Independent contractors and unfair contracts

Independent contractors can apply to the FWC if they believe that their contract contains an unfair contract term. The FWC can cancel or change unfair contract terms relating to workplace relations matters as if the independent contractor was an employee.

What is an unfair contract term?

When considering whether a contract term is ‘unfair’ the FWC may consider:

• The bargaining power of the parties;
• If there is significant imbalance in the parties’ rights and obligations under the contract;
• Whether the contract term is reasonably necessary to protect the legitimate interests of a party to the contract;
• Whether the contract term imposes a harsh, unjust or unreasonable requirement on a party to the contract;
• Whether the contract provides for total remuneration that is less than what employees performing the same or similar work would receive.

What is a workplace relations matter?  

The FWC can only change contract terms as they relate to workplace relations matters. This includes:

• Remuneration, allowances or other amounts payable;
• Leave entitlements;
• Hours of work;
• Termination of contracts;
• Industrial action;
• Disputes between parties; and
• Other matters that are substantially the same as matters relating to employees and employers under the Fair Work Act or other laws.

Things such as superannuation, workers compensation, occupational health and safety, public holidays, consumer protection and taxation are matters that will not be dealt with by the FWC under these unfair contract term applications.

Who is eligible to apply? 

The FWC can make a decision regarding terms if:

• An independent contractor that is party to a contract, or a union or employer association that represents the contractor, applies to the FWC; and 
• The independent contractor’s annual earnings (and any other amounts) are less than the contractor high income threshold; and
• The FWC is satisfied that the contract contains one or more unfair terms which would relate to workplace relations matters if the independent contractor was an employee.

What is the Contractor High Income Threshold? 

From July 2024, the Contractor High Income Threshold is $175,000.

What do businesses need to know or do now? 

Review your contracts

In preparation for these changes, businesses should review their contract terms for any terms which may be unfair and take proactive steps to ensure that those terms are removed or amended prior.  

Builders should consider using a HIA Project Trade or HIA Period Trade contract to ensure that not only are key terms between you and your contractor are addressed, but to ensure that there are no unfair contract terms.  

Confirm that your contractors are independent contractors, not employees  

It is important to review your independent contracting arrangements to ensure that they are reflective of that. If you have any independent contracting arrangements which under the multi-factorial test could be held to be employees, it is important to review those arrangements and make changes accordingly to avoid penalties. Find out more about the differences between employees and contractors.

To find out more, contact HIA's Contracts and Compliance team

Email us