Private sector employers and employees
Telephone: 1300 655 266
Mailing address
Locked Bag 100
East Perth WA 6892
Employee or independent contractor
This information is only relevant to employers and employees in the WA state industrial relations system.
An independent contractor is not an employee, but rather a worker running their own independent business. They are also sometimes referred to as ‘contractors’ or ‘subcontractors’.
The table below provides an overview of the main differences between employees and independent contractors. It is recommended that you seek legal advice if unsure.
| Contractor | Employee |
|---|---|
|
Worker has entered into a written contract with another party and agreed to be engaged as an independent contractor |
Worker has accepted a written employment contract from an employer and agreed to be engaged as an employee |
| Usually in control of the hours worked and when and how the work is performed | The employer is in control of how and when work is performed |
| Can generally accept and perform work for more than one party | The employee is an integral part of the business and will usually be working for that business on a regular and ongoing basis |
| Provides a rate for a specific job and an invoice for work performed | The employer pays the employee in accordance with the relevant WA award, or contract of employment |
| Paid on the completion of a task | Paid on an ongoing basis |
| Often supplies their own plant, materials and equipment | The employer supplies the employee with materials and equipment |
| Responsible for their own tax and superannuation arrangements | The employer is responsible for tax and superannuation and workers' compensation for the employee |
| Presents as their own enterprise |
The employee represents somebody else's business |
Prohibition on sham contracting
In the WA state industrial relations system, the Industrial Relations Act 1979 prohibits sham contracting. A ‘sham contracting’ arrangement may occur where an employer knowingly disguises an employment relationship by telling an employee that they are being hired as an independent contractor when they are really an employee.
An employer is prohibited from representing, or telling an employee or prospective employee, that a contract of employment (where the worker is an employee and entitled to minimum wages and other protections) is a contract for services (where the worker is an independent contractor).
It is a defence for the employer to prove that, when the representation was made, they did not know (and could not reasonably be expected to have known) that the contract was a contract of employment rather than a contract for services. The onus is on the employer to prove this.
An employer is prohibited from dismissing (or threatening to dismiss) an employee performing particular work for the employer in order to engage them to perform the same (or substantially the same) work under a contract for services. If enforcement proceedings are taken against the employer in the Industrial Magistrates Court (IMC) for breaching the sham contracting provisions, the employer bears the onus of proving that they did not dismiss (or threaten to dismiss) the employee for the prohibited reason.
An employer is prohibited from making a statement that the employer knows (or could reasonably be expected to know) is false in order to persuade an employee to enter into a contract for services to perform the same (or substantially the same) work. If enforcement proceedings are taken against the employer in the IMC for breaching the sham contracting provisions, the employer bears the onus of proving that they did not make the statement for the prohibited reason.
If the IMC determines that an employer has breached the provisions preventing sham contracting, it may impose a penalty on the employer, and may make an order to:
- reinstate the employee if they were dismissed from employment;
- employ a prospective employee who was refused employment; and
- pay the employee compensation for loss or injury suffered as a result of the contravention.
The IMC is not able to make an order in relation to sham contracting if the employee has applied for relief in relation to the matter (e.g. the same dismissal) under another provision of the Industrial Relations Act or any other written law.
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