---
created: 2026-03-12
source: Rivet
tags: [agent-archive, rivet]
---

# RateRight Sham Contracting & Employment Law Analysis

**Legal Research Memo**  
**Date:** February 2026  
**Re:** Sham Contracting Risk Assessment for RateRight Construction Marketplace  
**Status:** Research only – NOT legal advice. Lawyer review required.

---

## Executive Summary

RateRight's business model as a **pure marketplace/matching platform** positions it favourably under Australian employment law. The platform:
- Does NOT employ workers
- Does NOT pay workers  
- Does NOT control how work is performed
- Only facilitates connections between contractors (builders) and workers (tradies/labourers)

**Overall Risk Assessment: LOW to MEDIUM**

The primary risks relate to (1) ensuring RateRight is clearly not a labour hire provider, and (2) platform design choices that might inadvertently create employment-like characteristics.

---

## Table of Contents

1. [Fair Work Act Sham Contracting Provisions](#1-fair-work-act-sham-contracting-provisions)
2. [High Court Employee vs Contractor Tests](#2-high-court-employee-vs-contractor-tests)
3. [ATO Guidelines](#3-ato-guidelines)
4. [Platform Economy Precedents](#4-platform-economy-precedents)
5. [Labour Hire Licensing](#5-labour-hire-licensing)
6. [Employee-Like Worker Provisions (2024)](#6-employee-like-worker-provisions-2024)
7. [Risk Assessment Matrix](#7-risk-assessment-matrix)
8. [Mitigation Strategies](#8-mitigation-strategies)
9. [Questions for Employment Lawyer](#9-questions-for-employment-lawyer)

---

## 1. Fair Work Act Sham Contracting Provisions

### Relevant Legislation

The sham contracting provisions are found in **Sections 357-359 of the Fair Work Act 2009 (Cth)**:

| Section | Prohibition | Description |
|---------|-------------|-------------|
| **s.357** | Misrepresentation | Employer cannot represent employment relationship as independent contracting |
| **s.358** | Dismissal to re-engage | Cannot dismiss employee to engage them as contractor for same work |
| **s.359** | False statements | Cannot knowingly make false statements to convince someone to become a contractor |

### Key Elements

Sham contracting occurs when:
1. A person **employs** or **proposes to employ** an individual
2. That person **represents** to the individual that the contract is for services (not employment)
3. The representation is **not reasonably believed** to be accurate

### Critical Point for RateRight

**RateRight is not "a person that employs or proposes to employ" the workers.** The contractor-worker relationship is directly between the builder and tradie. RateRight is a third-party platform facilitating introductions.

### Defence Changes (Closing Loopholes Act 2024)

As of **26 August 2024**, the defence has been strengthened:

| Before | After |
|--------|-------|
| Employer "did not know" the contract was employment | Employer must prove they **"reasonably believed"** it was a contract for services |

This is an **objective test** requiring evidence of reasonable belief, not mere lack of knowledge.

### Penalties (As of February 2024)

Penalties increased **five-fold** under the Closing Loopholes amendments:

| Entity | Maximum Penalty Per Contravention |
|--------|-----------------------------------|
| Individual | $19,800 (60 penalty units) |
| Small business (<15 employees) | $99,000 |
| Large business (15+ employees) | $495,000 |

**Recent Cases:**
- **Doll House Training Pty Ltd (2024):** $197,000 penalties for sham contracting involving workers with disability
- **Australian Sales and Promotions:** $124,000 penalties for misclassifying backpacker worker

### Application to RateRight

**Direct Risk: LOW**

RateRight is not the employer in any contractor-worker relationship facilitated through the platform. The sham contracting provisions apply to the **hiring business** (the builder/contractor using RateRight), not to RateRight itself.

However, RateRight could face:
- **Accessorial liability** if knowingly involved in sham contracting arrangements
- **Reputational risk** if platform users engage in sham contracting

---

## 2. High Court Employee vs Contractor Tests

### The 2022 Decisions: Contract is King

On **9 February 2022**, the High Court handed down two landmark decisions:

1. **CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1**
2. **ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2**

### Key Principles Established

| Principle | Explanation |
|-----------|-------------|
| **Primacy of written contract** | The legal rights and obligations in the contract determine the relationship |
| **No multi-factorial test** | Courts should NOT look at the "totality" of how work is performed in practice |
| **Conduct not determinative** | How the parties actually behave cannot contradict clear contract terms |
| **Labels don't matter** | Calling someone a "contractor" doesn't make them one |

### From Personnel Contracting (Majority):

> "It is necessary to consider the rights and obligations provided for by the contract... The characterisation of the relationship between the parties must be determined by reference to the legal rights and duties which constitute that relationship."

### From Jamsek:

Despite working for decades and being called "contractors," the workers were found to be **genuine contractors** because:
- They operated through their own business structure (partnership)
- They owned and maintained their own trucks
- They bore commercial risk of profit/loss
- The written contract reflected a genuine services arrangement

### 2024 Amendment: Whole of Relationship Test

The **Closing Loopholes No. 2 Act 2024** introduced a new test effective **26 August 2024**:

**Section 15AA Fair Work Act** now requires considering:
- The **real substance, practical reality and true nature** of the relationship
- **ALL parts** of the relationship, including:
  - Terms of the contract
  - **How the contract is performed in practice**

### Important: The New Test Only Applies To:

- **Constitutionally covered businesses** (Pty Ltd, Ltd companies)
- For determining whether someone is an **employee** for Fair Work Act purposes
- From **26 August 2024** onwards

### Opt-Out for High Earners

Workers earning above the **contractor high income threshold** (currently $175,000/year) can **opt out** of the whole of relationship test and revert to the start of relationship (contract-only) test.

### Application to RateRight

**Risk: LOW**

Under both tests, RateRight's position is strong because:
1. RateRight has **no contract of employment** with workers
2. Workers set their own rates, choose their own hours, control their work methods
3. The contractor-worker relationship is **between the builder and the tradie**, not involving RateRight

The test changes primarily affect the **builders hiring workers** through the platform, not RateRight itself.

---

## 3. ATO Guidelines

### ATO's Approach Post-High Court

Following Personnel Contracting and Jamsek, the ATO updated its guidance. Key principles:

> "The critical differences between an employee and independent contractor are:
> - An employee **serves in your business**, and performs their work as a representative of your business
> - An independent contractor **provides services to your business** and performs work to further their own business."

### Key Indicators

| Indicator | Employee | Contractor |
|-----------|----------|------------|
| **Control** | Business controls how, where, when work is done | Worker controls their own work methods |
| **Integration** | Works as part of the business | Works for their own business |
| **Payment** | Paid for time or by commission | Paid for achieving a result |
| **Risk** | No commercial risk | Bears profit/loss risk |
| **Tools** | Business provides tools | Worker provides their own |
| **Delegation** | Cannot subcontract work | Can delegate to others |
| **Goodwill** | Goodwill benefits employer | Goodwill benefits worker's business |

### Superannuation for Contractors

Even genuine contractors may require super contributions if they work:
- **Principally for their labour** under the contract
- More than 30 hours/week domestically

This is the "extended definition of employee" under the Superannuation Guarantee (Administration) Act 1992.

### How RateRight Workers Score

| Factor | RateRight Worker Status | Analysis |
|--------|------------------------|----------|
| **Control** | ✅ Contractor | Workers control their own methods, hours, location |
| **Rate Setting** | ✅ Contractor | Workers set their own rates |
| **Tools/Equipment** | ✅ Contractor | Tradies bring their own tools (industry standard) |
| **Risk** | ✅ Contractor | Bear risk of defective work, liability |
| **Delegation** | ✅ Contractor | Can bring their own team/subcontract |
| **Integration** | ✅ Contractor | Working for the builder's project, not RateRight |
| **ABN/Insurance** | ✅ Contractor | Required to have their own |

### Application to RateRight

**Direct Risk: LOW**

RateRight is not the payer and not the hirer. The ATO tests apply to the **builder-worker** relationship, not to RateRight.

**However:** If the ATO finds workers on the platform are actually employees of the builders, the builders face liability – not RateRight directly.

---

## 4. Platform Economy Precedents

### Key Australian Cases

#### Deliveroo v Diego Franco [2022] FWCFB 156

**Initial Decision (May 2021):**
- Commissioner Cambridge found Franco was an **employee**
- Applied multi-factorial test considering how work was actually performed
- Ordered reinstatement for unfair dismissal

**Appeal Decision (August 2022):**
- Full Bench **quashed** the decision
- Applied Personnel Contracting: look at the **written contract**
- Contract gave Franco freedom to work for others, no set hours, could refuse work
- Found Franco was a **genuine contractor**

**Key Quote:**
> "The characterisation of the relationship between the parties must be determined by reference to the legal rights and duties which constitute that relationship."

#### Foodora (2018)

- Delivery rider found to be an **employee**
- Foodora exited Australia shortly after
- Case highlighted importance of contract terms matching reality

#### Uber Eats (2020 - Gupta case)

- Federal Court found Uber Eats driver was **not an employee**
- Key factors: driver could work for competitors, set own hours, use substitutes
- Case later settled for $400,000

#### Menulog Employment Trial (2021)

- Menulog voluntarily began **employing** some riders
- Applied for a new modern award for food delivery riders
- Shows platforms can choose to employ if they want

### Key Distinguishing Features

| Factor | Uber/Deliveroo | RateRight |
|--------|----------------|-----------|
| **Platform sets rates** | Often yes | ❌ No - workers set own rates |
| **Platform assigns work** | Yes (algorithm) | ❌ No - workers choose jobs |
| **Platform tracks location** | Yes | ❌ No |
| **Platform controls uniform/branding** | Sometimes | ❌ No |
| **Platform processes payment** | Yes | ❌ No - direct payment |
| **Platform takes %** | Yes (typically 20-30%) | ❌ No - flat $50 fee |
| **Ongoing relationship** | Yes | Variable |

### Application to RateRight

**Risk: LOW**

RateRight is **substantially different** from gig platforms like Uber/Deliveroo because:
1. RateRight doesn't assign work – builders choose, workers accept
2. RateRight doesn't set rates – workers set their own prices
3. RateRight doesn't process ongoing payments – flat $50 connection fee only
4. RateRight doesn't control work performance – that's between builder and worker
5. Workers are skilled tradies, not commodity labour

RateRight functions more like **Hipages** or **Airtasker** than like Uber.

---

## 5. Labour Hire Licensing

### What is Labour Hire?

Labour hire typically involves:
1. A **provider** who employs or engages workers
2. **Supplying** those workers to a **host business**
3. The provider **pays** the workers
4. The host **directs** the work

### Licensing Requirements by State

| State | Licensing Required | Legislation |
|-------|-------------------|-------------|
| **Queensland** | ✅ Yes | Labour Hire Licensing Act 2017 |
| **Victoria** | ✅ Yes | Labour Hire Licensing Act 2018 |
| **South Australia** | ✅ Yes | Labour Hire Licensing Act 2017 |
| **ACT** | ✅ Yes | Labour Hire Licensing Act 2020 |
| **NSW** | ❌ No (as of mid-2024) | No mandatory scheme |
| **WA/NT/TAS** | ❌ No | No mandatory scheme |

### Queensland Definition (Most Detailed)

From the Queensland Labour Hire Licensing Authority:

> "Labour hire providers supply workers to another business or person (the labour hire user) to do work. Under the arrangement, **the labour hire provider has the obligation to pay the workers** for the work they do."

### Critical Exclusions

Queensland explicitly states:

> **"Recruitment and permanent placement services, volunteering arrangements and workplace consultants are not considered labour hire services and do not fall within the labour hire licensing scheme."**

### Is RateRight a Labour Hire Provider?

**Analysis:**

| Labour Hire Element | RateRight? | Explanation |
|--------------------|-----------|-------------|
| Supplies workers to host | ❌ No | RateRight facilitates introductions only |
| Has obligation to pay workers | ❌ No | Builder pays worker directly |
| Employs or engages workers | ❌ No | Workers are not RateRight employees |
| Invoices host for workers' time | ❌ No | RateRight charges flat connection fee |
| Controls how work is done | ❌ No | Builder directs work |
| Bears liability for workers | ❌ No | Workers have own insurance/liability |

### Queensland Examples (From Official Guidance)

**NOT Labour Hire (similar to RateRight):**
> "An IT firm submits a tender for the job, and is paid a total contract sum... The IT firm assumes responsibility for completion of the scope of work, and bears the associated commercial risks and legal responsibility."

**IS Labour Hire (different from RateRight):**
> "A business provides workers to a licensed trade contractor on an hourly rate basis to perform work for the trade contractor's business. The business does not provide materials, is not responsible for rectifying defects..."

### Victoria Definition

The Labour Hire Authority defines a labour hire provider as:

> "A business that has an arrangement with one or more individuals under which the business **supplies** the individuals to perform work in, and as part of, a host's business or undertaking."

### Application to RateRight

**Risk: LOW**

RateRight is a **matching platform**, not a labour hire provider because:
1. RateRight does not **supply** workers – it connects them
2. RateRight does not **pay** workers – direct builder-worker payment
3. RateRight does not **employ or engage** workers as its own
4. The relationship is builder→worker, with RateRight as facilitator only
5. Queensland explicitly excludes "recruitment and permanent placement services"

**Recommendation:** Confirm this analysis with a lawyer familiar with each state's specific legislation, particularly Victoria and Queensland.

---

## 6. Employee-Like Worker Provisions (2024)

### New "Employee-Like" Category

The Closing Loopholes Act 2024 created a new category: **"Employee-Like Workers"** effective 26 August 2024.

### Who Qualifies as Employee-Like?

A contractor is "employee-like" if they:

1. Perform work using or arranged through a **digital labour platform**
2. Have **2 or more** of:
   - Low bargaining power
   - Receive similar or less pay than employees
   - Little authority over how they perform work
3. Earn below the contractor high income threshold ($175,000/year)

### What is a Digital Labour Platform?

> "An online app, website or system used to book or arrange services where the operator:
> - Engages contractors directly OR acts as intermediary
> - Processes payments for work performed"

### Protections for Employee-Like Workers

- Fair Work Commission can set **minimum standards orders**
- Protection from **unfair deactivation**
- Protection from **unfair contract terms**
- Collective bargaining rights

### Critical Exclusion: Construction Tradies

**The Housing Industry Association (HIA) successfully lobbied for exclusions:**

From HIA (September 2023):
> "Legislation introduced into Federal Parliament today confirms that **tradies in the residential building industry will not be captured** by measures targeted at 'employee-like' workers."

> "Under the proposed laws a worker must be operating via a digital platform and be 'employee-like' to become subject to the Fair Work Commission's proposed new powers to set minimum standards."

### Is RateRight a "Digital Labour Platform"?

**Analysis:**

| DLP Criterion | RateRight? | Notes |
|--------------|-----------|-------|
| Online app/website to arrange work | ✅ Yes | RateRight is a platform |
| Operator engages contractors directly | ❌ No | Builder engages worker directly |
| Acts as intermediary | ⚠️ Maybe | Introduces parties but doesn't control relationship |
| Processes payments for work | ❌ No | Only $50 connection fee, not work payment |

### Would RateRight Workers be Employee-Like?

**Analysis:**

| Criterion | RateRight Workers | Assessment |
|-----------|-------------------|------------|
| Low bargaining power | ❌ No | Workers set own rates, choose jobs |
| Same/less pay than employees | ❌ No | Market rates, often higher |
| Little authority over work | ❌ No | Full control of methods |
| Below $175k threshold | Variable | Some tradies earn above |

**Most critically:** Construction tradies are **explicitly excluded** from the employee-like provisions per HIA's successful lobbying.

### Application to RateRight

**Risk: LOW to MEDIUM**

- Construction tradies are **excluded** from employee-like provisions
- RateRight workers have **high bargaining power** (set own rates)
- RateRight workers have **authority over their work** (control methods)
- RateRight likely does NOT qualify as a "digital labour platform" because it doesn't process work payments

**However:** This is a new area of law. The Fair Work Commission's interpretation may evolve.

---

## 7. Risk Assessment Matrix

### RateRight-Specific Risk Assessment

| Risk Area | Risk Level | Rationale |
|-----------|------------|-----------|
| **Sham contracting (RateRight as employer)** | 🟢 **LOW** | RateRight is not the employer. No employment relationship exists with workers. |
| **Sham contracting (accessorial liability)** | 🟡 **LOW-MEDIUM** | Could arise if RateRight knowingly facilitates sham arrangements. Mitigate through platform design and terms. |
| **Labour hire licensing (QLD/VIC)** | 🟢 **LOW** | RateRight doesn't pay workers, doesn't supply them, only matches. Explicit exclusion for recruitment/placement services. |
| **Employee-like worker provisions** | 🟢 **LOW** | Construction tradies explicitly excluded. Workers have high bargaining power. |
| **ATO contractor classification** | 🟢 **LOW** | RateRight not the payer. Risk sits with builders, not platform. |
| **Platform design creating control** | 🟡 **MEDIUM** | Features like ratings, mandatory availability, or rate guidance could inadvertently create control indicators. |
| **Contract template liability** | 🟡 **MEDIUM** | If RateRight provides contract templates, they should clearly establish contractor relationships. |
| **Regulatory evolution** | 🟡 **MEDIUM** | Gig economy laws are evolving. Future amendments may capture more platforms. |
| **Reputational risk** | 🟡 **MEDIUM** | If users engage in worker exploitation, reflects poorly on platform. |

### Risk Summary

| Category | Assessment |
|----------|------------|
| **Overall Direct Legal Risk** | 🟢 **LOW** |
| **Overall Indirect/Accessorial Risk** | 🟡 **LOW-MEDIUM** |
| **Mitigation Priority** | Focus on platform design and terms of service |

---

## 8. Mitigation Strategies

### Platform Design

| Strategy | Implementation |
|----------|---------------|
| **Don't set rates** | Workers must set their own rates. Never suggest "standard" or "recommended" rates. |
| **Don't assign work** | Builders search and choose. Workers can accept/decline any opportunity. |
| **No mandatory availability** | Workers should never be penalised for being unavailable. |
| **No control over methods** | Platform should not dictate how work is performed. |
| **Enable worker independence** | Allow workers to work for multiple platforms/sources. |
| **No exclusivity** | Never require workers to only use RateRight. |

### Terms of Service

| Element | Recommendation |
|---------|----------------|
| **Clear contractor relationship** | Terms explicitly state RateRight is a marketplace, not employer or labour hire. |
| **Direct builder-worker relationship** | Emphasise the contract is between builder and worker. |
| **No payment processing** | Keep the flat $50 fee model. Don't process ongoing work payments. |
| **Worker independence** | Terms acknowledge workers are independent businesses. |
| **Liability allocation** | Clearly allocate employment/contractor responsibilities to the hiring builder. |
| **Compliance acknowledgment** | Builders acknowledge their obligations to correctly classify workers. |

### Contract Templates (If Provided)

If RateRight offers contract templates, they should:

1. **Clearly identify** the relationship as contractor, not employment
2. Include key contractor indicators:
   - Worker sets their own rate
   - Worker controls their own methods
   - Worker can delegate/subcontract
   - Worker provides own tools
   - Worker has own insurance
   - Worker can work for others
3. **Not include** employment-like terms:
   - No set hours
   - No uniforms/branding requirements
   - No ongoing supervision
   - No termination notice periods
4. Be reviewed by an employment lawyer

### Operational Practices

| Practice | Purpose |
|----------|---------|
| **Don't call workers "our workers"** | Language matters for perception and legal analysis |
| **Don't provide training** | Training suggests employment relationship |
| **Don't provide tools/equipment** | Should be worker's own |
| **Don't handle complaints about worker performance** | That's between builder and worker |
| **Educational content** | Help builders understand their classification obligations |

### Documentation

- **Maintain records** showing RateRight's limited role
- **Platform terms** clearly establish marketplace model
- **Marketing materials** should not suggest employment relationship
- **User agreements** for both builders and workers

---

## 9. Questions for Employment Lawyer

### Critical Questions

1. **Labour Hire Licensing**
   - Does RateRight's model definitively fall outside labour hire licensing in QLD, VIC, and SA?
   - What specific language in our terms of service would strengthen this position?
   - Should we obtain formal rulings from each state's Labour Hire Authority?

2. **Employee-Like Worker Provisions**
   - Does RateRight qualify as a "digital labour platform" under the new provisions?
   - If not currently, what platform features might tip us into that category?
   - What is the scope of the construction/trades exclusion secured by HIA?

3. **Contract Templates**
   - Should RateRight provide contract templates at all, or does this create liability?
   - If we do, what specific terms are essential to establish contractor status?
   - Review and approve any templates before deployment

4. **Terms of Service**
   - Review our Terms of Service for any language that might create employment obligations
   - Ensure appropriate disclaimers and liability allocations
   - Add any necessary regulatory compliance acknowledgments

5. **Accessorial Liability**
   - What triggers accessorial liability for sham contracting?
   - What level of knowledge or involvement would expose RateRight?
   - What safe harbours exist for platforms?

6. **Future-Proofing**
   - What legislative changes are anticipated that might affect our model?
   - Should we consider any structural changes proactively?
   - Are there industry associations we should join for advocacy?

### Recommended Lawyer Profile

Seek a lawyer with:
- Specialist employment law expertise
- Experience with gig economy/platform models
- Knowledge of construction industry practices
- Familiarity with labour hire licensing regimes
- Experience advising tech/marketplace platforms

---

## Appendix: Key Sources

### Legislation
- Fair Work Act 2009 (Cth), ss 357-359 (Sham Contracting)
- Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024
- Labour Hire Licensing Act 2017 (Qld)
- Labour Hire Licensing Act 2018 (Vic)

### Cases
- CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1
- ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2
- Deliveroo Australia Pty Ltd v Diego Franco [2022] FWCFB 156
- Fair Work Ombudsman v Doll House Training Pty Ltd [2024]

### Official Guidance
- Fair Work Ombudsman: Whole of Relationship Test
- Fair Work Ombudsman: Sham Contracting
- Fair Work Ombudsman: Employee-Like Workers
- ATO: Difference between employees and independent contractors
- Labour Hire Licensing Queensland: Licensing guidance
- Labour Hire Authority Victoria: Provider guidance

### Industry Commentary
- Housing Industry Association: "Government agrees tradies are not employee-like" (Sept 2023)
- Minter Ellison: High Court contractor decisions analysis
- Holding Redlich: Primacy of contract analysis

---

## Disclaimer

**This document is a legal research summary, not legal advice.**

The analysis is based on publicly available information and general legal principles as of February 2026. Employment law, particularly in the gig economy space, is rapidly evolving.

**RateRight must obtain formal legal advice** from a qualified Australian employment lawyer before:
- Finalising platform terms of service
- Providing any contract templates to users
- Launching or expanding in states with labour hire licensing
- Making representations about employment status

The risk assessments provided are indicative only and should be validated by legal counsel with full knowledge of RateRight's specific operations.

---

*Research compiled: February 2026*
*Next review recommended: August 2026 (or upon relevant legislative changes)*