Sham contracting far from endemic, according to Master Builders Australia

The research released by the Fair Work Building and Construction agency about sham contracting shows that the practice is far from endemic in the building and construction industry and that the answer lies in the enforcement of the current law, according to Master Builders Australia.

“The research is welcomed and shows that only a relatively small percentage of building workers are potentially misclassified as contractors.

“The report highlights two things. The first is to use the existing and extensive legislative powers to seek compliance and second that the law must be further clarified before rushing to draft additional legislation,” said Wilhelm Harnisch, the CEO of Master Builders Australia. 

“The fact that a number of workers may be misclassified is different to the deliberate and pernicious manipulation of people to force them to become contractors: that is the nature of a sham. Master Builders does not support that practice. But the finding that up to 13% of contractors may be misclassified is not evidence that endemic sham arrangements are in place.

“What this statistic highlights is that the clarity of the law that defines how a person is classified as a contractor rather than as an employee needs to be examined. The current law that provides an appropriate fine for sham contracting should be relied on to deliver the necessary regulatory response at the same time as government focuses on clarifying the law. The rush to new law would be unwarranted.

“The industry has more independent contractors than other industries - 36% compared to 10% for all industries, with a large number of industry participants choosing to be engaged through these legitimate arrangements because of the benefits that are conferred by being a contractor. Contractors opt for the benefits conferred by the flexibility of hours, the freedom to move easily between workplaces and higher remuneration. They are not exploited or in so-called insecure work.

“Independent contractors choose that status, not because other options do not exist but because they can work and achieve more than they could within the rigid structure of permanent or other award or agreement-based employment and other workplace relations restrictions. Their status should not be called into question merely because there are a number of indicators that are the same as if they were employees. In other words, the legal test to distinguish an employee from a contractor is multifaceted and research that looks at the individual strands of the legal test can never give the full picture.

“This new research points to the need for education about the law rather than the addition of regulation that punishes those who are inadvertently in the incorrect category. The law should punish only those who deliberately act to deceive others,” Harnisch concluded.