Sham Contracting: When You're Wrongly Called a Contractor
Being labelled an independent contractor when you are really an employee strips away award minimums, the National Employment Standards and the National Minimum Wage. If you are truly an employee, those entitlements are due — and unpaid amounts are recoverable underpayments. Here is how to tell, and what to do.
Why the Label Matters So Much
Workplace entitlements in Australia flow to employees, not to genuine independent contractors. Our reference framework assumes a national system employee — the position of the overwhelming majority of private-sector employees. If you fall inside that category, you are entitled to the full NES, the modern award or enterprise agreement covering your work, and the National Minimum Wage. A genuine contractor is not.
So the whole value of your claim turns on one gate: are you actually an employee? If yes, everything the label denied you — overtime under your award, award minimums, the minimum wage floor — was due, and any shortfall is a recoverable underpayment. If you are a genuine contractor, the Fair Work entitlements do not apply. Sham contracting is the term for wrongly dressing an employment relationship up as a contracting one.
What You're Owed If You Are an Employee
Once employee status is established, the numbers work exactly as they do for any other employee.
The certain floor is the hours you actually worked but were not properly paid for, valued at your ordinary hourly rate on a 1:1 basis, checked against the National Minimum Wage — $26.44 per hour from 1 July 2026 ($1,004.90 per week, following the Fair Work Commission's Annual Wage Review 2026, [2026] FWCFB 3500). If you were "contracting" at a flat rate that worked out below that floor, the gap is a recoverable underpayment.
On top of that floor, once your modern award is identified, sit the award minimums and any overtime or penalty multipliers. Australia has no statutory overtime rate — the multiplier comes from the award or agreement, not the law — so those add-ons attach once the applicable award is confirmed. What we never do is assume a multiplier before the award is known.
The Recovery Route
If you are an employee, the path is the standard underpayment route.
- Fair Work Ombudsman (FWO) — the free, official starting point for information, mediation and compliance. Sham contracting is squarely within its remit.
- Small claims procedure (art. 548) — a simplified, less formal application before a magistrates court or the Federal Circuit and Family Court of Australia (Division 2), capped at $100,000.
- Ordinary application (art. 545) — a standard application before the Federal Court of Australia or the Federal Circuit and Family Court, with no $100,000 ceiling, for larger or more complex claims.
Note the terminology: this is the Fair Work system. There is no "labour tribunal" or "prud'hommes" in Australia.
Records and the Burden of Proof
Once employee status is established, the record-keeping obligations apply in full — and they help you. Your employer must make and keep employee records for 7 years (art. 535) and give you a pay slip within one working day of paying you (art. 536). If they treated you as a contractor, they very likely kept none of these. That failure is not neutral: where the employer was required to keep records or give pay slips and failed to do so, in proceedings the employer bears the burden of disproving your allegation about hours and amounts (art. 557C), unless they show a reasonable excuse.
So your own timestamped log of the hours you worked is central — especially here, where "contractor" arrangements rarely come with proper records. The recovery window is 6 years (art. 544).
Cadre
The reference framework assumes a national system employee (the overwhelming majority of private-sector employees). Workplace entitlements — the NES, the applicable modern award or enterprise agreement, and the National Minimum Wage — flow to employees, not to genuine independent contractors. If the person is truly an employee, those entitlements are due and any shortfall is a recoverable underpayment; the record-keeping and burden-shifting rules (arts. 535, 536, 557C) apply once employee status is established.
Fair Work Act 2009 (Cth), art. 544: "A person may apply for an order under this Division in relation to a contravention of one of the following only if the application is made within 6 years after the day on which the contravention occurred."
Sources: Fair Work Act 2009 (Cth), arts. 535, 536, 544, 545, 548 and 557C (compiled version, legislation.gov.au); National Minimum Wage from [2026] FWCFB 3500.
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