Telecommunications workers have launched what lawyers have called an "unprecedented" class action, alleging they are victims of sham contracting.

Key points: Class action alleges subcontractors were legally entitled to be treated as employees

Class action alleges subcontractors were legally entitled to be treated as employees Company denied the allegations, saying arrangements were approved by regulators

Company denied the allegations, saying arrangements were approved by regulators Professor said case had potential to change the "industrial landscape"

The case is against workforce management company ISGM (now trading as Tandem Corporation), which supplies subcontractors to Telstra, Foxtel and NBN Co.

"In terms of class actions, we think this particular action is the biggest in Australia [involving workers] and probably quite unprecedented," said Vicky Antzoulatos, a special counsel for Shine Lawyers, which is running the case.

"We expect that there's over 4,000 people that are eligible to join the claim."

In documents filed to the Federal Court, lawyers alleged that the subcontractors engaged by ISGM from 2011 onwards were legally entitled to be treated as employees and should thus receive significant compensation.

They said the company had overarching control of the workers, including the hours in which they were available to work, and the circumstances in which they could work for others.

"The central allegation against ISGM will be that it set up a system of work that was designed to avoid paying workers their lawful entitlements," Ms Antzoulatos said.

"Those rights include the right to receive a wage, to annual leave, long-service leave, to overtime and other allowances."

Tandem (ISGM) denied the allegations and said its arrangements with subcontractors had been approved by regulators.

"Tandem cares for its staff and subcontractors and is committed to ensuring that all forms of engagement are managed in a compliant way," the company said in a statement.

Shine Lawyers first began investigating the company after the ABC's 730 program reported on the company's treatment of vulnerable young workers.

The lead applicant in the case is Victorian man Robert Mutch, who said his experience working for the company had a devastating impact on his mental health.

"Unfortunately, I tried self-harming not so long ago, believing it would be easier if I just gave up," he told 7.30 earlier this year.

Implications are 'considerable'

Andrew Stewart from the University of Adelaide's law school said the case had the potential to significantly alter the industrial relations landscape.

"We've seen a few class actions started but covering very different kinds of workers. For example, there's a class action going on to cover telemarketers. This is a very different case," Professor Stewart said.

"It's involving much more highly skilled work and the implications are really considerable — if these workers are found to be employees they're going to be owed potentially a lot of money.

"For other companies in the telecommunications industry who have been engaging technicians of this sort as contractors, this really could have major ramifications."

The case is against the company which supplies subcontractors to NBN Co, Telstra and Foxtel. ( Supplied: NBN Co )

Ms Antzoulatos was unwilling to disclose the damages being sought for each individual worker, but said "we do expect the quantum of the claim to be significant".

The national president of the Communication Workers Alliance, Len Cooper, is advising Shine Lawyers, and said plenty of industries would be following the case closely.

"I would imagine every employer organisation in the land will be interested in this one," he said.

"I've been in the union business and telecommunications for decades now and I haven't seen a worse case of exploitation of workers than this.

"I think it's probably one of the most significant industrial relations cases in Australia yet."

Ms Antzoulatos said workers across the country have reported similar stories.

"Many of the workers have been personally and financially devastated by these events, to the point where some of them have attempted to take their own lives," she said.

"ISGM prescribed the clothes they were to wear, the equipment they were going to use and the car they had to drive.

"They often had to take out large personal loans and go into large personal debt in order to buy this equipment and the cars and this ultimately put many of them into personal and financial hardship."

Toxic environment

Bill Makalovski hopes the industry will be "cleaned up" by the class action. ( ABC News: Damian McIver )

ISGM was formed in 2010 and said its business model was based on the idea that "large workforces could be managed in a better way."

After establishing itself in telecommunications, it has recently branched out into insurance, trade and in-home services.

It turned over $650 million last financial year and owners recently considered listing the company on the ASX.

Critics said the company's growth had been fuelled by the exploitation of workers.

Bill Makalovski is a former subcontractor with ISGM who's been in the industry for almost 30 years.

"I decided to get into contracting because of the flexibility of managing your own time … being your own boss, basically," Mr Makalovski said.

"All those things that appealed to me in contracting were taken away from us to the point that a toxic environment was created," he said.

"Our time was no longer managed by ourselves but was managed by a computer that dictated when we start and when we finish in a day.

"They had exclusivity to our time right across the day and it prevented us from being able to do any other work."

Professor Stewart said it was difficult to predict how the Federal Court would view the case.

"When a court has to work out whether someone is an employee, there's no single test or single question they ask," he said.

"They look at a number of different factors and it's all very impressionistic.

"Among the factors they consider is how much control is being exercised over the workers.

"They look at whether the workers are visibly associated with the organisation with which they're working — for example, do they drive a company vehicle? Do they wear a company uniform?"

The only certainty appears to be that the allegations will be vigorously defended and the case is likely to drag on for some time.

"There's no question of resources at our end but to prosecute the case will take two to three years I expect," Ms Antzoulatos said.

Regardless of the outcome, Bill Makalovski is happy the company has now been called upon to defend its conduct.

"Finally someone's going to be held accountable," he said.

"I hope that it cleans the whole industry up."