Under the sham contracting provisions of the Fair Work Act 2009 (FWA), an employer is prohibited from misrepresenting an employment relationship or a proposed employment arrangement as an independent contracting arrangement. An employer is also prohibited from:

– Dismissing or threatening to dismiss an employee for the purpose of engaging them as an independent contractor

– Knowingly making false statements in order to persuade an employee to become an independent contractor

A recent case on the subject was Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45. In this case Quest South Perth Holding Pty Ltd (Quest) had engaged Contracting Solutions Pty Ltd (Contracting Solutions) in order to convert two of its housekeeper employees into independent contractors. The arrangement involved the independent contractors being supplied back to Quest by Contracting Solutions. The nature of the work carried out by the housekeepers was the same, except that they were being paid by Contracting Solutions.

In order to establish that the above arrangement was a contravention of the sham contracting provisions in the FWA the Fair Work Ombudsman was required to show:

1. The housekeepers were employees and not independent contractors; and

2. The sham contracting provisions extended to include agreements with third parties such as Contracting Solutions.

The Federal Court considered the housekeepers were employees because there was nothing to suggest they were running their own business, they wore Quest uniforms, used Quest supplies and worked under the complete direction of Quest. However, the Federal Court dismissed the claim on the basis that it did not consider the sham contracting provisions to cover representations by an employer about a contract with a person other than the employee.

On appeal, the High Court held that the sham contracting provisions did cover a representation by an employer about a contract with another person. As a result, Quest was held to have contravened the sham provisions of the FWA.

If you require any further information in relation to sham contracting provisions, please do not hesitate to contact our team of lawyers at The Quinn Group on (02) 9223 9166 or submit and online enquiry form today.