Sydney executives fined over sham contracting

23 June 2011

Two former executives of a Sydney finance company have been fined a total of $16,950 for sham contracting activity that affected nine workers.

The former owner and sole director of Parramatta-based Centennial Financial Services, Rolf Mertes, has been fined $13,200. The company's former human resources manager, Christopher Chorazy, has also been fined $3750.

The penalties were imposed in the Federal Magistrates Court in Sydney following an investigation and prosecution by the Fair Work Ombudsman. The Court found that both Mertes and Chorazy were involved in breaches of the sham contracting provisions of workplace law in 2007.

Federal Magistrate Robert Cameron also found that Chorazy was involved in nine sales staff being underpaid $39,533 as a result. He ordered the fines be paid to the workers to partially rectify their underpayments.

Federal Magistrate Cameron said: "The law's disapproval of the conduct in question should be marked and a penalty serve as a warning to others not to engage in similar conduct."

The sham contracting breaches occurred when the Centennial Financial Services employees were converted to contractors.

Each of the workers was dismissed, told to obtain an Australian Business Number (ABN) and then immediately rehired as an independent contractor to perform the same duties under the employer's direction.

They were then paid on a commission-basis only and were no longer paid employee-related entitlements, including wages and leave entitlements.

Fair Work Ombudsman Executive Director Michael Campbell says the case illustrates that just because a worker has an ABN and has been labeled a contractor does not necessarily mean they can legally be classified as a contractor.

Centennial Financial Services was also a respondent to the prosecution, but the proceedings against the company were stayed when the company went into liquidation in 2009.

The Fair Work Ombudsman is currently conducting a national education and compliance campaign targeting sham contracting.

Employers and workers seeking advice or assistance regarding independent contracting and sham contracting can visit the Fair Work Ombudsman's website at

They can also contact the Fair Work Infoline on 13 13 94. A free interpreter service is available by calling 13 14 50.

Media inquiries:

Ryan Pedler, Senior Adviser, Media & Stakeholder Relations
(03) 9954 2561, 0411 430 902

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