Entertainment & Arts Law · Employee vs Contractor & Fair Work
Sham contracting and the risks for arts organisations.
Arts organisations engage performers, crew and creatives as contractors every day. The law now looks past the label to the real relationship, and the penalties for getting it wrong have grown.
By Aaron Kernaghan · Brady & Associates Lawyers · 14 September 2026
This article is for informational purposes and general commentary only. It does not constitute legal advice and does not create a solicitor-client relationship.
Arts organisations run on contractors. Performers, stage crew, designers, technicians and freelance creatives are often engaged with an ABN and an invoice rather than a payslip. That is normal, and much of it is lawful. It becomes sham contracting when a person who is really an employee is treated as a contractor, whether by design or by mistake. The Fair Work Act 2009 (Cth) prohibits it, and the rules changed in 2024 in ways that raise the risk for the people who engage artists.
What is sham contracting?
Sham contracting is calling an employment relationship a contracting one. A worker is engaged as an independent contractor, given an ABN and told to invoice, when the real nature of the work makes them an employee. The label on the paperwork does not settle the question. The substance of the relationship does. It matters because employees have rights that contractors do not: award pay, paid leave, superannuation, and unfair dismissal protection among them. Treating an employee as a contractor strips those rights away, and the Act treats that as a contravention.
The three sham contracting offences: sections 357 to 359
The Fair Work Act creates three separate prohibitions. Section 357 stops an employer misrepresenting employment as an independent contracting arrangement, so an employer cannot tell an employee that their contract of employment is a contract for services. Section 358 stops an employer dismissing, or threatening to dismiss, an employee so it can re-engage that person as a contractor to do substantially the same work. Section 359 stops an employer making a statement it knows is false to persuade an employee to become a contractor. Each is a civil remedy provision, so the Fair Work Ombudsman or the worker can take the matter to court.
How the law now decides who is an employee
From 26 August 2024 a new provision, section 15AA, tells courts how to decide whether a person is an employee or a contractor. The test looks at the real substance, practical reality and true nature of the relationship. It weighs the terms of the written contract together with how the work is actually done. This is often called the whole-of-relationship test. It moved the law back from the approach the High Court took in 2022, which read the relationship mainly from the words of the contract.
For arts organisations that means a written contractor agreement is no longer the end of the inquiry. If the person works like an employee, the label in the contract will not save the arrangement. There is a narrow opt-out for higher-earning contractors above a set income threshold, who can choose not to be covered by the new definition, but it does not apply to most performers and crew.
The defence just got harder
Section 357 has always carried a defence for an employer who genuinely believed the person was a contractor. Until 2024 that defence asked whether the employer did not know, and was not reckless about, whether the contract was really one of employment. From 27 February 2024 the test changed. The employer must now show it reasonably believed the contract was a contract for services. That is an objective standard. A court looks at the size and nature of the business and any other relevant matter. Saying the business never turned its mind to the question no longer clears the bar, because a reasonable belief has to rest on a reasonable basis. A small volunteer-run company and a large producer are each judged on what was reasonable for an organisation of that kind.
What are the penalties?
Sham contracting is a civil penalty contravention, and the maximum penalties are set in penalty units that are updated from time to time. As a guide, at 2026 rates a single contravention can expose an individual to a maximum penalty of around $19,800 and a small business to around $99,000, with higher maximums again for a larger business or where an underpayment is involved. Serious contraventions carry much larger maximums, and the threshold for a serious contravention now covers conduct that is reckless, not only conduct that is knowing and systematic. On top of any penalty, an organisation can be ordered to back-pay the wages, leave and superannuation the worker should have received as an employee. The current figures are published by the Fair Work Ombudsman.
Why this matters for arts organisations
The sector relies on flexible, project-based engagement, and much of it is genuine contracting. A guest director engaged for one production, a freelance photographer for one shoot, a session musician for one recording, these can all be real contractor relationships. The risk sits with the ongoing engagements dressed up as contracting: the performer who works set hours under direction across a long season, the technician rostered week after week, the administrator who does the same job as a salaried colleague but invoices instead. Where the substance is employment, the Live Performance Award, the National Employment Standards and superannuation apply, and calling the person a contractor does not change that.
How to stay on the right side of the line
The safe course is to look at the substance before the season starts. Decide honestly whether the person is running their own business or working in yours. Check the real indicators: control over how the work is done, who supplies the tools and equipment, whether the person can work for others and delegate the work, how they are paid, and how far they are built into the organisation. Where the relationship is really employment, engage the person as an employee and pay the award, leave and superannuation. Where it is genuine contracting, paper it accurately and make the working arrangements match the paperwork. If you are not sure, get advice before the engagement, not after a claim. The cost of advice is small next to a penalty and a back-pay order.
Frequently asked.
What is sham contracting?
It is treating a worker who is really an employee as an independent contractor. The person is given an ABN and told to invoice, when the substance of the relationship makes them an employee. The Fair Work Act 2009 (Cth) prohibits it, whether it is deliberate or a mistake.
What do sections 357, 358 and 359 of the Fair Work Act do?
Section 357 stops an employer misrepresenting employment as contracting. Section 358 stops an employer dismissing a worker to re-engage them as a contractor for the same work. Section 359 stops an employer making a false statement to persuade a worker to become a contractor.
Does calling someone a contractor make them one?
No. From 26 August 2024, section 15AA requires courts to look at the real substance, practical reality and true nature of the relationship, weighing the contract terms together with how the work is done. A contractor label on the paperwork does not settle it.
What is the whole-of-relationship test?
It is the test in section 15AA of the Fair Work Act 2009 (Cth) for deciding whether a person is an employee or a contractor. It considers the whole working relationship, including the written contract and how the work happens in practice, not just the words of the agreement.
What are the penalties for sham contracting?
It is a civil penalty contravention. Maximum penalties are set in penalty units and updated periodically. As a guide, at 2026 rates a single contravention can reach around $19,800 for an individual and about $99,000 for a small business, with higher maximums for larger businesses and for serious contraventions. Back-pay of the entitlements owed can also be ordered.
How can an arts organisation avoid sham contracting?
Look at the substance of each engagement before it starts. Where the person works like an employee, engage them as one and pay the award, leave and superannuation. Where it is genuine contracting, make the paperwork and the working arrangements match. Get advice before the engagement if you are unsure.
If you are a performer, producer, venue, or independent practitioner and this raises a question about your own situation, Aaron Kernaghan and the team at Brady & Associates Lawyers can give you tailored guidance. Call 0421 717 019 or contact the firm.
This article is for informational purposes and general commentary only. It does not constitute legal advice and does not create a solicitor-client relationship. It reflects the law in Australia as at 14 September 2026, with a focus on Commonwealth law and New South Wales and ACT practice. The law changes and applies differently to every set of facts. Written by Aaron Kernaghan, Brady & Associates Lawyers.