Industry Update

Know your rights on sham contracting

If you are unsure if you should be classified as an employee or independent contractor, FWBC can help you to figure it out.


We want to see everyone in the industry get a fair go, and that’s not happening if employees are being short-changed their entitlements. Sham contracting involves employers disguising an employment relationship as an independent contracting relationship.

This practice allows employers to avoid paying payroll tax, workers’ compensation and employee entitlements. Workers are also denied protections such as sick, holiday and long service leave, public holidays, maximum weekly hours and unfair dismissal rights.

However, genuine independent contracting is common in the industry and is preferable for some workers due to greater flexibility, freedom and earning potential.

The FWBC website contains useful information to help you work out if you are an independent contractor or employee, including a summary of the common law test. The courts use this test to work out the classification.

Some of the factors include:

  • Do I have control over the way I perform my task?
  • Do I supply/maintain my own tools or equipment?
  • Do I work standard hours?
  • Am I paid according to task completion, rather than receiving wages based on time worked?

If you are a business that is being undercut by your competitors who are engaged in sham contracting you can report those breaches to FWBC.  Your competitors shouldn’t have an unfair advantage because they are doing the wrong thing and underpaying their workers.  Stamping out sham contracting also provides a fair go for decent employers.

We have 27 active investigations underway and have commenced seven legal proceedings with regards to sham contracting. Four of those proceedings have been finalised – all were successful and resulted in penalties totalling just under $100,000 awarded against the respondents.

The results were:

  • On 9 October 2012, penalties totalling $11,800 were awarded against the respondents in FWBC v Supernova Contractors Pty Ltd and Long.
  • On 17 May 2012, penalties totalling $48,000 were awarded against the respondents in ABCC v Inner Strength Steel Fixing Pty Ltd and Sacha.
  • On 19 July 2011, penalties totalling $25,500 were awarded against the respondents in ABCC v Rapid Formwork Constructions Pty Ltd and Anderson.
  • On 5 April 2011 penalties totalling $14,000 were awarded against the respondents in Darlaston v Risetop, Rummukainen and Rummukainen.

Later this week, FWBC will release the research it commissioned into working arrangements in the building and construction industry.  This research will further inform FWBC’s regulatory actions to stamp out sham contracting.

Further information:

FWBC website - Employee or contractor

FWBC website - Sham contracting Inquiry

FWBC hotline - 1800 003 338

Return to newsletters