Australia: Regulators continue to focus on 'sham contracting'

Sham contracting has been, and will likely continue to be, a key focus for Australian regulators. Recent cases indicate the intention of regulators to prosecute contraventions of the sham contracting provisions of the Fair Work Act 2009 (Cth), with a risk of substantial penalties being imposed.

Earlier this year, the Fair Work Ombudsman published the findings of an inquiry into the Victorian Department of State Development and Business Innovation. The FWO made no finding of sham contracting, however noted that the Department had engaged in practices which increased the risk of workers being incorrectly classified.

The FWO made recommendations to the Department including:

• undertaking a review of labour engagement policies,
• auditing the engagement of independent contractors, and
• obtaining legal advice regarding the engagement of independent contractors.

Recent cases have indicated that courts are prepared to impose substantially harsher penalties than have previously been seen. In Director of the Fair Work Building Inspectorate v Linkhill Pty Ltd the court imposed total penalties of $313,500.

Actions for employers

Employers who current engage workers as independent contractors or are intending to do so are encouraged to review current engagement policies, agreements and practices so as to reduce the risk of significant penalties.

Click here for more details.

Authors: John Cooper, Partner and Melanie Smith, Solicitor