Sham Contracting and Fair Work Act 2009 in Australia

This article discusses the issues related to sham contracting in Australia and the legal provisions under the Fair Work Act 2009 to protect the rights of employees. It covers the penalties for violating the rights of employees and the role of the Fair Work Ombudsman. The article also highlights the landmark case of Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45. Subject: Human Resource Management, Course Code: N/A, Course Name: N/A, College/University: N/A

Running head: HUMAN RESOURCE MANAGEMENT
Human Resource Management
Name of the Student
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Author Note

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Introduction
Sham Contract is a way of disguising unemployment relationship to make it look like an
independent contractor in relationship. It can be defined as a deliberate misrepresentation an
already existing employment relationship between the employer and employee It is a way to
avoid payment by the employer to the employee. It is considered an unlawful act and the
Australian law does not permit contracting. More often than not sham contacting is done against
the will of the employees. The employees are bullied into signing an agreement which is a
contracting agreement. The bullying done against a worker in a workplace is also called
workplace bullying. Therefore instead of respecting the position of the employee as a worker in
the company he is treated as an independent contractor and as a result of that the employer is
freed from his duties to pay entitlements to the employee. The national employment standards
entails that a worker has to be paid in accordance with the statutory and the legislative
regulations. These entitlements include compensating the worker paying his superannuation and
also recognizing his legal rights under the Australian law.
Issue 1
It is the duty of the employer to pay the above mentioned entitlements to the employee
but if he is made to work as an independent contractor the employee will not have to pay any
extra amount of money or pay the entitlements of the employee. This is called a contracting
agreement because it is a façade whereby the employer escapes is liability to pay to the employee
the special entitlements that he is obligated to pay to the employee. The Fair Work Act 2009 is
an Australian legislation that acts as a shield for the employees and prevents them from sham
contracting and ensures that they get proper entitlements that they are deemed to get under the
Australian law. Under the Fair Work Act 2009 it is clearly stated that sham contracting will be

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treated as an unlawful agreement between the employer and the employee. Under the provisions
of the legislation the main this contract in arrangement is illegal it is imperative for the
employees to keep in mind that he cannot tell the employee that he is an independent contractor.
If the employee does not want to add an independent contractor the employee cannot force his
opinions on him and cannot use force on exertion to make him act like an independent
contractor. The employee cannot threaten the employee if you does not wish to become an
independent contractor and also cannot make him do the works of an independent contractor
which she had already performed as an employee. It is found that the works of the independent
contractor and the employee at the same and the employer cannot in anyway mislead the
employee into believing that he can walk like an independent contractor and cannot also force
him to perform the functions of an independent contractor even though he is in the position of an
employee. In Australia there are strict legislations that punish and employee who indulges in
such unlawful activities and makes an employee walk like an independent contractor even
though he doesn't wish to. The fair work ombudsman is obligated under the Australian lost to
take strict actions against an employee who makes an employee work under such compelling
situations and makes them worked as an independent contractor to make sure that the employees
does not have to pay then that payments. Under the Fair Work Act, 2009 if an employee
misrepresents to a person about the employment contract then it is an unlawful activity and the
employee shall be held liable.
Issue 2

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Section 357 does not give much emphasis on the intention of the employer and how he
wanted to make the contract with the employee. In cases of misrepresentation it is not important
to consider whether the employer while making the representation was not sure about the facts or
he made the agreement recklessly. Therefore if under section 357 the employer makes a contract
for service and ensures that the employee is engaged does an independent contractor instead of
an employee the employee shall be held to be violating the provisions of the fair work act. The
employee shall not be given shield where we can clean that they can escape liability because they
have involved third party. 357(1) clearly states that an employee cannot make any representation
to the employee and he cannot make the arrangement look like an agreement for services. This
provision isn't for the rest of the basic principle of the fair work act which is enacted to uphold
the rights of a worker (Flamingh and Bell 2017). The high court in this case held that it was the
duty of the legislation and the judiciary to protect workplace rights. The rights under the fair
work act also extend to protect an employee from being misled by the employer. After the claims
of the applicant was dismissed in the federal court and also the court of first instance the fair
work officer made an appeal to the high court (Webster 2015). The court in this case held that
the misrepresentations made by the employer was a clear violation of section 357 and the
misrepresentation also took into consideration the agreement between the worker and the third
party. In the upper limit to the high court the judge of the high court clearly disagreed with the
orders of the federal court observing that if the news of the federal court are made to be allowed
then there will be no liability fixed on counterparty. The court therefore held that section 357
involved in its orbit triangular contracting agreements. That is not important that there was a
third party involvement the most important thing to consider in such cases is that there shall be
no denial of workplace right to an employee who is working in an organisation. The high court

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also made a reference to the independent contractors act 2006. Therefore for the employers to
escape from pecuniary penalties and for breach of section 357 it is important that they do not
misrepresent any information to the employee (Wills and Mills 2017).
Issue 2
Section 358 talks about workplace bullying which says that if an employee is dismissed
from his original position and is made to work as an independent contractor where they working
as an employee that will lead to workplace bullying. In such cases it is important to prove that
the employee had used force and exertion and course the employee to leave his original position
and work as an independent contractor. Taking the example of the recent case that happened in
Australia a person was employed as an employee initially and lifter through the agreement he
was made to work as an independent contractor and therefore the employer did not have to pay
the extra entitlements that he has to regularly pay and employee because an employee is not
obligated to pay special in sentence and employments to an independent contractor. The biggest
issue in cases of sham contracting is vet it is a deliberate act and the employees of the intention
to deceive and on unlawfully by making them work in positions they are not willing to. In cases
of a human resources professional he might not be getting the same entitlements that a registered
employee of the company would have got even though he is putting extra hours in the office as
an independent contractor he shall not be allowed to take a sick leave or an annual leave and all
the other special benefits that an employee in a company gets. Well such cases of brought to light
it is not the company only who is health life but also the directors who take the decisions and
miss represent facts. Firing in already established employee and then again he admitting him to
the same of visan the position of an independent contractor is on love full and against the loss of
fair works act in australia. The fair work act 2009 came into the picture to protect the rights of

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thee independent contractor and make sure that they get the entitlements that’s the company used
to them by virtue of holding the position in the present scenario. In Australia going by the recent
judgments it is clear to see that the courts have come down very heavily on sham contracting and
has also held that sham contracting is a way of violating an employee is legal rights and his
rights to act freely in an organisation..
Issue 3
Section 359 talks about the influences that the employer can exercise on the employee
and make a false claim to persuade the employee to act like an independent contractor and not
make him act in according to his wishes. There are no strict rules to differentiate between an
employee and an independent contractor and it is the complete discretion of the courts to decide
whether there was a relationship between the parties and whether the employee could be given
the status of being an employee in the company and whether he is holding the rights of
employment. There are many differences between an employee and an independent contractor
because in the latter he has a higher responsibility towards the work he is doing and he has to
exercise control over his work. Independent contractor is notified at the time for which she has to
work and has to also take rest to make sure that the company is making profits. There is a big
difference between the benefits that an employee gets and the benefits that the independent
contractor does not get. The Fair Work act 2009 has their work inspectors who worked for the
welfare of the employees and to impose strict penalties in cases of sham contacting agreements.
There are also limitations on the rights that the employee exercises and the rights that are not
given to an independent contractor. The fair work inspector has the power to impose penalty is in
cases then clat contravenes the provisions of fair work act. The inspector can apply for injunction
or dismiss the employer from further taking such actions because injunction will prove as a

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deterrent. The court also has the power to compensate an employee in faces when he has been
mystery presented by the employer and has been made to work as an independent contractor.
Fair work ombudsman v quest south perth holdings pty ltd [2015] HCA 45 talks about sham
contracting to extends to triangular arrangements where the employees are made to work as
independent contractor with the help of a third party. The high court in this case held that the
involvement of the third party was not important in understanding the liability of the employer
and in such cases when the employee was made to act as an independent contractor there was a
violation of section 357 of the fair work act 2009
Conclusion
The aim of the fair work act is to make sure that there is no violation of workplace rights
in an organization and that the workers are not made to suffer due to the malafide intentions of
the employers (Anderson, Brodie and Riley 2017). The employers owe a duty towards the
employees and if they start putting their interest ahead of the employees, there shall be a
complete breach of their duties. In cases of breach, the employer shall be held liable and
pecuniary penalties shall be attracted to him (Mathews and Roufeil 2017). It is the duty of the
workplace to keep in mind that the employers do not exercise their supremacy and coerce the
employee to enter into agreements. Therefore, the employer is not permitted to make any
misrepresentations regarding the employment of the employee. This is a landmark case dealing
with the liabilities of the employer. Sham contractor is a propaganda of the Australian employees
to misrepresent facts and give different colour to the agreement that is existing between him and
the employee.This is done to make sure that the employees working in the corporate sector do
not get properly remunerated and they are made to part with their working entitlements.

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References
Anderson, G.J., Brodie, D. and Riley, J., 2017. The Common Law and the Individual
Employment Relationship: A Three Jurisdictional Perspective.
de Flamingh, J. and Bell, C., 2017. Employment law:'Corporate avoidance'of the'Fair work
Act'. LSJ: Law Society of NSW Journal, (39), p.74.
Mathews, R. and Roufeil, L., 2017. If it quacks like a duck: Independent contractor or
employee?. InPsych: The Bulletin of the Australian Psychological Society Ltd, 39(2), p.30.
Webster, J., 2015. Whose trolley now?: Workplace liability moves up the supply chain. Proctor,
The, 35(4), p.16.
Willis, E. and Mills, A., 2017. Lessons for employers in landmark sham contracting
case. Governance Directions, 69(7), p.419.