By Dr Alysia Blackham
In Australia, workers may be engaged as employees or as self-employed independent contractors. Employees are entitled to a range of employment rights, but independent contractors are not — after all, they are not employees. ‘Sham self-employment’ is where individuals are supposedly engaged as independent contractors, but they are actually employees. Cases where employers have misrepresented employees as being independent contractors are increasingly prevalent, affecting well-known companies like Myer (here and here), Australia Post (here) and the MCG (here and here). This may significantly affect workers’ terms and conditions of work — for example, cleaners employed as ‘independent contractors’ at Myer (via cleaning contractor Spotless) alleged that they were paid less than casual employees, did not receive penalty rates and had to pay their own tax, superannuation and insurance (see here and here).
Sham self-employment has again come on to the political agenda, thanks to the High Court case of Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd  HCA 45, which was handed down on 2 December 2015. Under s 357(1) of the Fair Work Act 2009 (Cth), an 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.’ Section 357(1) does not apply where the employer proves that, when the representation was made, the employer:
(a) did not know; and
(b) was not reckless as to whether;
the contract was a contract of employment rather than a contract for services (s 357(2)). Continue reading