A recruitment company has failed to recoup its fee for a partially completed placement, while in other legal news, a sham labour hire arrangement has cost a company and its directors close to $100,000.
Court finds against recruiter in fee dispute over half-finished placement
A recruitment company has failed to recoup its fee for a partially completed placement, in a legal case that cuts to the core of one of the recruitment industry's biggest pain points.
Business services provider Civica engaged Toowoomba-based agency JP Smith Recruitment and HR in 2012, but it altered the company's contract prior to signing it, removing clauses that would allow the agency to charge a smaller fee if Civica terminated the agreement before a placement occurred.
When Civica advised JP Smith two months later that it no longer required its recruitment services, the agency sent an invoice for its minimum placement fee, plus advertising costs, which Civica refused to pay.
JP Smith subsequently brought legal action against Civica, arguing it had advertised the job, shortlisted candidates, and arranged final interviews on behalf of Civica already, and should be compensated.
The Magistrate agreed it was reasonable for JP Smith to be compensated for that work, but found that because Civica had not agreed on the terms of the nominated pay scale, and no candidate had been introduced or accepted a position, it was not liable for the fee.
JP Smith appealed, and in the latest decision, Queensland Civil and Administrative Tribunal President David Thomas said the case hinged on whether the company was entitled to charge a consulting fee in circumstances where an employer terminated the contract before the introduction of a candidate.
The agency's argument relied on one of the contract clauses that Civica removed, which stated, "JP Smith has a minimum fee of $3,500 plus GST applicable to all recruitment jobs".
Judge Thomas found, however, that while JP Smith was entitled to recoup both its advertising and subsequent legal costs, Civica had not agreed to the minimum fee or progressive pay scale proposed.
"Unless there is a provision allowing additional rights (such as the deleted clause 14), the entitlement contemplated by [that clause] arises on performance of the services i.e. introduction and engagement of a staff member," he said.
"The alternative view, that JP Smith was making it clear that once a client signed the contract, whatever happened, the client would have to pay it $3,500 plus GST, cannot stand.
"Imposing such a fee on a client, where no recruitment had in fact occurred (for whatever reason) would be inconsistent with the structure of the [company's] progress fee scale."
Sham on-hire arrangement proves costly
The Federal Court has fined a company and two affiliates close to $100,000 over a "sophisticated" sham labour hire arrangement.
Federal Court Justice Robert Buchanan penalised Crystal Carwash Cafe, and a director and senior employee a total of $90,000 for setting up at least 10 "labour hire" companies in order to pay its employees below-award entitlements.
The Fair Work Ombudsman alleged a number of carwash employees, who had no experience as company directors, established the sham labour hire businesses at the direction of Crystal Carwash.
"It is an agreed fact in these proceedings that the [Crystal Carwash] received all of the profits and takings generated by the operations of the labour hire entities," said the judge.
The FWO claimed from time to time the labour hire entities would be liquidated, and their employees transferred to newly-created companies.
It argued the use of these labour hire entities was designed to confuse the employees, who may have had difficulty claiming their correct employment entitlements, because they were unsure who their true employer was.
"The fact that a majority of the employees came from non-English speaking backgrounds was admitted by the respondent and it did not offer any direct submission on this point," said Justice Buchanan.
"It did not seek to contest the assertion made by the [FWO] that the business... is a sophisticated one. In my view, the employees concerned were particularly vulnerable given the asymmetrical bargaining power that existed between them and the respondents. The respondents took advantage of that circumstance."
Judge Buchanan found multiple contraventions of the Fair Work Act, and granted penalties that were close to the maximum allowance.
"I consider all the contraventions to be serious. The [FWO] is correct to point out that the underpayment of wages is particularly significant given the number of employees (359), their relatively low minimum rate of pay under the Award to begin with ($14.31 per hour to 30 June 2010 and $15.00 per hour to 18 September 2010), and the overall amount of underpaid wages in a relatively short period," he said.
Fair Work Ombudsman v Crystal Carwash Cafe Pty Ltd (No 2) [2014] FCA 827 (7 August 2014)