Australia’s telecommunications sector has been left reeling by a bombshell potential $400 million class action launched by the Australian arm of Erin Brokovich’s Shine Lawyers against alleged sham contracting arrangements at communications services heavyweight Tandem, formerly known as Infrastructure Services Group Management (IGSM).

In a landmark action that could redefine contracting arrangements and related labour costs across the sector, Shine is claiming that conditions and arrangements required of contractors effectively made them employees and pursuing a claim for back pay and entitlements for as many as 4700 workers.

The case, in broad terms, is similar to the successful action run against Foodora by the Transport Workers Union (TWU) in NSW that successfully pursued a precedent that the strict level of control and employment conditions imposed on delivery staff made them employees at law as opposed to independent parties.

Importantly, while the Tandem class action is being run by Shine and is backed by litigation funder Litigation Lending Services Limited, the new Australian Communications Workers Alliance and two branches of the Victorian Communications Workers Union have thrown their support behind the action.

The involvement of the industrial movement, especially at an advisory level and grass roots level, is important because it indicates that the case will go full run in an effort to set a lasting precedent.

Unions typically run test cases on employment classifications, like the one pursued by the TWU. However it is understood the scale of the Tandem case is so substantial that around $5 million in commitment was needed up front to get it up and running, which was likely beyond the immediate means of the Victorian branches.

“Our investigations have revealed that telecommunications workers who were purportedly employed under sub-contracting arrangements, were actually employees of ISG Management and therefore entitled to benefits such as wages, leave, allowances and overtime payments under the Commonwealth Fair Work Act and the relevant Telecommunications Services Award” said Shine Lawyers’ special counsel, class actions Vicky Antzoulatos.

National president of the Australian Communications Workers Alliance, Len Cooper, told iTnews that some of the subcontractors and trainees “have been exploited in a worse fashion than the cases that have so far been turned up which they call wage theft.”

Tandem says it will fight

On Friday a spokesperson for Tandem said the company would defend the case and said it was “extremely confident” about the legality of its subcontracting arrangements. The company also sought to address a number of allegations made in the action against it in a statement provided to iTnews.

NBN watching case closely

The National Broadband Network has an obvious interest in the progress of the case and on Friday confirmed it was watching matters closely.

An NBN spokesman said the company was “aware of this matter” and in communications with its contractor.

“Tandem inform us that they strongly deny the allegations, and they have provided assurances that Tandem cares for its staff and its subcontractors, and they are committed to ensuring that all forms of engagement are managed in a respectful and compliant way,” the NBN spokesman said.

He said NBN’s “approach of engaging main contractors such as Tandem to deliver the nbn™ broadband access network” was “a standard telecommunications sector method of services and project procurement.”

“NBN does not stipulate the model that its delivery partners like Tandem are required to use, whether that be through subcontractors or not,” the NBN spokesman said.

“It is up to the delivery partners like Tandem to engage and retain their own workforce, which can include subcontractors. The management of works, remuneration and benefits paid to employees and subcontractors is undertaken entirely by the delivery partner.”

Biggest case ever

Shine is pushing the case as potentially the biggest class actions the country, let alone the tech industry, has seen.

“We believe that over 4000 workers could be eligible to join this class action. This could be the largest employment class action that has been commenced to date in Australia,” Antzoulatos said.

“In our view, ISG Management exercised total control and direction over the employment of these workers including where they worked, the jobs they worked on, the clothes they wore to work, the branding on their vehicles, the methods of work they were required to follow, such that they were actually employees rather than independent contractors.”

Bill Makalovski is one of those being represented in the action, with Shine saying he worked for ISG Management between 2012 and 2016.

“The control would include the hours contractors worked, the computers and software we used, and the uniforms we all wore,” Makalovski said in a statement issued by the law firm.

“Supervisors would come over the top of us saying “this is how we do things now”. This would occur without any change in our contracts, it was simply a directive from above.”

A major grievance is that the earning capacity of contractors shrank by up to 40 percent, even though their outgoings went up.

“Our operating costs increased due to the distances we were required to travel from job to job,” Makalovski said.

The law firm is also alleging that ISG Management took advantage of the government-funded ‘Australian Apprenticeships Access Program’ which took on trainee telecommunications workers “to provide services to ISG Management as telecommunications technicians working on the Telstra network amongst other things.”

“A number of these workers, who had little business experience, were required to set up their own companies in order to receive work from ISG Management, and had to take out large personal loans to pay for tools and a motor vehicle in order to conduct the work,” Shine said.

Interest in the case was sparked after an ABC 7.30 Report investigation into contractor grievances that included a range of onerous conditions that made it difficult or impossible for contractors to make money or sometimes break even.

Industry Funds under pressure

One eye-opening feature of the case is that union-backed industry super funds could be stung by a successful outcome, with Tandem’s largest shareholder reported to be $100 billion-plus asset manager IFM Investors.

IFM’s private equity arm describes Tandem “Australia’s largest specialist contractor management company” and says it “manages over 2,900 subcontracting companies who employ in excess of 5,200 workers across a number of industries” and specifically calls out Tandem’s “workforce design and delivery capabilities”.

The allegations in the cause of endemic sham contracting are a major headache for Tandem’s shareholder because it raises questions about the risk appetite around the investment in regard to labour relations given the proximity to unions.

Tandem nee ISG Management is expected to file a defence within in coming weeks or months.