The Case

Two Indian workers paid upfront ‘training fees’ of more than $2,000 to Mr Gaur, an IT businessman based in Melbourne. The workers were led to believe this would lead to employment with Mr Gaur’s two companies, Konsulteq, and Konsulteq Upskilling and Training Services.

However, Mr Gaur did not provide the workers with proper accredited training and did not properly pay them. He alleged that the workers were independent contractors or alternatively were volunteering “to get local work experience”, and hence he did not need to pay them.

The Fair Work Ombudsman (FWO) conducted an investigation and then commenced legal proceedings against Mr Gaur and his two companies in the Federal Circuit Court.

The Verdict

The Court found that the two workers had little understanding of Australian employment laws and their employment entitlements. The Court found that Mr Gaur had used this to his advantage and had deliberately underpaid them.

The Court ordered that Mr Gaur’s two companies pay:

• $160,000 in penalties (one company was fined $40,000 and the other $120,000);
• $16,000 in outstanding wages; and
• $5,144 for dismissing a worker in breach of adverse action provisions when the worker complained about not being paid correctly.

The Court ordered that Mr Gaur pay $35,000 for engaging in sham contracting, underpaying workers and not keeping proper employment records.

Mr Gaur attempted to de-register the two companies during the proceedings to try to avoid having to pay the workers. However, the Court held that the two companies were nothing more than Mr Gaur’s “alter egos” which he attempted to use “as a shield for his own conduct”.

The Court indicated there was a need to deter employers from “attempting to use the corporate veil to avoid responsibility for workplace obligations where they have been the operating mind of the companies when conducting the breach”.

The Lesson

This case shows the severe repercussions of exploiting vulnerable workers. The FWO and courts have also indicated that attempts by employers to avoid their employment obligations by paying workers through companies will not protect employers, with the courts willing to lift the corporate veil and sanction directors who are the operating minds of the companies.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.