11 Feb 2019

Sham Contracting Exposes Workers to Being Sued


Sham Contracting Exposes Workers to Being Sued

by Simon Byrne.

Our regular readers would know that CX often bangs on about casual labour being essentially forced to get an Australian Business Number, or miss out on the work offered. This is sham contracting. It is where a worker is engaged as a contractor but is doing the same work, or substantially the same work, as an employee, and I believe it is grossly unfair for the worker.


The casual worker misses out on their lawful superannuation under the Superannuation Guarantee Scheme, and all the paperwork, tax and possibly Workers Compensation insurance liabilities are offloaded to them as well.

Check out our previous articles on this here:


Biz Talk: Contractor or Employee? It Makes a Difference
Employee or Contractor: Are YOU Sham Contracting?

There is one more ugly aspect to sham contracting, the workers exposure to public liabilities.

As I mentioned in last month’s CX Mag, Public liability refers to the obligation to take responsible care to avoid injury to a person whom, it can be reasonably foreseen, might be injured by an act or omission. A duty of care exists when someone’s actions could reasonably be expected to affect others.

Public liability insurance protects you if your actions, your negligence or the condition of your property is found to cause a person to be injured or killed, or a person’s property to be damaged or destroyed or they suffer loss as a result of relying on your services.

Say a casual worker is employed under a sham contractor arrangement, under the direction of a prime contractor, and that worker causes an accident through an act or omission and someone is injured. Who is at fault? The prime contractor running the show, or the casual worker employed under a sham contract?

These situations end up in the courts to attribute blame and award payouts, and it is normal for courts to attribute blame across several parties.

So if the worker is found to be even partly at fault, which is entirely likely because they have been hired as an independent contractor, the worker could be sued for hundreds of thousands of dollars. Even defending such a case will cost eye watering amounts of money.

That would destroy most casual workers financially, unless they have proper public liability insurance in place. And let’s face it, that is highly unlikely.

So a poor old worker in a sham contractor arrangement, misses out on their rightful superannuation that every other properly employed worker in Australia gets, has to manage their own tax arrangements, may have to fight for workers compensation should they get injured at work, may even get sued and be destroyed financially! Yet regular employees would not be exposed to any of that.

Worth thinking about… huh?


From CX Magazine – February 2019CX Magazine is Australia and New Zealand’s only publication dedicated to entertainment technology news and issues – available in print and online. Read all editions for free or search our archive
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