January 2013 Industry Update

Up to 13 per cent of independent contractors misclassified - Independent research report

FWBC Chief Executive Leigh Johns has released a research report which paints a clearer picture of the prevalence of sham contracting in the construction industry.

“Views on the level of sham contracting in the industry vary considerably and, until now, there has been no reliable research on the issue,” Mr Johns said.

“I commissioned this report to help give us a better idea about how widespread the problem is so we can come up with new ways to address it.

“The research identified that 13 per cent of contractors interviewed were likely to have actually been employees.  Given there are approximately 385,000 contractors in the Australia’s construction industry, this would equate to 50,000 contractors.”

Mr Johns said the study was conducted by independent firm TNS Research, with assistance from eminent academics in the workplace relations field.

“The research was extensive, involving telephone interviews with 900 workers and 450 employers in the construction industry,” he said.

“One in eight of those surveyed who classified themselves as independent contractors were potentially misclassified because they exhibited practices and arrangements typical of an employee, rather than an independent contractor.

“Such practices and arrangements include employer-determined hours, using employer’s tools and equipment, working exclusively for one employer and wearing an employer’s uniform.”

Mr Johns said the research also revealed that awareness of sham contracting was low, with 54 per cent of workers and 77 per cent of employers having never heard of it.

“Low levels of awareness reinforce the important work FWBC is doing to educate and inform people working in the construction industry about sham contracting,” he said.

“In our last Industry Update we published an article to encourage workers to know their rights on sham contracting – this is just one of the many educative initiatives we have undertaken in this area.

“FWBC is committed to educating people in the building and construction industry about sham contracting and prosecuting where appropriate.”

The study also showed that workers from Culturally and Linguistically Diverse (CALD) backgrounds were particularly vulnerable to sham contracts. FWBC recently launched a campaign to help raise awareness among CALD workers about their rights.

Since October 2010, FWBC and its predecessor agency have:

  • Commenced 193 investigations into allegations of sham contracting
  • Commenced eight civil penalty proceedings, with a further 10 presently being considered for litigation
  • Successfully litigated four civil proceedings in relation to sham contracting resulting in $99,380 in civil penalties.

Mr Johns said FWBC is committed to raising awareness of sham contracting and stamping out unlawful practices.

“In response to this research, we will tailor our educative and compliance strategies with regards to the research,” Mr Johns said.

“We will convene a high level social partner working group to examine the outcomes of the research; including whether legislative amendments to eliminate sham contracting in the construction industry would be effective.

“We will also look at the advantages and disadvantages of a negative licencing scheme, in consultation with key industry stakeholders.”

Further information

Media release – Sham contracting research released

Report – Working arrangements in the building and construction industry

FWBC Response to report

FWBC website – Employee or contractor?

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