NTEU launches legal action against JMC alleging sham contracting

Campbell Smith, National Industrial Officer

In September, NTEU filed proceedings in the Federal Court on behalf of members at JMC Academy alleging that the higher education provider was engaging its lecturers as independent contractors in order to avoid their obligations under the Fair Work Act 2009.

JMC Academy is a higher education provider with campuses in Melbourne, Brisbane and Sydney. It offers courses up to Masters level in areas including contemporary music performance, song writing, audio engineering and sound production and animation, game design and entertainment business management.

To our knowledge they predominantly engage their lecturers who deliver the majority of their teaching content as independent contractors rather than employees.

An independent contractor is a person or business engaged by another business to perform a specific service. In contrast to an employee, an independent contractor is paid to produce an agreed result (e.g. build a fence, upgrade an IT system) while an employee is paid for the time they spend in the service of their employer. An employee is subject to the direction and control of their employer, in general an independent contractor is not.

Genuine independent contractors are usually businesses that are generating goodwill for their own business while performing work, where as an employee will usually be generating goodwill for their employer while conducting their duties.

Sham contracting occurs when an employer tells an employee that they are being engaged as an independent contractor when in reality they are an employee. The common law position is that little regard is paid to how the parties describe their relationship, it is the actual nature of the relationship that determines whether a person is truly an employee or independent contractor.

As the courts have repeatedly said, it is not open to an employer to ‘create something that has every feature of a rooster, but call it a duck and insist that everyone else recognise it as a duck’.

Sham contracting will usually involve egregious wage theft. That is because legitimate independent contractors are not entitled to the minimum employment standards provided by the Fair Work Act, including award wages, overtime or penalty rates, or superannuation in addition to wages. In the case of JMC, NTEU believes that members were paid around 50% of the minimum wage provided for in the Educational Services (Post Secondary) Award and paid no superannuation in respect of the work they performed for JMC.

The litigation has been brought by the Union in our representative capacity, and four members are named as witnesses. We are seeking back pay for the alleged wage theft and penalties for the alleged breaches of the sham contracting provisions of the Fair Work Act.

We know our members across the country stand in solidarity with those at JMC that are taking the fight to JMC for their alleged exploitative employment practices.

Read the ABC story about the case, along with a profile of one of the members participating: nteu.info/abcshamcontracting