ABCC Sham Contracting Inquiry Report released


ABCC Sham Contracting Inquiry Report released

Australian Building and Construction Commissioner Leigh Johns yesterday released the report of the ABCC’s inquiry into sham contracting in the building and construction industry.


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Australian Building and Construction Commissioner Leigh Johns yesterday released the report of the Australian Building and Construction Commission’s (ABCC) inquiry into sham contracting in the building and construction industry.

The ABCC has rejected taking strong action on sham contracting, such as changing the law to create a new legal category of worker. The report is unlikely to please the Australian Council of Trade Unions (ACTU) or the CFMEU (Construction) because the unions has been pushing for decisive action to stop alleged abuses. Employers have generally welcomed the report.

’Australia’s building and construction industry is one of our most significant in economic terms. One million Australians work in this industry and almost one-third of these workers operate as contractors, most of them legitimately so,’ said ABC Commissioner Leigh Johns.

‘The recommendations of this Inquiry include a set of regulatory remedies aimed at eliminating sham contracting in the industry,’ said Johns.

‘Flexible contracting arrangements are crucial to the success of our industry, and most of them are lawful. However, as regulator I cannot tolerate the prevalence of a practice that undermines competitiveness, denies worker’s entitlements and threatens productivity. This Report sets out a roadmap for the ABCC to work with industry to address sham contracting.’

Extent of the inquiry
The ABCC Sham Contracting Inquiry was concerned with any situation in which a worker in the building and construction industry was described as, or asserted to be, a contractor when they should have been an employee.

‘We examined the scope and incidence of sham contracting, the current legal treatment of such situations and possible solutions,’ Johns said.

‘These proposed solutions range from looking at the legislative definitions of “employees” and “contractors”, developing Whole-of-Government regulatory responses and examining how the ABCC might better conduct its core work investigating breaches of Australia’s workplace laws.’

Partnership with industry
‘The findings from this Inquiry set out a clear program of activities that will help the ABCC to develop, in partnership with industry, a more effective response to sham contracting.’

This program of activities will include: 
  • the ABCC conducting further research to build an accurate picture of the incidence and impact of sham contracting in the building and construction industry. 
  • after the completion of the research, the Australian Building and Construction Commissioner convening a high level social partner working group to examine the outcomes of the research 
  • the ABCC undertaking education activities (including in partnership with key industry stakeholders and the ATO) to specifically inform employers and employees in the building and construction industry regarding the appropriate use of Australian Business Numbers.
  • The ABCC strengthening its relationships with other government agencies including the ATO, ASIC and the Department of Immigration and Citizenship to ensure that the ABCC’s work to eliminate sham contracting in the building and construction industry is coordinated with the programs of these other agencies.
  • In consultation with key industry stakeholders, the ABCC developing an ABCC Fair Work Contractor Statement for voluntary distribution to independent contractors prior to engagement. This Contractor Statement would provide contractors with information regarding the common law test for employment as well as the consequences of engagement as a contractor rather than an employee.

‘Industry representatives, academics, major contractors, subcontractors and other stakeholders provided invaluable insights.’

‘This positive contribution made by industry partners significantly bolsters the efforts of the ABCC and legitimate operators in the industry to eradicate sham contracting.’


The ABCC handed down 10 recommendations. Visit the Inquiry’s website for full details of the recommendations, a copy of the Report and further information about the Inquiry.

ABCC takes sensible approach to sham contracting: AMMA
The ABCC’s  final report on sham contracting demonstrates a sound approach to the issues according to resource industry employer group Australian Mines and Metals Association (AMMA).

AMMA chief executive Steve Knott said the ‘sensible’ recommendations would ensure genuine contracting arrangements could continue without ‘excessive and restrictive’ regulation.

‘The ABCC has recognised there are conflicting views on how widespread sham contracting is in the building and construction industry. Despite claims by the CFMEU that the practice is rife, the reality is the current evidence doesn’t support such claims,’ Knott said.

‘It’s great news for the industry that the ABCC has acted on several of AMMA’s recommendations and decided not to impose additional compliance mechanisms on employers at this stage.’

‘In the resources construction industry, mutually agreed contracting arrangements are regularly made to the benefit of both parties. Often such agreements are driven by independent contractors themselves due to the benefits involved.’

In addition to AMMA’s central recommendation that hard evidence must be collected before any further compliance mechanisms are introduced, the ABCC has also adopted AMMA’s proposal that an aggressive and targeted education campaign should precede any other actions being taken.

AMMA submitted that independent contracting arrangements should be freely entered into without third-party interference, as long as both parties consented to the arrangements in an informed manner.

‘We also believe that in the event the ABCC does decide to impose further legislative compliance obligations on employers, it should exclude those earning more than the high-income unfair dismissal threshold under the Fair Work Act,’ Knott said.

‘The ABCC should focus its compliance efforts on low-paid, vulnerable workers given there is unlikely to be any exploitation involved in those high-income arrangements.’

‘With $316 billion worth of approved major resources projects across Australia plus a further $307.6 billion in projects awaiting approval, efficient contracting arrangements are integral to the success of these projects and the 83,000 construction jobs they will create by 2013.’

‘The ABCC has demonstrated a sound and measured approach to the sham contracting issue and has ensured genuine contracting arrangements can continue for the benefit of Australian workplaces.’
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