Bob Day to face ombudsman over ‘sham contracting’ allegations

He was the senator whose vote was pivotal to the Coalition’s crusade to stamp out lawlessness in the building sector through the re-establishment of the Australian Building and Construction Commission.


But now Bob Day will be investigated by the workplace umpire amid claims he engaged in sham contracting before his home building empire went bust last year.

Employment Minister Michaelia Cash referred allegations to the Fair Work Ombudsman after her department raised a question mark over the former Family First senator’s insistence that his workforce were paid as contractors.

Mr Day, who was a loud voice for liberalising workplace rules and reducing union influence on construction sites, was paying all sales staff at his Homes Australia group as independent contractors on commission-only pay.

A former sales representative at Mr Day’s Newstart Homes business in Queensland, who is owed $140,000 in unpaid commissions, has been found by the department to have been a full-time employee not a contractor.

Like other sales staff, Trond Smith was expected to do set hours at company display homes, wear a Newstart Homes uniform and attend regular sales meetings but, as a contractor, Mr Day’s company did not offer any annual leave, sick pay or other entitlements.

In a decision letter last week, the Department of Employment said Mr Smith, 45, qualified as an employee under the Fair Entitlements Guarantee.

He has been paid $13,000 from the scheme for his 15 months at Newstart, leaving him $127,000 out of pocket.

“After carefully considering the evidence provided by the claimant, it has been determined that the claimant was likely to be an employee,” the Department found.

“As the agreement did not provide a base weekly wage and expressly excluded leave and termination entitlements, the claimant’s FEG claim has been assessed with reference to the award.”

In a statement from Senator Cash on Tuesday following the finding, she said: “The allegations in relation to the status of this worker have been referred to the Fair Work Ombudsman for possible action.”

Mr Day, whose political career imploded with the company collapse and a High Court ruling that his election was invalid, said his sales force had knowingly entered into the arrangement.

“These guys were very sophisticated. They formed proprietary limited companies to take advantage of all the benefits of being incorporated for tax purposes. They can’t have it both ways,” he told Fairfax Media on Tuesday.

Mr Day was founding president of Independent Contractors Australia, which was formed to “protect the rights of independent contractors to be treated fairly, justly and equitably in Australia and to be allowed to work free from intimidation or harassment from bureaucrats, the Australian Taxation Office, political parties, unions and others”.

In an email to Mr Day 10 days before the financial difficulties at Homes Australia became public, Mr Smith argued strenuously that he was an employee of the company.

“Your employment agreement may be dressed up as an independent contractors agreement but at no stage do we qualify as anything but employees,” Mr Smith wrote on October 6.

“Both the legal advice I have been given and my own research indicates that as a home building consultant for Newstart Homes I am an employee, not an independent contractor and the agreement that I have signed is in fact an employment agreement that has been portrayed as an independent contracting agreement and is in fact sham contracting.”

Mr Day, who has promised to repay all his creditors, never responded to the email.

In an explainer for employers, the Australian Tax Office, says: “You’re responsible for getting it right” as to whether a worker is a genuine contractor or an employee.

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