For employees
Sham contracting: were you really an employee, and what can you claim
You invoice with an ABN, but you work set hours, take direction, use their equipment and cannot send someone else. The law looks at the substance of the relationship, not the label. If you were really an employee, the employer may have engaged in sham contracting, and you may be owed years of award wages, leave and super. These claims are contested, document-heavy, and often worth real money, which makes the lawyer question a live one.
Updated . General information, not legal advice.
Time limits that apply
| What | Limit | Source |
|---|---|---|
| Recovery of unpaid wages and entitlements if you were an employee | 6 years back from the date of the claim | Fair Work Act s 544 |
| If the arrangement ended after you raised it | 21 days to lodge a general protections application | Fair Work Act s 366 |
| Employer's defence to a sham contracting allegation | Since 27 February 2024, the employer must show it reasonably believed the contract was for services | Fair Work Act s 357 |
Do you need a lawyer for this?
Advice usually pays for itself when
- The arrangement ran for years and the back pay, leave and super at stake is substantial.
- The employer relies on a written contractor agreement and will argue you chose the arrangement.
- Several workers are in the same position, or the business has a model built on the contractor label.
- You were let go after questioning the arrangement, which raises a general protections claim on a 21-day clock.
The free route is usually enough when
- The relationship was short and the money is modest, and you mainly want the Ombudsman's view on whether you were an employee.
- You are still working there and want to understand your position before deciding anything.
What is sham contracting?
Sham contracting is an employer representing to a worker that they are an independent contractor when the relationship is really one of employment. The Fair Work Act prohibits that misrepresentation, prohibits dismissing an employee to re-engage them as a contractor doing the same work, and prohibits making false statements to persuade someone to become a contractor. It is not sham contracting to engage a genuine contractor. The wrong is the mismatch between the label and the reality. Since 27 February 2024 the employer's defence is narrower than it was: it must show it reasonably believed the contract was a contract for services, and the old test of not knowing and not being reckless is gone.
How is employee or contractor decided?
By looking at the whole relationship. Control over how, when and where the work is done. Whether you could delegate or subcontract. Who supplied tools and equipment. Whether you bore commercial risk and could profit from good management. Whether you worked for others. How you were paid and whether you presented as part of the business. The written contract matters, and recent law gives it weight where it reflects the true arrangement, but a document that calls you a contractor while every other factor says employee does not settle it. FairWork Mate's contractor-or-employee check walks these factors and the sham contracting self-test scores your situation, free.
What can I recover if I was an employee?
The difference between what you were paid and what an employee in your role was entitled to: award or agreement wages, penalty rates, overtime, allowances, annual leave and personal leave accruals, and superannuation at the guarantee rate. Six years back from the date of the claim. Payments you received as a contractor are set off, and the arithmetic can go either way for highly paid contractors, so the first step is a proper calculation. Penalties for the sham contracting contravention itself are paid to the Commonwealth or as the court directs, not to you, but they raise the stakes for the employer and shape settlement.
What does the process look like?
It starts with the calculation and the evidence: contracts, invoices, rosters, messages showing direction and control, and records of who supplied what. A written request to the employer follows, setting out why you say you were an employee and what is owed. The Fair Work Ombudsman can be asked to assist and does investigate sham contracting. A court claim, through the small claims procedure for amounts up to $100,000 or the general division above it, is the enforcement route if the employer will not engage. Court filing fees apply and are not stated here. These matters settle when the employer's exposure becomes clear, which is why the calculation is where the work goes.
When does a lawyer pay for itself?
When the years and the numbers are large. When the employer's whole model depends on the contractor label and it will defend it. When more than one worker is affected and the claims are stronger together. And when the arrangement ended because you asked questions. Liquid Employment Lawyers is FairWork Mate's paid legal partner for these matters. It is an Australian employment law firm, not free government help, and it explains scope and fees before anything starts. For a short engagement with a small shortfall, the Ombudsman's free help and the small claims procedure are usually enough.
What is the free route?
The Fair Work Ombudsman on 13 13 94 investigates sham contracting and advises on entitlements at no cost. The Australian Taxation Office handles the super guarantee side, which often catches labour-only contractors regardless of the employment question. FairWork Mate's contractor-or-employee check, sham contracting self-test and the contractor-versus-employee guide are free. This is general information, not legal advice, and FairWork Mate is not affiliated with the Commission, the Ombudsman or the ATO.
Free FairWork Mate tools for this
Talk to Liquid Employment Lawyers about this
Share a few details and their team will be in touch to talk it through. No obligation, and you decide whether to go further after that first conversation.
Liquid Employment Lawyers is an Australian employment law firm and FairWork Mate's paid referral partner, not free Fair Work advice. They discuss scope and any fees with you directly. FairWork Mate is not affiliated with the Fair Work Commission or the Fair Work Ombudsman. For free general guidance, use the tools above or call the Fair Work Ombudsman on 13 13 94.
Prefer to read about the partnership first? About Liquid Employment Lawyers
Common questions
I agreed to be a contractor and have an ABN. Does that end it?
No. Agreement and an ABN are factors, not the answer. The relationship is judged on control, delegation, equipment, risk and how you were integrated into the business. Many people who agreed to a contractor arrangement were employees in law.
What changed on 27 February 2024?
The employer's defence to a sham contracting allegation narrowed. It now has to show it reasonably believed the contract was a contract for services. Before that date it only had to show it did not know, and was not reckless as to whether, the contract was one of employment.
Will my invoices be deducted from any back pay?
Yes. Amounts you were paid as a contractor are set off against what an employee would have received. The calculation can still leave a large shortfall once leave, penalties and super are counted.
Is Liquid Employment Lawyers free?
No. It is an Australian employment law firm and FairWork Mate's paid referral partner. Enquiring is free and there is no obligation. The free official route is the Fair Work Ombudsman on 13 13 94.
Can I still claim if I left a year ago?
Yes. The recovery period is six years back from the date of the claim, whether or not you are still engaged. A general protections claim about the ending of the arrangement is different and runs on 21 days.
Official sources
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General information and estimates only — not legal, financial or tax advice. Always check your specific award, agreement or contract, or a qualified professional, before you rely on the result.
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