Tooheys parent company Kirin could be liable for up to $1.5 million in unpaid payroll tax stemming from an ugly legal dispute with a dumped labour hire contractor.

FP Group — which provided labour hire services at Tooheys’ Lidcombe plant for two decades before being dumped for rival Skilled last year — has argued their deal with Tooheys was a union-busting sham and that the brewer was therefore liable for redundancy payments owed to 10 sacked employees and hundreds of others.

FP says it was effectively a division of Tooheys, with company costs — including business establishment and office rental paid by the brewer. The company’s directors were initially selected from Tooheys management when forerunner Feyman was set up in 1991.

In a potentially precedent-setting case to be heard later this year, FWA deputy president Peter Sams will rule on which company was the “true employer”, and therefore liable to pay millions of dollars in redundancies, unpaid leave and entitlements owed to the workers. Employees’ redundancy payments and other perks including a weekly “beer ticket” may also have to be paid.

And Tooheys, if it is fingered, could face an additional payroll tax bill. Over the life of the Tooheys agreement, both firms claimed the payroll tax-free threshold of about $600,000. It could be ordered to pay the threshold claimed by FP Group, which at its peak boasted an annual payroll of $10 million.

In the lead-up to the case, details of a disturbing alleged s-xual assault case have cropped up that appear to cast doubt on the brewer’s internal culture. In one instance, according to a legal letter seen by Crikey, a male Tooheys employee demanded oral s-x with a female colleague in a lift in the mid-1990s, who then “permitted” him to fondle her bre-sts to avoid a more serious assault.

An alleged physical assault has also been cited, after which FP alleges that Tooheys failed to properly discipline the offender.

But sources close to Tooheys said this morning FP’s case was “weak” and that it had dredged up the assault allegations in order to extract a cash settlement for the workers suing separately for unfair dismissal that are also the applicants in the case before the industrial umpire.

Other documents seen by Crikey appear to suggest there was doubt about whether FP was ever a real company. When Feyman was founded, it was unclear whether “redundancy” payments paid to Tooheys employees who defected to FP should be treated as such. An archived letter shows the beer giant had offered to pay the tax on redundancy if it was deemed by the Australian Tax Office to in fact be a component of regular wages. But the ATO failed to accept that the payment was proper and the worker was slugged at the full rate, which was then reimbursed.

At the previous FWA hearing in March, FP said it had only provided a shell of services and that the “true employer” was Tooheys. But the company also maintained that the redundancy payments should be written off or reduced under section 120 of the Fair Work Act, which provides relief for companies not in a position to pay. Sams dismissed the application, arguing it was tautological.

A spokesperson for Kirin subsidiary Lion said this morning that “it is not appropriate for Lion to make detailed comments on a matter before the industrial courts.

“In general terms the FP Group, a contract labour supplier to the Tooheys Brewery, recently lost its contract and is seeking to avoid its legal obligations to its employees. These obligations were clearly recognised in its contract with Tooheys Brewery and specifically allowed for in the fees paid by Tooheys Brewery to FP over the years. As the employer of its employees, FP is required to not only pay wages and payroll tax, but to accrue for annual leave and long service leave.

“The use of third party labour contractors is common across the industry. Our contractual arrangement with FP was legal and ethical and typical for the industry and we are rigorously defending our position in this matter.”

The case was originally set down for next month but will now not be heard until September at the earliest.