In brief

  • The Australian Building and Construction Commission (ABCC) recently announced that it would be focusing on independent contracting and the use of ‘sham’ contracting arrangements in the building and construction industry.
  • As part of this new focus, the ABCC will be establishing a new roundtable consultation process with interested stakeholders and also making greater use of its powers to prosecute ‘sham’ contracting arrangements under the Fair Work Act and Independent Contractors Act.
  • The ABCC’s increased interest in this field follows on from several recent prosecutions of ‘sham’ contracting arrangements by the Fair Work Ombudsman.
  • Given the renewed interest of regulators in this field, clients with independent contractor arrangements may wish to review these arrangements to ensure they would withstand scrutiny by regulatory bodies or courts.
  • Our previous article of 26 October 20101 includes a list of key factors relevant to determining whether an employment or independent contractor relationship exists.  

In a major speech on 20 November, the Australian Building and Construction Commissioner, Leigh Johns, announced the ABCC would establish an inquiry and roundtable consultation process into sham contracting arrangements in the building and construction industry.

Under the Building and Construction Industry Improvement Act 2005 (Cth) (BCII Act), the ABCC has the power to ‘monitor and promote’ compliance with relevant legislation and provide ‘assistance and advice’ regarding parties’ obligations under such legislation. Under this power the ABCC will establish a ‘roundtable conference’ with building industry participants to closely consider current issues relating to sham contracting.

The roundtable process

The roundtable conference will take place in February 2011.

Prior to the roundtable, the ABCC proposes to release a Discussion Paper dealing with key issues. This paper is intended to provide a detailed resource of objective data and background information for interested parties. This will be followed by a public consultation process in which interested parties may make submissions. Submissions may be made on a confidential basis if need be. The ABCC has indicated that any information it receives via submissions could be used as the basis for future investigations and/or prosecutions.

The terms of reference of the Discussion Paper were set out in a speech by Commissioner Johns on 19 November 2010.2

The proposed roundtable is intended to include a number of relevant government agencies and building industry ‘stakeholders’, with the intent to devise an ‘all-of-government action plan aimed at eliminating sham contracting in the building and construction industry.’

In terms of the likely outcomes of the roundtable conference, the ABCC has flagged the possibility of it issuing a ‘Code of Conduct and Practice for Labour Hire’ in the building industry and recommending appropriate amendments to relevant legislation.

Sham contracting and the ABCC

The ABCC has also announced that it intends to take a more proactive role in addressing issues of sham contracting in the building and construction industry.

Both the Fair Work Act 2009 (Cth) (FW Act) and the Independent Contractors Act 2006 (Cth) (IC Act) prohibit ‘sham’ contracting arrangements in which employees are treated as contractors but these provisions have been rarely used. The ABCC has indicated that it intends to actively utilise these provisions and has revealed that it is currently has a number of investigations on foot that are likely to result in court proceedings. However, Commissioner Johns has indicated that he does not plan to use the ‘coercive powers’ to gather evidence as part of this new focus.

Implications for employers

The ABCC’s increased interest in this area will be of interest to clients in the building industry who encounter sham arrangements or are concerned about such practices.

The increased utilisation of the ABCC’s powers under the IC Act may mean that existing independent contractor relationships will be subject to closer scrutiny, both in the building industry and more broadly. Some existing arrangements may need to be reviewed to determine whether they could survive any legal challenge under the new provisions of the FW Act and the IC Act.

The ABCC’s interest in this area follows on from several prosecutions this year by the Fair Work Ombudsman relating to alleged sham contracting arrangements. These prosecutions have also included orders for compensation to be paid to employees who incorrectly treated as contractors.

Clients who wish to make a submission to the roundtable process, or review their independent contractor arrangements, should contact one of our Employee Relations partners.