Contractor rights and protections

The Fair Work Act 2009 protects contractors from:

• adverse action. For example, a business can't end a contract because a contractor makes a complaint to a regulator about their workplace rights
• coercion. For example, a business cannot threaten to act against a contractor to stop them exercising their workplace rights
• abuses of freedom of association – contractors are free to join (or not join) a trade union or employer group.

Workers and businesses should know the difference between an employee and a contractor to avoid sham contracting arrangements.

Sham contracting happens when an employer hires a contractor, but the work conditions are more like an employee.

An employer may try to hire a contractor to avoid paying certain taxes and employee entitlements like:

• minimum

• wages

• super leave.

It’s illegal for an employer to:

• misrepresent an employment relationship as an independent contracting arrangement

• dismiss (or threaten to dismiss) an employee so they can hire them as a contractor for the same work

• say something false to persuade an employee to become a contractor.

Contractors negotiate their own rate of pay and working conditions, including leave entitlements. The National Employment Standards (part of the Fair Work Act 2009) do not cover contractors.

Hirers need to pay superannuation for some contractors. The Australian Taxation Office’s (ATO) website has information about which contractors get super and how much.

Contractors who aren’t eligible for compulsory super payments should consider making voluntary personal contributions to their chosen super fund.

The best way to avoid unfair contract terms is to negotiate a fair contract from the start. But if you’ve negotiated a contract with a term that you think is unfair, there are several ways to try and resolve the dispute.

Start by trying to manage the dispute directly with the other party. If you’re not able to resolve your dispute this way, the other options are:

• alternative dispute resolution (ADR)
• the Fair Work Commission (FWC)
• courts and tribunals.

You can get advice from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) if you’re unsure which approach is right for you.

ADR is a confidential and informal process. It allows parties to resolve conflicts without going to court.

The ASBFEO website has a list of state and territory small business commissioners offering ADR services.

The FWC may consider any of these when deciding if a contract term is unfair:

• both parties’ ability to influence the other to get the best contract terms for themselves
• any big imbalances in the rights and obligations of both parties
• if the term is reasonable or it imposes a harsh or unjust condition
• if you're being paid less than employees or regulated workers doing similar work
• any other matters it thinks is relevant.

To apply, you must have:

• a services contract (to perform work) made on or after 26 August 2024
• an unfair term that the FWC considers a workplace relations matter. For example, hours of work, pay or leave entitlements
• annual earnings below the contractor high income threshold.

Under the Independent Contractors Act 2006, contractors can ask a court to review their contract. To do this, they must have:

• made the services contract before 26 August 2024
• annual earnings over the contractor high income threshold.

By law, all workers in Australia must have a safe and healthy workplace. Contractors and employers must follow the relevant state, territory and national workplace health and safety (WHS) laws and regulations.

Workers compensation does not usually cover contractors. But it depends on the rules of the workers compensation regulator in your state or territory.

Contractors who hire other workers may need workers compensation insurance if the regulator considers those workers employees.

If you’re a contractor who isn’t covered by workers compensation insurance, you should get your own personal injury and loss of income insurance.