Sham Contracting-Coordinated approach needed to restore balance to the supply chain in Australia

Why this matters

Sham contracting substitutes real employment relationships with arrangements that hide liability, shift costs and avoid workplace obligations. In road freight transport, this translates into unsafe operations (because responsibility and oversight are obscured), economic distortion (unfair cost‑suppression) and regulatory non‑compliance across multiple statutory regimes. This is not a correlation alone — sham contracting is a causal driver of risks the HVNL was intended to reduce.

The legislative toolkit already exists, policy makers and enforcement agencies don’t need new theory so much as focused application of existing laws. Relevant legal levers include:

Competition law (ACCC)

• Section 46 (misuse of market power): pricing below cost or other unlawful conduct used to disadvantage competitors or deter entry.
• Section 18 (misleading or deceptive conduct): pricing or cost structures underpinned by false or misleading practices.

Corporate and financial regulation (ASIC)

• Sections 286/344: false or misleading financial records and failures to keep proper books.
• Sections 180–184: breaches of director duties (lack of care and diligence; acting improperly or dishonestly).

Australian Consumer Law

• Misrepresentations that promote “efficiency”, “low cost” or “best value” when those claims rest on illegal cost suppression.

There are two interpretive frames in practice for authorities:

1. The express-permission view: “The law says I can.”

2. The residual-permission view: “The law doesn’t say I can’t, so I can.”

Resolving which approach prevails requires policy clarity and enforcement that targets causal mechanisms (the illegal behaviours) rather than merely correlated outcomes. The first policy challenge is therefore definitional: identify, with crisp and certain language, the conduct that causes the harm.

What should industry and regulators do next?

1. Prioritise enforcement that links sham contracting to safety and competition harms, not just employment disputes.
2. Harmonise guidance across agencies (workplace regulators, ACCC, ASIC, HVNL enforcement bodies) so businesses and operators face consistent expectations and consequences.
3. Strengthen investigative focus on financial records, contractual realities and market conduct that reveal deliberate cost suppression and misclassification.
4. Promote industry-level reporting and transparency in contracting and subcontracting chains to improve traceability and accountability.

Sham contracting is more than a labour law problem — it is a systemic threat to the HVNL’s aspiration of safe, efficient and productive road freight transport industry. The legislative and regulatory tools are available; the task is to apply them in a coordinated, outcome-focused way that addresses the causal conduct, protects legitimate businesses, and restores a balance to the supply chain.