What has changed?
This measure amends the Fair Work Act 2009 (the Act). to insert an interpretive principle that applies when determining the meaning of ‘employee’ and ‘employer’.
For the purposes of the Act, the terms ‘employee’ and ‘employer’ would be determined by assessing the real substance, practical reality and true nature of the working relationship, by considering the ‘totality’ of the relationship.
Eligible high income earning individuals can ‘opt out’ of the application of the interpretive principle.
What is shame contracting?
Sham contracting is misrepresenting an employment arrangement as an independent contractor arrangement.
Employers who engage in sham contracting can be penalised.
A defence is one provided to a court to defend a claim against sham contracting. The previous defence to sham contracting claims (known as the ‘recklessness’ test) has been changed to a ‘reasonableness’ test.
Understanding sham contracting
Sometimes a business or person may tell or represent to a worker that they are an independent contractor (contractor), when in fact they’re an employee of the business.
This may be a sham contracting arrangement, unless the business can prove that they reasonably believed the employee was a contractor.
It’s illegal to represent to a worker that they’re a contractor when the business doesn’t reasonably believe this.
It’s also illegal to:
- knowingly say something false to convince an employee to become a contractor to do the same work (or mostly the same work), or
- dismiss or threaten to dismiss an employee to engage them as a contractor to do the same work (or mostly the same work).
