The former operators of Quest serviced apartments in South Perth have been fined almost $59,000 for a sham contracting arrangement designed to bypass industrial relations laws.

Quest South Perth Holdings Pty Ltd sacked two housekeepers and immediately re-hired them as purported independent contractors to perform the same duties in 2009.

They also sacked a receptionist at Quest on Arlington but she was not re-hired.

The Fair Work Ombudsman initiated legal action in 2011, alleging the arrangement contravened sham contracting laws, and while part of its case was dismissed twice in the Federal Court, the watchdog then succeeded with its first High Court appeal.

The matter was referred back to the Federal Court, where penalties have now been imposed by Justice John Gilmour against the company and former manager Ashvin Luchmaya.  Justice Gilmour found Quest South Perth sought to engage the employees as independent contractors so their rights and entitlements would not be protected by industrial relations legislation.