The Workers Voice

Protecting Workers under Sham Contracts

The Minister for Workplace Relations, David O'Byrne, has moved to protect workers against sham contracting.

Amendments to the Workers Rehabilitation and Compensation Act 1988 will prevent employers from avoiding their full responsibilities.

They extend the definition of "worker" to ensure anyone on a sham contract has the same workers compensation rights as people on traditional contracts.

"Supporting and protecting workers is a core Labor value," Mr O'Byrne said.

"These changes give full workers compensation rights to anyone placed on a sham contract.

"They ensure all workers get the protection they need and deserve in the event of a workplace injury.

"They provide certainty and security for both workers and employers.

"And they encourage employers to avoid sham contracting, by removing some of the perceived financial advantages of it," he said.

A "worker" is generally considered as someone who works in someone else's business - while an "independent contractor" carries on their own business.

Over time, that distinction has become blurred by sham contracting - creating uncertainty about who's covered by the Act.

Sham contracting can happen when an employer hires a worker through a third party, like a labour hire firm. Despite only usually working for that one employer (making them equivalent to a direct employee), the worker's sham contract still defines them as an independent contractor - and therefore not entitled to superannuation, leave and workers compensation rights.

The amendments ensure that:
• All labour hire employees are officially defined as workers of the labour hire agency, even if they end-up on a sham contract.
• Workers under labour hire arrangements won't be left with little or no compensation if they're injured at work.
• Any employer who's obliged to make superannuation contributions for a person will also have to take out workers compensation insurance cover for them.
• Businesses are operating on a similar cost base when competing for new work.

"Ideally, the Tasmanian Government would prefer that sham contracting didn't happen, and all workers had fully protective contracts," Mr O'Byrne said.

"The Commonwealth Fair Work Act prohibits and warns against sham contracting, but we recognise that it still happens in some circumstances.

"As a State Government, our best option is to ensure a worker's rights and entitlements are still fully protected, regardless of their contract type. That's what we're doing," he said.

The amendments stem from a thorough review by the WorkCover Tasmania Board.

A draft of the Bill was released for comment in late October.

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