New caselaw: two steps to avoid SHAM contracting.

The future of the workplace is certainly changing thanks to the global impact of COVID-19 – with some changes easily spotted and already in your awareness.

Like the tip of an iceberg, these are widely discussed in media and business groups – from flexible working, skills shortages and changes to the law.

Not as obvious in preparing the future of work, and just below the waterline, is the increasing use of freelance or independent contractor (contractor) workforces.

We’ve talked about engaging contractors in previous articles but two recent HIGH COURT decisions have underscored the importance in establishing fundamental ways to engage them.

A little background

This might not sound like a big deal however, up until this time, determining if someone was a worker or contractor was sometimes a complex undertaking.

Especially when having a written agreement in place was no guarantee of a Court finding that the agreement was indeed for contracted services.

Some legal ‘boffins’ refer to this lack of a guarantee as the Duck Test. If it waddled like a duck, quacked like a duck and swam like a duck – you can call it what you like but is clearly a duck [e.g. it is an employee].

But not as much now we have these two cases.

Both cases held that:

because there was a clear written agreement in place -it was sufficient to determine the nature of the relationship by looking at the terms of the written agreement.

Why worry?

The use of contracted workforces will grow – we’re already seeing more widespread use of individual contractors (sadly, often with only an ABN) start to fill the skills shortages here in Australia.

So preparing for a flexible and contracted workforce on the basis of the recent changes is just good planning.

TWO easy steps

While deliberately (or unknowingly) ‘mischaracterising’ the type or relationship is now less grey through a written Agreement, it is by no means any less serious if your organisation is found wanting when tested.

So here are some simple and quick steps to help you towards genuine contractor Agreements

1. Agreements

  • The obvious thing is to revisit your written Agreements with each contractor and satisfy yourself that it is VERY clear what the engagement is for.
  • If you don’t have a written Agreement – this is a big Red Flag for you to prioritise. Given this issue will become more news worthy in the post-COVID world, ‘gig workers’ can expect to be bombarded with information on their rights and entitlements (as they should be).

2. Existing contractors

  • Next, review any contractors you currently engage and conduct a ‘Duck Test’. Even with a written Agreement in place, there is still some risk of a duck being obvious to everyone if it comes to it – and it’s just the right thing to do.
  • We have a handy link here to a document you can use for this purpose (NB: please always seek advice before acting on it and also read the Fair Work information- you’ll be a boffin in no time!).

Where to find more help

There is plenty of great information available through the new Fair Work Ombudsman (FWO) webpages – noting it might sometimes read a little like everyone is assumed to be sham contracting.

And if it’s all still confusing?

If you need help after visiting the FWO , we suggest you contact one of the team at Quantum Hr or the lawyer you had draft up your initial Agreements. Either way, preparation now can save a significant impact in the future.

Click the link below and reach out to one of the QHr team and we’ll be happy to speak to you briefly about any issues this article has raised for you and your team.

Thanks for reading!