Taking a stand on sham contracting

ACT Minister for Industrial Relations, Katy Gallagher MLA, said today that passage of the Workers Compensation Amendment Bill 2009 would close the loop on employers who fail to fulfil their legal obligations as well as limit opportunities for sham contracting.

“Sham contracting occurs when an employer hires workers as independent contractors rather than on an employment contract in order to avoid their legal responsibilities to pay workers’ compensation insurance, portable long service leave, superannuation, and a range of employment entitlements.  These employers are also using this technique to avoid paying payroll tax,” Ms Gallagher said.

“There are an increasing number of labourers, cleaners, tradespersons and service workers who operate under the fiction of “contractor” by obtaining an Australian Business Number (ABN). These individuals have become a vehicle for employers to avoid paying workers' compensation insurance for individuals who are legitimately workers,” she said.

“This behaviour is a breach of the Commonwealth’s Fair Work Act, and the prevalence of this contracting structure severely penalizes those employers who do the right thing and employ their workers on an appropriate basis and comply with their legal responsibilities.

“The commercial advantage of these contracting arrangements is so significant that the viability of businesses ‘doing the right thing’ and protecting their workers is under threat.

“If an individual on a worksite, in a café, at a retail shop, or commercial cleaning company supplies labour only, then without a doubt they are a worker and this legislation clarifies this.

“These workers must be protected by their employers and covered under their employers’ workers’ compensation policies,” Ms Gallagher said.

The Minister said the legislation also included new penalties for employers who fail to protect their workers and provides for a hierarchy of penalties that culminates in possible criminal prosecution and/or a cease business provision that would operate until such time as the non-compliant employer has a workers’ compensation policy. It also introduces amendments to ensure that rehabilitation providers are engaged to assist workers return to work in a timely manner.

“The ACT Government is committed to improving the performance and operation of the ACT workers’ compensation scheme by creating an affordable system for employers, fair treatment of injured workers, improving the performance of scheme providers and ensuring an effective governance and management regime for the scheme,” Ms Gallagher said.

11 December 2009