A Telstra and Foxtel contractor backed by industry fund-owned IFM Investors is facing a $400 million class action for allegedly underpaying thousands of technicians through sham contracts.
Shine Lawyers filed what is understood to be the largest employment-related class action case ever against Tandem on Wednesday, with the potential of covering more than 4700 workers.
Tandem, formerly known as Infrastructure Services Group Management, is one of Australia’s largest private companies, with revenue of $640 million a year and an “innovative” workforce management model that has won it field work contracts at Telstra, NBN Co and Foxtel.
But the class action alleges the company’s business model is premised on treating independent contractors as employees but without minimum wages, leave, overtime or other entitlements.
The claims of systemic sham contracting are a major embarrassment for the company’s largest shareholder, IFM Investors – the $111 billion asset manager owned by 27 industry funds and chaired by former Australian Council of Trade Unions official Garry Weaven, with Greg Combet as deputy chairman.
Special counsel Vicky Antzoulatos said Shine Lawyers had been investigating the claims since January and that many Tandem workers became overwhelmed by the work conditions, debts and low pay.
“It is quite confronting and shocking that there are people that are working under these circumstances in modern-day Australia,” she said.
“The personal hardship these people have suffered – marital breakdowns, suicide attempts, the impact on not only the workers but their families.”
‘Impossible to earn sufficient wage’
Several hundred Tandem workers come from the most vulnerable groups, including long-term unemployed, the disabled, Indigenous Australians and former offenders.
Those workers were trained on the promise of a job with Tandem and encouraged to borrow about $65,000 from Macquarie to pay for vehicles and equipment with interest rates of up to 16 per cent.
Ms Antzoulatos said despite purporting to engage the workers as independent contractors, Tandem “basically controlled every aspect of their working lives”.
“Technicians worked back-to-back shifts for six and in some cases seven days a week.
“They had no say over the jobs that were allocated to them or the location and had no ability to delegate work or negotiate pay.
“They couldn’t refuse jobs, and if they did try and get out of it would be penalised by getting less jobs in the future.
“The system of work made it impossible for them to undertake enough jobs every day to earn a sufficient wage to pay off their debt and expenses.”
Ben Van Vree was on Centrelink and had no employment or business experience when he was recruited to Tandem on the promise that he could earn up to half a million dollars a year.
He says after he was trained and signed up he immediately had to borrow $85,000 for vehicles and equipment.
When he left five years later he was still in debt by $50,000 and owed the tax office another $20,000 because he fell behind on his business activity statements.
“I didn’t even know what a BAS was.”
Experienced technician Bill Makalovski said he was required to be available for work from 8am to 4pm even if he finished his jobs earlier and had to give three months’ notice if he was unavailable.
Meanwhile, he said Tandem would cut rates during the contract’s term without negotiation and introduce additional duties without extra remuneration.
“It was completely economically non-viable to continue contracting,” he said.
“The money you were earning did not cover your expenses. I had to stop paying myself super just to make ends meet.”
Class action ‘misconceived’: Tandem
The class action is supported by the Communications Workers Union Victoria branch, which estimates the total compensation could reach $400 million once unpaid entitlements and debts are included.
A Tandem spokeswoman said the class action was “misconceived” and “evidence will show that our business model is sound”.
“We believe that our subcontractor model provides flexibility, choice and competitive returns for Australian small businesses and we are prepared to defend it,” she said.
“We enter into commercial agreements with our subcontractors, and they are free to provide services to others, delegate or subcontract, and reject requests to perform services.”
She said the company worked through issues with subcontractors “if they discover that running a small business is not for them”.
IFM should ‘reconsider’ involvement: union
CWU Victorian industrial officer Val Butler said the class action was a “game changer” that could open the gate for similar actions against other employers over sham contracting.
“The ISGM contract is a lengthy, sophisticated, complex document,” she said. “If you can pierce through this shield, those below it will be easy.”
She said she was “very surprised” about IFM Investors’ involvement given that concerns around Tandem’s contract arrangements had been reported at the start of the year.
“I would hope they would seriously reconsider their position given what’s happened to these workers,” Ms Butler said.
IFM Investors took a half share in Tandem in 2016 and had intended to reduce its share once the company listed on the ASX. However, Tandem has repeatedly shelved its IPO plans over the past year.
A spokesman for IFM said: “IFM Investors takes very seriously the fair treatment of workers employed and contractors engaged by companies within which it invests”.