What is sham contracting?

Sham contracting refers to the act of engaging an individual under a contract for services where the true character of the engagement is an employment relationship.

The Code provides that a code covered entity must not engage, or propose to engage, an individual to perform building work under a contract for services where the true character of the engagement is that of employment.

A code covered entity must not enter into a contract for building work services if an individual (who is not the building work services contractor):

  • is to perform those services;
  • has ownership in, or is an officer or trustee of the building work services contractor; and
  • would otherwise be in a contract of employment if the contract were entered into directly with the individual.

These requirements are stricter than the sham contracting provisions in the FW Act.