Sham Employment Contracts

Sham Contracting How to identify a sham arrangement How to assist employees to assert their rights How to obtain unpaid entitlements

Sham Contracting A sham contract is when an employer/principal deliberately disguises an employment relationship as an independent contracting arrangement. Individuals who are working as contractors or sub-contractors when in reality they are not running their own independent businesses or company.

How to identify a Sham arrangement Understand working relationships Being aware of key indicators that the Courts use to differentiate working relationships Knowing when you are running your own business or working for someone else’s business Tell tale signs: Have previously been an employee; and Told by your boss that you’ll need to get an ABN to continue working; or Being dismissed and then offered the same or similar position as a contractor.

Working in Australia Employees Contractors Workers

The difference between employees and contractors? Provide their "labour" Engaged full-time, part-time or casually Duties of fidelity and good faith to employer Have less control over how they work, when or where Legislated entitlements such as Fair Work Act, State Industrial Relations Acts, Superannuation Acts, WorkCover etc Employees Hired to provide a service or a result Running own independent business separate from the business that hires it Independence, freedom, little or no control over how work is performed, autonomous working environment Responsibility, liability for work, may engage own workers to perform the work Independent Contractors Act, Corporations Act, Competition and Consumer Act, and some sections of the Fair Work Act Contractors

Annual and Personal Leave Collective Bargaining Wages/Overtime Entitlements Employees' Superannuation Long Service Leave Workers' Compensation Unfair Dismissal Annual and Personal Leave Collective Bargaining Wages/Overtime Vicarious liability NES

Key Indicators – the “totality approach” Control Hours of work How the job is done Conduct Direction Supervision Provision Uniforms Tools Training Procedures and policies Superannuation Relationship Lack of records Behavioural duties Reporting Personal performance Sub-contracting Contract wording Tax arrangements

More Freedom or flexibility Unfair Contracts Protection Contractors Benefits More Freedom or flexibility Unfair Contracts Protection Sub-contracting Creation of goodwill Own/ control all intellectual property

True Contractors advertise, wear own uniforms, own tools, often experts or specialists in their fields, tradesmen or professionals Running their own business: Have control over when, where and how they work Generally assumed to be two equal businesses contracting in normal commercial contracts May employ their own staff to do the work Contract for services - they provide results as opposed to service Invoice the contracting company for their work.

The Fair Work Act - General Protections – Sham Contracting A person (the employer ) that employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed by the employer is a contract for services under which the individual performs, or would perform, work as an independent contractor. s.358 An employer must not dismiss, or threaten to dismiss, an individual who: (a)  is an employee of the employer; and (b)  performs particular work for the employer; in order to engage the individual as an independent contractor to perform the same, or substantially the same, work under a contract for services. s.359 A person (the employer ) that employs, or has at any time employed, an individual to perform particular work must not make a statement that the employer knows is false in order to persuade or influence the individual to enter into a contract for services under which the individual will perform, as an independent contractor, the same, or substantially the same, work for the employer.

Case Law Hollis v Vabu Pty Ltd [2001] HCA 44

Asserting Rights Know your Rights

Individual workers Trade unions Fair Work Ombudsman Courts Employers

General Protection s.340 – Workplace Rights (1) A person must not take adverse action against another person: (a) because the other person: (i) has a workplace right; or (ii) has, or has not, exercised a workplace right; or (iii) proposes or proposes not to, or has at any time proposed or proposed not to, exercise a workplace right; or (b) to prevent the exercise of a workplace right by the other person. Note: This subsection is a civil remedy provision (see Part 4-1). (2) A person must not take adverse action against another person (the second person ) because a third person has exercised, or proposes or has at any time proposed to exercise, a workplace right for the second person's benefit, or for the benefit of a class of persons to which the second person belongs.

What is a workplace right? For the purposes of Sham Contracting, it is reasonable to presume that an enquiry or complaint about sham contracting or a possible potential sham contracting arrangement is asserting a workplace right. Always raise issues in writing

Dismissal Adverse Action Demotion or lack of promotion, relocation, internal transfer, changes in work type or quality, being sidelined, constructive dismissal Broadly speaking any negative affect on an employment relationship by an employer doing or not doing something, or having something or not having something done.

Inspectors The FWO inspectors conduct their own investigations and inquiries. Act on tip-offs Have rights to enter premises and search or inspect records May report your concerns about sham contracting to the FWO at: 13 13 94 www.fairwork.gov.au/contact-us

How to obtain unpaid entitlements Community Legal Services to advise on Legal Proceedings Fair Work Ombudsman

Community Legal Services If you have been: Dismissed Offered an independent contract over employment Bullied into entering into an independent contract Contact a community legal service to seek advice, guidance and support about next steps Alternatively, contact the Fair Work Ombudsman

The Fair Work Ombudsman PART 5-2 of the Fair Work Act establishes the Office Of The Fair Work Ombudsman Functions of the Fair Work Ombudsman             (1)  The Fair Work Ombudsman has the following functions: (a)  to promote: (i)  harmonious, productive and cooperative workplace relations; and (ii)  compliance with this Act and fair work instruments; including by providing education, assistance and advice to employees, employers, outworkers, outworker entities and organisations and producing best practice guides to workplace relations or workplace practices;                      (b)  to monitor compliance with this Act and fair work instruments;                      (c)  to inquire into, and investigate, any act or practice that may be contrary to this Act, a fair work instrument or a safety net contractual entitlement;                      (d)  to commence proceedings in a court, or to make applications to the FWC, to enforce this Act, fair work instruments and safety net contractual entitlements;                      (e)  to refer matters to relevant authorities;                       (f)  to represent employees or outworkers who are, or may become, a party to proceedings in a court, or a party to a matter before the FWC, under this Act or a fair work instrument, if the Fair Work Ombudsman considers that representing the employees or outworkers will promote compliance with this Act or the fair work instrument;                      (g)  any other functions conferred on the Fair Work Ombudsman by any Act. Note 1:       The Fair Work Ombudsman also has the functions of an inspector (see section 701). Note 2:       In performing functions under paragraph (a), the Fair Work Ombudsman might, for example, produce a best practice guide to achieving productivity through bargaining.              (2)  The Fair Work Ombudsman must consult with the FWC in producing guidance material that relates to the functions of the FWC.

The Fair Work Ombudsman (FWO) Enforces compliance with the Fair Work Act, related legislation, awards and registered agreements.  Help employers and employees by providing advice and education on pay rates and workplace conditions. Provide reliable and timely information about Australia’s workplace relations system Educates people about fair work practices, rights and obligations Resolve workplace issues by promoting and monitoring compliance with suspected breaches of workplace laws, awards and registered agreements Enforce workplace laws and seek penalties for breaches of workplace laws Enforce certain orders made by the Fair Work Commission. FWO does not: investigate unfair dismissal and unlawful termination applications - See the Fair Work Commission to make a claim investigate bullying and harassment complaints - See the Fair Work Commission to make a claim make changes to the legislation, awards or registered agreements

Other Options The Federal Court Commence proceedings Mediation Seek to dispute resolution techniques to make an agreement Settlements Using a deed to resolve the underpayment might be in the best interests of all involved

Recent Case Law Fair Work Ombudsman v Australian Sales & Promotions Pty Ltd & Anor [2016] FCCA 2804 (10 November 2016) Fair Work Ombudsman v Jooine (Investment) Pty Ltd & Anor [2013] FCCA 2144 (20 December 2013) Mr Y Aslam, Mr J Farrar & Ors v Uber (The Uber decision: Employment status in the UK)

Conclusion Protections exist against being forced to enter into an independent contract Right to recover if you have been forced to enter into an independent contract when you are really an employee Recover wages Recover penalties Recover accrued leave entitlements Options Community Legal Service FWO

Know your rights