"Sham contracting" is a tactic used by some employers to disguise an employment relationship, and refers to the engagement of a worker as an "independent contractor" not as an employee. The primary motivation for sham contracting is so that employers can avoid paying workers their legal entitlements, including workers' compensation, leave entitlements and superannuation.
This practice is illegal under the Fair Work Act 2009 and the Federal Government will be introducing tougher penalties against employers who engage in this unlawful activity.
Sham contracting does not ultimately evade an employer's responsibility to an injured worker under the WorkCover system, and victims may still be entitled to lodge a WorkCover claim in the event that they are injured during the course of their employment.
This was evident in the case of BSA Ltd v Victorian WorkCover Authority & Ors (2018).
In this case, Mr Yoresah was a telecommunications technician and was the director and sole employee of Cloudless Vision Pty Ltd (CV). CV was contracted by BSA Limited (BSA) to install and upgrade satellite television communication equipment for Foxtel's customers.
During the course of his employment Mr Yoresah suffered an injury and lodged a WorkCover claim against CV. This was rejected, and re-lodged against BSA. This was accepted on the basis that Mr Yoresah is classified as a worker under the Workplace Injury Rehabilitation and Compensation Act 2013 (the Act).
BSA objected to this classification and lodged an appeal in the Supreme Court of Victoria. The judge held that CV was not carrying on an independent trade or business and that Mr Yoresah was deemed to be a worker under the Act. Accordingly, the appeal by BSA was dismissed.
The keys facts which led to the judgement, included:
- BSA dictated the terms of the contract between BSA and CV
- BSA was CV's only client and source of income. CV did not advertise its services to anyone else
- the work of CV was largely controlled by BSA
- BSA allocated Mr Yoresah's work the night before
- Mr Yoresah wore a Foxtel T-shirt with BSA's sign on it when he attended his jobs
- the work of Mr Yoresah was supervised by BSA's quality assurance team.
If you believe you have been a victim of sham contracting, and have suffered an injury during the course of your employment, please contact Adviceline Injury Lawyers on 9321 9988 for advice.