publication.

An employment law expert says the Fair Work Commission needs to take workplace safety issues more into consideration after a former Patties Foods employee won his job back after being sacked for allegedly speeding into a staff car park.

The commission heard Heath Stephenson, who worked as a part-time storeman for Patties Foods in Bairnsdale, was dismissed in April this year after a workplace investigation concluded he did not adhere to the speed limit while arriving for work one evening around 10.30pm.

A supervisor reported Stephenson was driving at an “unreasonable dangerous high speed” while coming around the bend closest to the office.

There were no other cars on the road at that time of night and no semi-trailers in the loading area.

The commission heard Stephenson had previously been given a final formal warning for breaching the company’s OH&S policy due to the unsafe operation of a forklift and Patties was found to have properly notified the former employee of the reason for his dismissal and give him an opportunity to respond.

Despite this, Commissioner John Ryan found the dismissal was harsh, unjust and unreasonable.

“The dismissal was unreasonable because in all of the circumstances of the matter the level of breach of the Code of Conduct committed by the Applicant did not warrant or justify dismissal when other employees had breached the Code of Conduct in the same way without the same penalty being imposed,” Ryan said in his judgment.

Because of this, Ryan ordered Stephenson should be reinstated, despite Patties arguing reinstatement would be inappropriate.

Employment law specialist and Swaab Attorneys partner, Warwick Ryan, told SmartCompany the Fair Work Commission needs to give more weight to the strict liability conditions faced by businesses when ruling on these sorts of cases.

“What they seldom ever do is focus on the realities of the risks that an individual who is a repeat offender in relation to breaches of safety presents to fellow employees,” Ryan says.

“They talk about the hardship of the employee on losing their job, but they don’t look on the trauma their fellow employees could deal with when they stumble on an employee who has been severely injured by the actions of a risk-taker. It utterly distorts the outcome and the impact of that frequently in these types of cases — and there are many of them.”

Ryan says commissioners will often say the reinstatement of an employee who has breached safety requirements is not to be seen as condoning safety breaches in the workplace.

“But that is exactly what those decisions do,” he says.

“They significantly hamper businesses form maintaining safety. They expose offices within that business to liability, and they expose fellow workers to injury.”

Workplace relations expert and partner at M+K Lawyers, Andrew Douglas, told SmartCompany businesses need to take safety issues very seriously.

“If the nature of the conduct causes a real risk of serious injury or death, then employers must act upon that,” Douglas says.

“The issue for businesses is if they have failed to act on it with others, or if they’ve failed to have a system that acknowledges it. Just taking an action once every now and then that has no system or common sense to it is just unfair.”

SmartCompany contacted Patties Foods but did not receive a response prior to publication.

SmartCompany was unable to contact Heath Stephenson for comment.

Businesses risk hefty fines and ongoing brand damage if they underpay workers and engage in sham contracting, according to one payroll expert.

The warning comes as Myer and two contractors are facing claims cleaners in the retailer’s stores have been underpaid and incorrectly treated as contractors instead of employees.

The ABC reports the Fair Work Ombudsman is investigating claims of worker underpayments at Myer, which contracts its cleaning services to Spotless, which then sub-contracts the work to other cleaning businesses.

One cleaner who works at Myer’s flagship store in the Melbourne CBD told the ABC he is paid a flat rate of $20 an hour by one of these subcontractors, INCI Corp, despite casual cleaners being entitled to between $23-25 an hour for normal work and higher rates for weekend and after-hours work.

“It doesn’t matter if it’s weekend, or holidays, late hours, long hours, it’s all just a flat rate,” the cleaner said.

The same cleaner said he is required to work as a “contractor” and had to obtain an Australian Business Number to be given the job.

This has led to United Voice, the union representing cleaners, to accuse the businesses involved of engaging in sham contracting, a practice by which direct employees are incorrectly treated as independent contractors.

A spokesperson for Myer told SmartCompany this morning the retailer is “extremely concerned” about the claims and has been in contact with the Fair Work Ombudsman about the matter.

“While cleaners for Myer stores are provided by Spotless, we hold the same concern for the rights and wellbeing of anyone who works in our stores, regardless of their role or employment status, whether they are permanent, part-time, casual or contractor,” the spokesperson says.

Earlier this year Myer terminated its contract with another cleaning services provider Pioneer Facilities Services, after subcontractors to Pioneer were found to have underpaid $6300 to nine cleaners at several Melbourne Myer stores.

Myer’s contract was with RCS Cleaning Services, which subcontracted work to Pioneer Cleaning Services, which in turn sub-contracted to A&K Saana Services.

“We do not tolerate circumstances where our required standards are not met,” the Myer spokesperson says.

“We only recently terminated the contract of a cleaning services provider which was not able to adequately demonstrate full compliance and appointed Spotless as our cleaning services provider to replace less than six weeks ago.”

“We have again sought full and urgent assurances from our cleaning provider, Spotless, that every person working on a Myer premises is being paid according to their rights and entitlements.”

The spokesperson says Myer will assist the Ombudsman with any required investigations and will take “any further steps that are necessary to ensure Myer’s standards continue to be upheld”.

Spotless told the ABC the claims will be investigated thoroughly and INCI Corp owner Mehmet Mesli told the ABC his cleaning staff had all asked to work on ABNs and he would be happy to hire them as employees if they asked.

Warning to SMEs

Tracy Angwin, executive director of the Australian Payroll Association, told SmartCompany this morning the issue of sham contracting continues to come up in several industries, including cleaning services.

“Industries that employ more vulnerable workers seem to be the ones getting in trouble,” Angwin says.

Angwin says there are a series of factors that are considered when determining if someone is a contractor of employee, including whether it is the employer or the worker who bears the financial responsibility for the work being carried out.

Another consideration is who owns the equipment that is being used to carry out the work, with employees generally using equipment that is owned by the employer. In this case, Angwin says it is unlikely the cleaners would be required to bring their own mops and other equipment to work.

Who has operational control, such as when the work can be completed, is also important, with contractors usually able to set their own working hours and timeframes.

But Angwin warns businesses that even if an individual indicates they want to be paid as a contractor, the employer can still be found to be in breach of the Fair Work Act if the conditions of the job mean the worker should be paid as a direct employee.

Angwin says businesses and company directors and HR and payroll managers can also be fined they are found to have known about the existence of sham contracts and done nothing to rectify the situation.

“It can be over $10,200 per breach,” she says.

“Fair Work is fining people.”

As well as the financial cost, Angwin says “payroll scandals” have the potential to cause long-term damage to brands.

She points to the current underpayment claims faced by 7-Eleven and recent reports that workers were being underpaid by burger chain Grill’d as potential examples.

“It really does affect the brand,” she says.

SmartCompany contacted Spotless and ICNI Corp but did not receive a response prior to publication.