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LawAccess NSW > Representing Yourself - LawAssist

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Sham contracting arrangements

    What is sham contracting?

    A 'sham arrangement' is where your employer tells you that you are an independent contractor when you are really an employee. Your employer must not ask you to enter into a sham arrangement.

    Can your employer dismiss you and rehire you as an independent contractor?

    Your employer must not dismiss or threaten to dismiss you so they can rehire you as an independent contractor.

    What is the difference between an independent contractor and an employee?

    Whether a person is an employee or an independent contractor depends on a number of things. Someone who is an independent contractor might:

    • supply their own tools or equipment
    • do work when and how they want
    • have their own workplace
    • contract the work out to someone else
    • spend some of their income on their own business expenses.

    Someone who is an employee might:

    • be paid a regular wage or salary
    • have tax taken out of their pay by their employer
    • have paid holidays and sick leave
    • be told what hours they have to work, and where they have to work
    • be supplied with tools and equipment
    • fill out time sheets
    • have superannuation contributions paid by their employer
    • be covered for workers compensation by their employer.

    If the list above suggests to you that you are an employee, but the person you work for is calling you an independent contractor, this might be a 'sham arrangement'.

    What can you do?

    If you were dismissed from your job, you may be able to make a number of different claims against your employer. Before you make any claims or applications, you should get legal advice to help you work out what is the right option for you.

    The Fair Work Commission (the Commission) will hold a conference to try and settle the dispute. If this does not end the problem, you can apply to the Federal Circuit Court to ask for an order.

    The Federal Circuit Court can order that:

    • you be reinstated (get your job back)
    • your employer pay a fine
    • compensation be paid to you.

    Alert Icon  If you want to make a general protections dismissal application to the Commission, you must do so within 21 days of the date you were dismissed.

    If you are not sure whether your employer has broken laws about general protections in the workplace, you should get legal advice. If you have been dismissed or are having problems at work, you may have other options, such as:

    • unfair dismissal claim if you were dismissed (for more information, see Unfair dismissal)
    • discrimination claim (if you have been discriminated against at work)
    • bullying claim (if you have not been dismissed but are experiencing workplace bullying).

    Which section of the Fair Work Act applies?

    Sections 357, 358 and 359 of the Fair Work Act are the sections that apply to sham arrangements. When filling out your general protections application form for the Commission, you will need to refer to this section of the Act.

    Case study

    LeanneCase study icon

    Leanne works for a large financial institution. She works full time as a mobile lender, visiting people in their homes and assessing whether they can get loans.

    Leanne was told last week that she would be dismissed and her last day of work would be at the end of the month. Her manager told her after the meeting that she could stay on working if she got her own ABN and worked as a contractor on a commission basis. Leanne may be able to make a general protections application.​

    For answers to commonly asked questions, see What are general protections? - Frequently Asked Questions. ​

    Picture of a person writing in a notebook at conciliation