exercise caution to avoid misrepresenting employment as an
independent contracting arrangement."
Quest Misrepresents Contract of Employment
Quest South Perth Holdings Pty Ltd ("Quest") purported
to enter into a triangular contracting arrangement with third party
labour hire business Contracting Solutions Pty Ltd
Under this arrangement Quest engaged two housekeepers to provide
cleaning services. Quest represented to the employees that they
were performing housekeeping work as independent contractors of
Contracting Solutions, despite the fact that they continued to
perform that work for Quest under implied contracts of
HCA Rules on Sham Third-Party Contracting Arrangements
Section 357(1) of the Fair work Act 2009 (Cth)
prohibits employers from misrepresenting to employees that they are
working as an independent contractor under a contract for
The Fair Work Ombudsman applied for penalty orders against Quest
for allegedly contravening s357(1). It argued that the employees
never became independent contractors as they continued to perform
exactly the same work as they had always done.
The Federal Court dismissed the proceeding at first instance. An
appeal to the full Federal Court was also dismissed. The full Court
construed s357(1) as applicable only where the misrepresentation
related to a contract of employment between the employee and the
employer. The High Court unanimously allowed the subsequent appeal,
and found that s357(1) applied to the misrepresentation of
contracts for services between the employees and third parties. It
held the identity of the other contracting party as immaterial to
the application of the section.
Going Forward: What Does This Mean For Employers?
In this decision, the High Court effectively dismissed the
Federal Court's narrow interpretation of s357(1). The effect is
that an employer can no longer avoid penalty under the section by
introducing a third party into the contractual arrangement between
the employer and the employee. Instead courts will look to the
substance of the work being performed where a conversion to
independent contractor status is purported. As a result, employers
should exercise caution to avoid misrepresenting employment as an
independent contracting arrangement. In determining whether a
person is an employee or an independent contractor, it is important
to make an objective assessment that looks to the substance of the
employment relationship. If in doubt, employers should seek legal
advice to avoid application of penalties under s357(1) of the Fair
Work Act 2009 (Cth).
Fair Work Ombudsman v Quest South Perth Holdings Pty
Ltd  HCA 45.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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