Sham Employment Contracts

The law contains a number of provisions to ensure that employers do not seek to avoid their obligations to employees by seeking to characterise them as independent contractors.

We have expertise in recovering unpaid entitlements.

Employee vs Sub-contractor

A sham employment contract is an agreement that purports to be an independent contractor agreement but is in fact a contract of employment. It is often done so as to deny an employee their proper entitlements.

The question of whether a person is an employee or subcontractor is a difficult and complex question of law. Issues such as the degree of control over the person, their capacity to work for others and the manner of payment are all relevant. Many people who are treated as contractors by an entity may in fact be employees at law.

Differences in entitlements

These people will often have claims for entitlements due as employees, but not payable to contractors such as:

• Superannuation;
• Allowances and penalty rates;
• Payments (such as redundancy payments) due on termination;
• Annual, long service and sick leave.

Turner Freeman lawyers have expertise in advising individuals if their work arrangement is, in fact, an employment arrangement or subcontracting arrangement. We have expertise in recovering unpaid entitlements.

The Fair Work Act

The Fair Work Act prohibits sham contracting. Under the Fair Work Act, an employer may not:

• disguise an employment relationship as an independent contracting arrangement;
• dismiss an employee and re-engage them as a contractor;
• knowingly make a false statement to persuade an employee to become an independent contractor.

A corporation in breach of the sham contractor provisions of the Fair Work Act may be liable to a fine of $33,000.