Who must avoid sham contracting (s 357 Fair Work Act)?

Employer must not misrepresent employment as contractor relationship.

Sections 357-359 Fair Work Act prohibit sham contracting — misrepresenting an employment relationship as an independent contractor relationship, dismissing for the purpose of contracting, knowing misrepresentation.

Applies when the business has contractors.

How the regulator frames it: All employers.

What triggers it: Engaging worker as contractor when relationship is in substance employment.

Jurisdiction: Commonwealth law, so the test is the same in every state and territory.

Outcome across the 35 industries Rules Mate maps (35 of 35: no).

The answer is the same in every industry: no. Industry does not change who must comply.

Structure does not change the answer across all industries: for every structure the answer is "no".

Size does not change the answer across all industries: at every size band the answer is "no".

Each line is one run of the Rules Mate applicability engine for a single business profile, with the reason the engine gives:

• Pty Ltd company in real estate agents with 6–19 employees, turnover $1M–$3M: does not apply. Requires contractors.

Starting from a small or large professional services company that does not otherwise meet the test, each of these single facts changes the engine's answer:

• The business engages independent contractors: it then applies (you engage contractors).

When due

Continuous.

Frequency

Ongoing

Evidence to keep

Contract documentation; worker status analysis; multi-factor test review.

Status

Current

Priority

Critical

Maximum penalty: Civil penalty for individuals + corporations; underpayment recovery; tax + super exposure.

Rules Mate has not yet classified the audit or assurance level for this obligation. Any audit, review or certification requirement is set by the regulator source listed below.

• FWO v Deliveroo Australia (sham contracting) (2024): Gig economy worker status now governed by FWC minimum standards under Closing Loopholes — pure contractor model harder to maintain.

• Casual employment definition + conversion (Closing Loopholes 2024): New casual employment definition + employee choice pathway from 26 August 2024.
• Employee-like worker minimum standards (Closing Loopholes No. 2 2024): FWC can set minimum standards for 'employee-like' workers (gig economy).
• Provide 10 days paid family + domestic violence leave (FDV): Paid FDV leave for all employees: 10 days per year (full-time + part-time + casual).
• Same job same pay (labour hire reform): Labour hire workers entitled to same minimum pay as direct employees on host site.
• Comply with casual employee conversion (Closing Loopholes — s 66B Fair Work Act): From 26 Aug 2024, eligible casual employees can notify their employer to convert to permanent employment.

Rules Mate tracks 19 published obligations tagged "workplace", 5 of them rated critical. For a professional services Pty Ltd company with 6–19 employees operating in every state, 13 of those apply outright. This obligation is rated critical priority, and is an ongoing duty.

Regulated by Fair Work Ombudsman and Australian Taxation Office.

FWO: Enforces compliance with the Fair Work Act, awards, and agreements. Investigates underpayments, brings civil penalty proceedings, and publishes compliance notices.

ATO: Federal tax administrator covering income tax, GST, PAYG, FBT, superannuation guarantee, STP, and self-managed super funds. Also administers the Director ID regime via ABRS.

• Fair Work Ombudsman
• Australian Taxation Office

FW Act: Federal workplace relations Act.

• Fair Work Act 2009

Free tools that help with this obligation:

• Payday Super readiness
• Right to Disconnect policy
• WGEA readiness