Unfair contracts and sham contracts
Unfair contracts
An unfair contract under the Independent Contractors Act 2006, is one where a person performs work on terms that are 'unfair' or 'harsh'.
If you are unable to resolve your unfair contract dispute through mediation or negotiation, you may be able to access remedies under the Commonwealth unfair contracts system. To be eligible, you must be covered by the Independent Contractors Act 2006.
When determining whether a contract is unfair or harsh, the Court may consider:
- the terms of the contract when it was made
- the relative bargaining strengths of the parties to the contract
- whether any undue influence or pressure was exerted upon, or any unfair tactics were used against, a party to the contract
- whether the contract provides total remuneration that is or is likely to be less than that of an employee performing similar work
- any other matters the Court considers relevant.
Sham contracts
A 'sham' contracting arrangement occurs when an employer deliberately disguises an employment relationship as an independent contracting arrangement, instead of engaging the worker as an employee. This may mean the worker misses out on a range of entitlements.
In other cases, employees are pressured to become independent contractors where they are threatened with being dismissed or are misled about the effect of changing their working arrangements.
The Fair Work Act 2009 protects genuine employees from 'sham' independent contracting arrangements and outlines employers' obligations when establishing an employment relationship.
What to do...
- To find out more about challenging an unfair contract and whether you are covered by the Independent Contractors Act 2006, see the Unfair contracts (PDF, 0.23MB) fact sheet on the Department of Innovation, Industry, Science and Research (DIISR) website.
- Read the Sham contracting (PDF, 0.01MB) fact sheet on the DIISR website.
- Phone the Independent Contractors Hotline on 1300 667 850 for information on unfair contracts.
