Sham Contracting
Over the last fifteen years, there has been a steady rise in the use of independent contractors by businesses in regulating their affairs.
Over the last fifteen years, there has been a steady rise in the use of independent contractors by businesses in regulating their affairs.
Independent contractors typically work through a corporate structure and/or as sole proprietors and utilize an ABN to generate their invoices.
A sham contracting arrangement is when an employer attempts to disguise an employment relationship as an independent contracting arrangement to circumvent the employee being provided his/her statutory entitlements including:
- minimum award wages;
- overtime and penalty rates;
- the Fair Work National Employment Standards and associated statutory leave entitlements and allowances;
- the superannuation guarantee;
- income tax assessment and payroll tax obligations.
Only a court or tribunal can rule on whether a work arrangement is an employment relationship or an independent contracting arrangement and whether the arrangement between the parties is a sham contract.
How can Connect legal help you in safeguarding your workplace rights and what outcomes can you expect?
Connect Legal understand that the complex nature of a sham contracting arrangement is one where a powerful employer exploits a vulnerable employee and when litigating and negotiating these matters it is important to have highly skilled and dynamic legal representatives who will properly protect your workplace rights.
These are complex areas of law and Connect Legal are expert in identifying sham contracting arrangements we have won major judgments in the Fair Work Commission and the Federal Court of Australia on the subject of sham contracting. Please see our judgments and claims page.
At Connect Legal we understand that sham contracting is another example of an employer and Directors profiteering at the expense of the employee and that is why our approach to these applications is to:
- hear your side of the story;
- hold to account personally the Directors and Management involved in the sham contract;
- prevent further instances of sham contracting.
I am an independent contractor and what laws exist to safeguard my rights in relation to adverse action and termination?
The provisions governing sham contracting are also found in Part 3-1 of the Fair Work Act and are a General Protection for employees. Please see our General Protections claim page.
Under the Fair Work Act 2009, an employer is not only prohibited from engaging in sham contracting, but it also must not misrepresent an employment relationship as an independent contracting arrangement, including knowingly making false statements and dismissing or threatening to dismiss employees for the purpose of engaging them as independent contractors.
We also have had many inquiries where employees have complained about sham contracting arrangements which is an exercise of a workplace's rights and have subsequently been dismissed for prohibited reasons. These claims also form part of section 340 of the Fair Work Act 2009.
If Connect Legal can prove that your engagement and work arrangements are indeed a sham contract, then you will be deemed an employee and the court will retrospectively recognize that during your period of engagement, you were entitled to the same workplace rights and benefits as if you were an employee. This means that you can seek back pay for underpayments pursuant to an industry award, superannuation benefits, statutory leave entitlements, and even long service leave under your applicable State legislation.
In August 2017, Connect Legal, its solicitors Mr. Richard Aslanian, Mr. Jake Boghossian and Mr. Nick Furlan (Barrister) secured a landmark judgment for Linda and Shane Putland who had been engaged as call center operators and as so-called independent contractors for over 10 years. Pursuant to these diligent efforts, Justice Bromwich of the Federal Court made significant orders in relation to breaches of the Fair Work Act 2009 and the Clerks Private Sector Award.
There are very strong grounds to demonstrate that you are an employee since you exclusively work for the employer, have set hours of work, are remunerated hourly, are employed under the Commercial Sales Award are integrated into their business, and are under their stringent control.
Practicing in employment law since the 1990s and advising not only company and owner drivers, and undertaking the landmark Putland case, there are very strong grounds you will be deemed an employee. We actually helped an employee like yourself at the NSW Chief Industrial Magistrates Court and received an affirmative judgment and had him deemed an employee. Finally, the parties' intention is not everything, i.e. what the employer and employee agreed to, but it is the conduct of the parties and in your matter, there is a very high likelihood you will be deemed an employee under the Road Distribution Award.
We would recommend you write to your employer, provide a brief employment history, and explain you would prefer to be employed as a PAYG employee, paid the same salary, plus annual leave, superannuation, long service leave, and other award and Fair Work entitlements. If they refuse, please contact us and we can act on your behalf to assist with the transitioning to an employee and be back paid your lawful statutory entitlements.
Providing your employment services through a company will not affect the Courts to determine that your employment is a sham. Indeed, your past employer will allege we employed XXX, but their company provided their services. This like much other employment indicia will be taken into consideration, the courts will apply the multi indicia and or control tests to determine if your employment is a sham. Please contact Connect Legal for confidential discussions regarding your sham employment contract and benefit from our over 20-plus years of helping employees defend their employment rights.
Connect Legal has acted for numerous clients outside of the mainland capital cities, so traveling to regional NSW is a pleasure. Firstly, we need to verify whether this is a sham arrangement, which it seems, next which industrial award applies to your employment, and thereafter the quantum of your underpayment. We will review your weekly salary, and whether annual leave, public holidays and superannuation is outstanding. Indeed, not a straightforward matter especially if you are required to litigate the underpayment claim at the Federal Circuit Court, where Connect Legal has substantial experience. Just look at our judgment page.
You may apply to a competent court to allege that the contract for services that you were engaged in was in fact a sham, and as an employee, your former employer is required under the Superannuation Guarantee (Administration) Act 1992 (Cth) to pay Superannuation contributions of 9.5% or on your ordinary time earnings.
Alternatively, you have a workplace entitlement under an applicable industrial instrument (modern award) to recover the unpaid superannuation in a court with competent jurisdiction in circumstances where clauses in that instrument require your former employer to make the same Superannuation contributions to a Superannuation fund.
In the alternative again, if you maintain that you are a contractor and not an employee, however your arrangement or engagement with the principal contractor occurred in an “employment-like setting” where the labour component of your services contract could have been performed by an employee. Your work arrangement may fall within the extended definition of “employee” in section 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth) entitling you to the payment of Superannuation.
You may apply to a competent court to allege that the contract for services that you were engaged in was in fact a sham, and as an employee, your former employer is required under the Superannuation Guarantee (Administration) Act 1992 (CTH) to pay Superannuation contributions of 9.5% or on your ordinary time earnings. Alternatively, you have a workplace entitlement under an applicable industrial instrument (modern award) to recover the unpaid superannuation in a court with competent jurisdiction in circumstances where clauses in that instrument require your former employer to make the same Superannuation contributions to a Superannuation fund. In the alternative again, if you maintain that you are a contractor and not an employee, however, your arrangement or engagement with the principal contractor occurred in an “employment-like setting” where the labor component of your services contract could have been performed by an employee. Your work arrangement may fall within the extended definition of “employee” in section 12(3) of the Superannuation Guarantee (Administration) Act 1992 (CTH) entitling you to the payment of Superannuation.
Our legal services will be undertaken on a No Win No Fee basis as has been the case from inception when we commenced defending employee rights in the late 90s. We will provide a written costs agreement outlining our No Win No Fee policy and will provide an estimate of the applicable fees.
