Friday, August 5th, 2016 #MEAAEquity News
MEAA Online

Some employers in the theatre, film and television industries engage performers as independent contractors.

Erroneously engaging someone as a contractor who is in fact an employee is known as ‘sham contracting’. Such contracts prevent performers from accessing various rights and entitlements which employees can access under the Fair Work Act 2009 and relevant collective agreements or Awards. Employers avoid paying payroll tax, and are less accountable to industry standard wages and entitlements.

There are also insurance and workers’ compensation implications. There can be difficulty getting employers to pay superannuation and performers can be in breach of their taxation obligations because they are not paying tax at the correct rate.

Should a performer be viewed as an employee or independent contractor?

Performers should generally be engaged as employees not independent contractors. Jobs in the entertainment industry inevitably vary in duration, with periods of work consisting of days, months or years. However, even if the job is for a short period of time, performers would generally still legally be viewed as employees (see table below).

As a performer you should avoid using an ABN (Australian Business Number) – however, simply quoting an ABN doesn’t automatically make someone an independent contractor. If an employer asks a performer to use an ABN they are potentially in breach of the Act.

The Act protects performers from ‘sham contracting’ arrangements and outlines employers’ obligations when establishing an employment relationship.

Impacts of sham contracting on performers

There are various reasons why it isn’t a good idea for a performer to be an independent contractor.

If a performer agrees to carry out work as an independent contractor where they should in fact be an employee they will not receive:

•  minimum wages
•  paid sick leave, holiday leave and long service leave
•  overtime, penalty and public holiday rates
•  protection against unfair dismissal
•  workers’ compensation insurance
•  travel allowances

How do I know if I’m on a ‘sham contract’?

The below table indicates the differences between an employee and an independent contractor. If you are a legitimate independent contractor you would be able to answer yes to the entire right hand column.

Indicator Employee Independent Contractor
Degree of control over how work is performed Performs work, under the direction and control of their employer, on an ongoing basis. Has a high level of control in how the work is done.
Hours of work Generally works standard or set hours (note: a casual employee’s hours may vary from week to week) Under agreement, decides what hours to work to complete the specific task. Determines their own starting and finishing times.
Expectation of work Usually has an ongoing expectation of work (note: some employee’s hours may be engaged for a specific task or specific period) Usually engaged for a specific task.
Risk Bears no financial risk (this is the responsibility of their employer) Bears the risk for making a profit or loss on each task. Usually bears responsibility and liability for poor work or injury sustained whilst performing the task. As such, contractors generally have their own insurance policy.
Tools and Equipment Tools and equipment are generally provided by the employer, or an equipment allowance is provided. Uses their own tools and equipment (note: alternative arrangements may be made within a contract for services.)
Tax Has income tax deducted by their employer. Pays their own tax and GST to the Australian Taxation Office.
Method of Payment Paid regularly (for example weekly/fortnightly/monthly). Has obtained an ABN and submits an invoice for work completed or is paid at the end of the contract or project.

(Having trouble reading this table? Download a PDF)

What can I do about it?

If you believe you might be involved in a sham contracting agreement or feel you are unable to access basic rights and entitlements because of your current contract you should contact the MEAA for assistance.

Inspectors from the Fair Work Ombudsman also have the power to take employers to court for breaches of these provisions and to seek penalties and compensation.
Employers who engage performers as independent contractors, even when that’s what the performer wants, are taking a risk that down the track a court will find that they have breached their legal obligations in relation to payroll tax, workers compensation and so on.

Similarly the performer who provided their ABN and agreed to be engaged in this way may find themselves in difficulty with the ATO, and without access to basic protections that employees enjoy.

As always, it is sensible to get advice before agreeing to a contract. Contact MEAA Member Central on 1300 656 513 if you need assistance.