The reach of labour regulation: tackling sham contracting

Abstract

An inquiry into sham contracting conducted by the Australia Building and Construction Commission has once again highlighted the difficulty in determining which work relationships should be covered by labour laws. Recent judgments from the Federal Court, and in particular a landmark ruling by the UK Supreme Court, suggest a greater willingness to find that workers are in substance being hired as employees, even in the face of carefully drafted contracts that present them as independent contractors; but not all judges are prepared to place so strong an emphasis on the economic reality of a relationship. In this article, we identify the different meanings that the term ‘sham contracting’ can be given, and review evidence as the prevalence of disguised employment. We argue that despite the recent shifts in the way the common law tests for employment are being applied, there remains a compelling case for a statutory definition that would make it harder to disguise employees as contractors.