In late November last year, the workplace relations regulator for the building and construction industry, the Australian Building and Construction Commissioner (ABCC) Leigh Johns announced the Sham Contracting Inquiry, which was to consult with key industry stakeholders and create some coordinated action on the increasingly pressing issue of sham contracting in the Australian construction industry.
Sham contracting essentially occurs when people are employed as independent contractors but are treated as regular employees. This generally results in them missing out on legal entitlements such as annual leave and long service leave. It also disadvantages fairer employers in the industry by placing them at a significant competitive disadvantage.
The inquiry’s call for written submissions closed in March; and in March and April roundtable sessions were held in Sydney, Melbourne, Perth, Brisbane and Canberra, which were attended by 146 industry representatives including Federal and State Government representatives, employer bodies, industry associations, and contractors.
The final report of the Inquiry was initially to have been published by the end of this month, but will now be postponed until more meaningful statistical data has been collected.
“The quality of the submissions was high, but participants in the inquiry primarily provided anecdotal information,” Johns has said. “It became clear that, in order to be meaningful, the inquiry results must be based in both anecdotal and evidentiary information”.
However, the Fair Work Ombudsman has continued to investigate sham contracting arrangements and has this year launched a prosecution against two companies for alleged sham contracting activity affecting thousands of call centre workers and door-to-door salespeople. Documents lodged by the Fair Work Ombudsman in the Federal Court in Melbourne allege the two companies have contravened sham contracting provisions of workplace laws in relation to salespeople working in all states and territories in Australia.
“We are alleging the workers followed managers’ directions and had little or no freedom over fundamental matters such as their work hours and how they performed their duties” Fair Work Ombudsman Executive Director Michael Campbell says.
Mr. Campbell says all employers should realise that just because a worker has an ABN and has been labelled a contractor does not necessarily mean they can legally be classified as a contractor.
Accordingly employers and head contractors should ensure that practical precautions must be taken to ensure that subcontractors must be subcontractors in reality and not just in name. the careful documentation of the arrangements and the manner in which the relationship in maintained are crucially important in avoiding being caught up in a situation which often requires much expense and inconvenience to resolve.