Sham Contracting Is Still Wage Theft — And the Courts Are Clear

Across Australia, thousands of workers are told they are “independent contractors” when, in reality, they are working as employees. They wear the uniform, follow directions, work set hours, and rely on one business for their income — yet they are denied basic workplace rights.

This practice is called sham contracting, and despite being unlawful, it remains widespread.

At MYUNION, we continue to see workers underpaid, overworked, and left without protections because a piece of paper says “contractor”, even though the reality of their work says otherwise.

The good news is this: the courts have been very clear — labels do not decide your rights.

Sham Contracting Is Still Wage Theft — And the Courts Are Clear

What is sham contracting?

Sham contracting occurs when a business represents an employment relationship as an independent contracting arrangement in order to avoid legal obligations.

This can include avoiding:

• minimum wages

• superannuation

• paid leave

• workers’ compensation

• unfair dismissal protections

In many cases, workers are pressured to sign contracts they don’t fully understand, often early in their careers or during financially vulnerable periods.

Calling someone a contractor does not make it lawful.

What actually determines your rights?

Australian courts have repeatedly confirmed that the substance of the working relationship matters more than the label.

In the case of Personnel Contracting Pty Ltd t/as Tricord Personnel v CFMEU, the Court examined whether workers who were labelled as contractors were, in fact, employees.

The key takeaway was simple but powerful:

You cannot contract your way out of employment law.

Courts look at the reality of the relationship, including:

• who controls how, when, and where work is done

• whether the worker operates a genuine independent business

• who sets pay rates

• whether the worker can refuse work or subcontract

• whether the relationship is ongoing and dependent

If it looks like employment in practice, calling it contracting will not make it lawful.

Common warning signs of sham contracting

You may be sham contracted if:

• you do not control your own hours

• you must follow strict company directions

• the business prepares your invoices

• you cannot subcontract or delegate work

• you work regular, ongoing shifts

• you rely on one business for most or all of your income

Many workers only realise something is wrong years later — often after doing the maths and discovering how much they’ve missed out on.

What workers lose under sham contracting

Sham contracting shifts risk entirely onto the worker.

It strips people of:

• minimum wages and penalty rates

• superannuation

• paid leave

• workers’ compensation coverage

• job security

• dignity and fairness

For some workers, the financial impact can reach tens or even hundreds of thousands of dollars over time.

Sham contracting is illegal

Under the Fair Work Act, sham contracting is unlawful.

Businesses found to have engaged in sham contracting can face:

• backpay orders

• penalties

• superannuation recovery

• compensation claims

Importantly, workers are also protected from adverse action for asserting their rights or questioning their classification.

Why this still matters

Sham contracting is not just a technical legal issue. It is a fairness issue.

It affects young workers, migrant workers, gig workers, and people in insecure industries the hardest. It undermines minimum standards and creates a race to the bottom.

That’s why MYUNION continues to campaign on this issue — because workers’ rights are human rights.

What to do if you think this applies to you

If your contract does not match the reality of your work, trust your instincts and get advice early.

You do not need to accept exploitation just because it is written down.

Understanding your rights is the first step to protecting them.