Former 'chuggers' join class action against Appco alleging underpayment of wages

Kyle King dreaded Friday mornings. If he missed his weekly target for raising money on the street for charities his name would appear on a whiteboard, a reminder that he would soon be taking part in a humiliating ritual.

Those named on the board were made to act like chickens as part of a bird fight against other "underperformers", at other times they had to slither on the floor in a slug race as teammates chanted.

"For the bird fight you would get on your knees, hold hands behind your back and fight to knock the other person to the ground and then hold them down for a few seconds," he says.

This is just one account of a murky world uncovered in a Fairfax Media investigation into the companies that serve some of the nation's biggest charities, as they compete for a piece of the highly sought-after philanthropic dollar.

Those who don't hit target risked being placed in a 'sluggie race'.

The humiliation felt by workers like King was amplified as a teammate would film it then upload it on a group app to share with other workers in the group around the country.

"It could get a bit rough, with pants and shirts getting ripped."

Once he suffered severe carpet burns.

"It wasn't my proudest moment."

Illustration: Simon Bosch

King still carries the scars – some physical, many emotional – from being pressured to participate in such demeaning public rituals doled out as punishment for failing to meet weekly performance targets.

Workers sue

He is one of an estimated 8000 workers who, in recent years, have signed up to work as "independent contractors" for companies linked to marketing and fundraising giant Appco Group.

Appco claims to reach 50,000 people face-to-face every day and to have raised $800 million in Australia for key charities and sporting bodies, which have flocked to this type of service because it's easier than marshalling volunteers and offers cash-hungry not-for-profits a source of income they might not otherwise have got.

A group of former workers have mobilised to join a class action, alleging sham contracting and gross wage underpayment, with some alleging they worked gruelling hours for as little as $2.50 an hour, and were forced to take part in humiliating rituals.

In response to questions from Fairfax Media, Appco said it was not aware of the litigation, but "would not allow or approve of any humiliating office rituals by anyone".

It said collectors are hired on "a self-employed basis to a marketing company (not to Appco), and earnings are based on performance".

But explosive allegations made in a statement of claim lodged in the federal court filed this week suggest there is a disturbing underbelly to the business of raising money for charities and the selling of dreams to those who rattle the tins.

Big names

NCH NEWS Picture of Ian the cat. Rutherford RSPCA, Rutherford. There are lots of cats that are up for adoption at the RSPCA. 1st March 2013 Newcastle NCH NEWS PIC JONATHAN CARROLLCredit: Jonathan Carroll

Some of the country's highest profile charities use third-party fundraisers to raise money. Workers have been underpaid in the past.

Sydney-based Mondial Fundraising, which has held contracts to raise funds for charities including UNICEF, RSPCA and the Cancer Council, recently agreed to pay $770,000 to 824 workers it had underpaid since 2010.

Charity collector Australian Sales and Promotions has been pursued twice in three years by the regulator for sham contracting.

This is the latest in a long line of industries under fire for alleged wage fraud following revelations of systemic wage fraud across convenience store giant 7-Eleven, sham contracting among some Pizza Hut franchisees and labour hire firms underpaying foreign workers in agricultural, construction, entertainment and tourism sectors.

Now Appco, a marketing juggernaut that claims to be the largest fundraising entity in the world, will face the blowtorch in legal action filed by a group of former "independent contractors" in the Federal Court this week.

Systematic underpayment

Person giving to charity studio cutout donation box for SHD Extra cover 29 Nov 2015Credit: Chris Brignell

Lawyer Rory Markham, from Chamberlains Law Firm which is running the class action, has described it as "one of the most systematic and largest underpayment disputes in Australian history, with the victims being young Australians, generous donors, charities and the taxpayers".

Markham estimates thousands of workers could have been underpaid as much as $80 million. The litigation is being funded by Britain-based Harbour Litigation Funding.

Appco's current and former clients include some of Australia's most high-profile and respected charities, such as Starlight Children's Foundation, Camp Quality and the National Breast Cancer Foundation. The Australian Paralympic Committee, Surf Life Saving Australia, and the AFL Players Association's Ladder are among those named as Appco clients in the statement of claim.

Often seen lurking on city streets and outside supermarkets pestering passers-by to make a donation, Appco's teams of young people work long hours flogging merchandise or collecting donations.

They present as happy, motivated and enthusiastic, even in the face of gruff brush-offs. But behind the facade a group of workers allege in legal documents they have been grossly underpaid.

There are an estimated 2500 workers currently in the Appco sales force in Australia. The class action claimants say they were paid a flat 20 per cent commission based on their individual sales each week.

Appco said 100 per cent of donations are paid direct to the charity, with Appco paid from a charity's annual fundraising budget. "Neither Appco nor independent contractors receive a percentage of individual donations," it said.

Promises sold

colour cartoon/illo/illustration/toon/art work Australian dollar gold coins, sandwiched, with a piece cut out, dollar bills in the middle. Colour Illustration / cartoon by Karl Hilzinger For AFR Portfolio Sally Patten 4th November 2007 NOTE: THIS IMAGE HAS BEEN DIGITALLY MANIPULATED Slice of the money pie AUSTRALIAN, AUSTRALIA NOTES AND COINSCredit: Karl Hilzinger

King alleges he earned just $35,000 over a 19-month period, working up to 75 hours a week, often weekends and late at night. He was told if he worked hard, he would make up to $250,000 in two to three years and run his own business.

"I did work hard ... but I didn't make any money," he says. On reflection, he believes he was brainwashed.

"It is a hard thing to come to terms with," he told Fairfax Media. He quit in November 2015.

King is also concerned that the people donating to the charities don't realise how much is taken in fees by Appco. This can be as much as 60 per cent of funds raised.

His last fundraising job before he quit was for the Alannah & Madeline Foundation, which uses Appco as a commercial fundraiser. It pays Appco 60 per cent of the sale price of booklets sold.

In a statement it told Fairfax Media: "it expects any partner we engage with to abide by the law in all respects. The Foundation expects all employees and independent contractors to be paid properly, especially young people."

Answers sought

Mercury, Weekender, Camp Quality. Camp Quality Staff Sonia Cameron, Bill White and Julie Redfern. 11th July 2013. Pix Ken Robertson, Story Louise TurkCredit: Ken Robertson

Some charities are less forthcoming. Camp Quality refused to answer how much of every dollar donated through the Appco sales force found its way to the charity, saying the exact amount "varies".

But it said it expected all its suppliers to comply with all relevant legislation, including workplace laws.

"We are opposed to any unlawful behaviour in the sector, including in the engagement and employment of fundraising staff."

Likewise the National Breast Cancer Foundation said it took its engagement with all staff and volunteers "extremely seriously and we expect all of our suppliers to operate lawfully and compliantly".

Ladder, the AFL Players Association, branded the alleged employment practices "not acceptable".

"We have raised the issue with the agency that manages the third-party relationship with Appco."

Others did not respond.

A voucher program run for the charity Special Olympics Australia cost $7 million in fees to Appco for a campaign that raised $12.2 million, according to media reports in 2014. Following the controversy the charity terminated its contract and ended the gift voucher program.

Early starts

Sonja Mamic was expecting a desk job involving administration duties.Credit: Jay Cronan

In the statement of claim, and in interviews with Fairfax Media, a picture emerges of life for an independent contractor – a world of frequent interstate travel and relentless pressure to meet targets.

"If you didn't meet your daily target you would get SMSs and phone calls pressuring you to do more," King says.

Days begin at the office at 6.30 or 7am with motivational music blaring through speakers, chanting and handclapping, to pump up the workers before sites are allocated and merchandise distributed.

Teams travel interstate as often as every second week, communal bed sharing or sleeping on the floor in cramped accommodation. Former worker Sonja Mamic recalls sleeping in a room booked for four with seven other men and women.

Those who make targets are lauded. Those who don't are told to work longer hours, and risk being placed in a "sluggy race" or getting assaulted by drunks on the street working late into the night.

Former worker Jonathan Mosslar, who has joined the class action, suffered frostbite on his right hand after working until midnight to try to meet his target.

The 21-year-old says he was working between 70 and 100 hours a week, making $600 to $700. By the time he left after eight months he was "exhausted". He believes he is owed thousands of dollars in backpay.

Appco said face-to-face fundraisers are not permitted to operate beyond 5pm or 6pm, depending on the state.

"This is something all independent contractors are made aware of," it said.

Out in the cold

Don't put off lodging your tax return on time, the ATO has warned.Credit: Gabriele Charotte

Mamic, 19, has joined the action against Appco. The role was her first out of school. Mamic says she was expecting a desk job, involving administration duties.

"I didn't want to work in fast food any more," she says. But she was sent from Canberra to Orange on her first day, to sit in the cold outside a burger chain outlet.

But she didn't complain. At Appco, she says, "you couldn't be negative about anything. You always had to be positive and if someone wasn't they were called a 'neghead'."

When she started she was shown the website for gaining an Australian Business Number (ABN) and told to get one.

She estimates she is owed tens of thousands of dollars in backpay and entitlements.

Central to the legal action is the argument that these fundraisers or "chuggers" were employees of Appco, not independent contractors, and should have been paid accordingly.

The workers' contracts aren't with Appco directly, but with marketing companies, set up and run by members of the Appco sales force.

Contracted out?

Appco, however, says they are independent contractors and "they can determine the hours they work, the level of income they generate, and the extent and the way in which they develop their own businesses". It says it "will not tolerate" any sham contracting by any business with which it has entered into a contract.

The litigation will shine a light on the fundraising practices of the $107 billion charity sector, which often lack transparency.

The issue has been dogging the sector for years and is only now being probed by the Fair Work Ombudsman (FWO), which has warned fundraising workers are "frequently" wrongly engaged as independent contractors.

Australia's charities regulator, the Australian Charities and Not-for-profits Commission, and the FWO launched a joint investigation into charity fundraising work practices earlier this month.

The charities regulator told Fairfax Media it has received more than 200 complaints relating to charities fundraising over the past two years – 13 per cent of all complaints it received.

FWO told Fairfax Media it was not currently investigating "any requests for assistance" from workers relating to the Appco Group. But it said it would inquire into the allegations set out in the statement of claim.

FWO plans to audit 15 randomly selected charities, including seven with an annual income of more than $1 million.

Global player

Jacob Bywater won the Appco Group's "top sales performer award" in 2015. He is the lead litigant in a class action against the group.Credit: Steven Siewert

Appco began in Melbourne as a multilevel marketing company, similar to Amway. Today, it has offices in more than 20 countries and claims its street walkers are seen by more than 1 million people.

"Appco complies with all current regulations around identification of fundraisers, their status and their relationship to Appco," it told Fairfax Media.

"Appco will work with the Fair Work Ombudsman whenever necessary."

The class action's lead litigant is former personal trainer Jacob Bywater, who joined the Appco sales force in April 2014 after seeing an advertisement online. He won the Appco Group's "top sales performer award" in 2015.

In its marketing material obtained by Fairfax Media, Appco describes workers like Bywater as "human commercials".

They wear T-shirts and caps emblazoned with the branding of well-known charities, but their affiliation with the actual charity ends there.

"You're standing there in a charity T-shirt and you have all the charity merchandise around you, the only place it's mentioned that you're a marketing company or associated with Appco is on the back of your badge which they can't see and small print on the front," says Bywater.

"People definitely had the impression that they were making a donation to a charity ... we were always taught in our sales pitches to say things like the money 'can' go towards things 'like' this or that."

Appco said it was not aware of these practices but "certainly does not condone" them.

"There is a disclosure statement printed on the top of every donor pledge form. Individual donations go direct to the charity and Appco is paid from a charity's annual fundraising budget – in much the same way as they would pay for a TV campaign from their marketing budget."

Star performer

Bywater collected for Blind Sports Australia, the Australian Paralympic Committee, the AFL's Ladder Foundation, the Alannah & Madeline Foundation and Surf Life Saving.

He says he worked seven days a week, putting in an average of 80 hours each week over the 22 months that he worked, until finishing up in February this year. During a very good week his average pay could be as high as $25 an hour. But when sales were down it could be as low as $2.50 per hour.

Bywater was one of the group's star performers, topping the monthly top leader competition. Despite this, he alleges he was short-changed $133,188 over the course of his employment.

"I've seen people who have literally made less than a hundred dollars in a week and done that consistently for a few weeks," he says.

He alleges he never received super, sick leave, annual leave, penalty rates, overtime or any of the other standard worker entitlements commonplace in businesses across the country. If any member of the public was asked how much he was paid, he was instructed to "refer them to customer service".

Marketing model

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