Sham Independent Contractor Agreements:

It is an offence under the Act to employ someone under a ‘sham contracting arrangement’ and represent to them that they are employed as a contract (under a contract for services) when they are actually an employee (a contract for employment).

The consequences for an employer who is liable under s357 of the Act may be that Fair Work Inspectors can seek to impose penalties for contraventions of a sham contracting arrangements and reform opt-in provisions. A maximum penalty of $51,000.00 per contravention can be imposed by the Courts. A Fair Work Inspector can also apply to the Courts for an injunction or an interim injunction should an employer seek or threaten to dismiss an employee for the purpose of engaging them as an independent contractor. The injunction would act to prevent the dismissal or remedy the effects.

An independent contractor is covered by the Independent Contractors Act 2006 (Cth). Self employed contractors are generally regarded as free agents who operate their own business with high autonomy and equal bargaining power. Accordingly, this affords them less protection, they are covered under general commercial law. In this regard, a person who engages an independent contractor may not be vicariously liable for the actions of a contractor.  In contrast an employee works under the direction and management of their employer, who has obligations to the employee under the Fair Work Act 2009 (the ‘Act’) and the Fair Work Regulations.

The Employment Lawyers at Navado Lawyers & Solicitors have advised on Employment Law for many years and deliver professional, expert advice on this area of law. If you need further legal advice on your employment law matter, you may book an appointment with us by telephone on (02) 9233 4048 or by email to info@navado.com.au.  

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