Self Employed Australia

"Everyone needs an Advocate"

“Everyone needs an Advocate”

Unfair contracts

There’s a small business reform ‘steam train’ happening with the federal government

by

There’s considerable reform occurring at the federal level affecting self-employed, small business people. This is all positive ‘stuff’.

Paying Small Business on time
From 1 January 2021, businesses with more than $100 million in turnover must report to a central government database their small business supplier payment terms and practices. We understand that the information will be publicly available. Next year we expect to see legislation where if a large business does not pay small business on time, the large business will lose access to government contracts. The reporting scheme is important for this. These are major moves to stop large businesses using small businesses as ‘banks’.

Beefing up unfair contract laws
In 2016 large businesses were required to have ‘fair’ contracts with small businesses. What is ‘unfair’ under the law is common sense. See here. But the laws were weak on enforcement and now the federal government has achieved agreement from all the state and territory governments to ‘beef up’ the laws. This is a significant development.

  • Currently, unfair terms are ‘null and void’. Now unfair terms will be ‘unlawful’.
  • Financial penalties will now apply.
  • The definition of small business is expanded.
  • Clarifying what is a standard form contract.
  • Currently, the law only applies to contract up to $300,000. Now there will be no limit.

Big businesses have bought these tougher laws on themselves. Too many large businesses have ignored the laws. Now the laws will have real teeth.

Small business insolvency
Following the Covid disaster, many small businesses will collapse or have collapsed. The federal government is changing insolvency laws for small business. This will give small business people a better chance to turn their businesses around or to retain some control of the situation during the insolvency process. For too long some insolvency practitioners have simply ripped out the value of a failed business to fund the insolvency practitioner’s business. The new laws are broadly designed around the US ‘Chapter 11’ insolvency laws.

These individual reforms are important but as a package are hugely important. If small businesses and self-employed people are to rebuild after the Covid-induced huge downturn, these reforms are doubly important. We congratulate the government on these moves.

There is more reform in the pipeline and we’ll talk about it in the coming weeks.

Labor takes bold move on unfair contracts

by

Tuesday, January 29, 2019

Bill Shorten’s Labor has announced that it will make unfair contract terms illegal and impose major fines for breaches. This is a position that we totally endorse.

Unfair contract laws protecting small business people were created in November 2015. Big businesses had 12 months to fix their contracts before the laws took effect. But big businesses did nothing. The ACCC has worked hard to enforce the laws but the task is huge when large businesses won’t voluntarily comply. (Idiots! Big business, that is!)

The government is conducting a review. Here’s the Treasury discussion paper.  In our submission we support

  • Making non-compliance illegal.
  • The imposition of fines.
  • No limit on the value of a contract that can be declared unfair.

***Further, we ask that government be subject to the unfair contract laws which, surprisingly, is not currently the case. It’s absurd that government makes one rule for the community but won’t apply the same rule to itself. Talk about double standards!

It’s excellent that Labor has declared its position supporting making non-compliance illegal. Labor’s policy is comprehensive. This includes increasing the number of small businesses and contracts that will have unfair contract protections. That is:

  • Businesses with a turnover of up to $10 milllion will be eligible.
  • The contract threshold will increase to $1 million (up from $300,000).

We’re particularly happy with this.

We ask that Labor also supports applying the laws to government.

We hope that the Morrision government finishes its review quickly, decides to beef up the laws and makes the needed changes quickly.

We don’t usually praise a bank. But—well done NAB!

by

Sunday, October 15, 2017

First we said that NAB had ‘trashed its own small business brand’. We said this in March this year because of NAB’s lie that it had made its small business finance contracts comply with the unfair contract laws.

Last week we expressed tentative praise for NAB after it had ditched its bad contracts and come up with new ones. NAB’s self-congratulatory PR seemed to indicate a major step forward. But we said we’d check its standard form contract first.

Well, we’ve obtained its new standard form small business contract and it looks pretty good. You’ll find here:

If you bank with NAB or expect to, we’d anticipate this would be the contract you would receive if obtaining small business finance from them.

What we like about the contract is the following.

a) It’s in ordinary person’s language. It’s pretty much removed the legal mumbo-jumbo that’s designed to confuse people and force you to get a lawyer to understand the contract. Tick!
b) It uses personal pronouns ‘you, we, us’ etc. That is, the contract says “we will do this”… “you will need to do that”. This wording makes for greater understanding and clarity. Tick!
c) It’s relatively short and to the point. Only 21 pages. Tick!
d) Nothing sneaky. We’ve looked hard but we can’t see any clauses that might suggest a meaning different to that which appears. Tick!
e) Obligations clarity. It states fairly clearly your obligations to the bank and its obligations to you. Tick!
f) No unfair clauses. Again, we’ve looked closely and we can’t find any clauses that might breach the new unfair contract laws. Tick!

Again, we’re delighted that our nearly 10-year campaign to achieve the unfair contract laws is having serious impact. But congrats to NAB! It has taken on board not just the specifics but also the spirit of the new laws and produced a sensible contract that people can understand.

We’ve said it before. What’s important is that as contracts are progressively cleaned up, the Australian economy will undergo major change. Small business people will have a fairer environment in which to operate. This will improve competition, entrepreneurship and make Australia a stronger, fairer society. NAB has taken an important lead in this.

Bank lawyer: “We’ll do what we’re made to do”. Now they’re doing it!

by

Sunday, October 08, 2017

More good news on the unfair contract front! But first some background.

Back around 2009, when we were talking to big businesses about having fair contracts, the chief legal counsel for one of the big banks said to us, “We’ll do what we’re made to do.” We realized then how difficult our campaign would be. But we succeeded. The new small business unfair contract laws we pushed for started at the end of 2016.

Well, now the banks are are doing what they’ve been made to do but, ‘butt’ has had to be kicked to achieve this. Look at NAB.

In March this year we exposed NAB lying (yes, lying) when it claimed that it had fixed its small business contracts to comply with the unfair contract laws. We said that the NAB had trashed its small business reputation. And the exposure of the NAB lie resulted in the banks being pushed into compliance by the regulators. In August the big four banks agreed to new, ‘fair’ small business contracts.

NAB has now taken an additional step. It has just announced simpler, shorter and plain English, ‘fair,’ standard form, small business contracts. Here’s its public relations blurb. The new contracts start on 16 October and don’t yet appear to be available. We’ve learnt to be careful and won’t comment until we study the new contracts. But if the contracts reflect NAB’s self-praising PR, they could deserve positive comment. We’ll let you know.

Do you rent a serviced office space?
Huge numbers of self-employed people rent serviced office space. One of the big players in the field is Servcorp. The ACCC is now taking Servcorp to Court over alleged unfair contract clauses. This will directly affect you if you use Servcorp’s services.

The ACCC alleges that clauses allowed Servcorp to, amongst other things:

  • automatically renew a contract, and increase the price, without prior notice to the customer;
  • unilaterally terminate a contract and impose penalty-type consequences on the customer;
  • unreasonably limit Servcorp’s liability or impose unreasonable liability on the customer;
  • unilaterally determine whether the contract had been breached; and
  • acquire the customer’s property without any notice.

Good on you ACCC! This is in addition to the litigation against the waste disposal company JJ Richards.

What’s important is that as contracts are progressively cleaned up (it’s going to take a long time), the Australian economy will undergo major change. Small business people will have a fairer environment in which to operate. This will improve competition, entrepreneurship and make Australia a stronger, fairer society.

Banks forced to change small business contracts. A huge win for fairness!

by

Thursday, August 24, 2017

We’re mighty proud of the work we did, over close to a decade, to achieve the 2015 unfair contract laws protecting small business people. Here’s the tracking of our campaign from 2009. And it’s pretty fair to say that, without us, the laws would not have come into existence.

In that long struggle the banks consistently opposed the unfair contract laws. During that campaign one bank, NAB, was found by the courts to have engaged in ‘misleading and deceptive conduct’ in relation to a business mortgage. In our view NAB’s bank officers arguably behaved as they did because NAB’s small business finance contracts seemingly gave them unfair power.

Continuing with this deceptive theme, in December 2016 NAB issued a letter to its small business customers claiming it had changed their small business contracts to comply with the new unfair contract laws. Here’s NAB’s letter. But when we had the contracts studied, it was found that the contracts were worse, not better! Talk about NAB destroying its own brand!

Our exposure of NAB’s misleading conduct along with important work by The Australian journalist Robert Gottliebsen resulted in a chain reaction. The bank regulator, ASIC, and the Federal Small Business Ombudsman conducted a wide-ranging investigation into whether the banks’ small business contracts complied with the unfair contract laws.

After some nine months of haggling, the big four banks have agreed to change their small business contracts, removing unfair contract terms in loan facilities up to $3 million. According to a report in The Age yesterday, some of the changes include:

  • the banks will not be able to require customers to cover losses due to fraud by the bank; and
  • the banks’ ability to vary contracts will be limited.

It’s staggering that these sorts of clauses were ever in contracts. We’d wager that banks would not agree if such clauses were imposed on them in a contract.

Also making common sense, small business customers will be able to exit a contract if the banks change a contract. Isn’t that what a ‘contract’ should allow? Robert Gottliebsen gives a fuller explanation today in The Australian.

The fact that the banks had to be dragged to agree to such changes is also staggering. Frankly, they would have faced legal action if they hadn’t agreed.

The banks like to portray themselves as ethical. But with this sort of behaviour it’s easy to understand why the banks’ reputations are in the gutter.

There’s a lot more work to be done on this issue. The ‘big end of town’ are avoiding fixing their unfair contracts. Our message to them is: ‘we’re watching’. And we’ll act and expose unfair contracts wherever we find them!

Like naughty schoolchildren, banks now complying with unfair contract laws

by

Thursday, June 01, 2017

Readers might recall our news alert headline, “we’ll only do what we’re made to do!” This was a senior counsel from one of the banks responding to our efforts about eight years ago asking them to support the unfair contract laws.

Then in March this year we said that NAB was trashing its own small business brand because it had, in our view, lied about changing its small business contracts to comply with the now operational unfair contract laws.

The huge news, however, is that last week the big four banks changed their small business overdraft contracts to comply with the laws. Robert Gottliebsen reports that the banks have:

  • Removed terms that absolve the bank from responsibility for their conduct.
  • Removed terms that gave banks total power to call a default when the value of secured property falls.
  • Removed terms that gave banks the power to call a default for an unspecified negative change in the circumstances of the small business customer.
  • Significantly limited terms that protect banks against losses outside the control of the small business borrower.
  • Significantly limited terms which gave the bank the ability to change the contract at will and without permission of the small enterprise.

But did the banks do this because they wanted to comply with the law? Well, the fact is that the head regulator, ASIC, forced them to comply. Robert Gottliebsen also recognizes the important role of Small Business Ombudsman, Kate Carnell and us, Independent Contractors Australia in achieving the outcome.

But now, according to the AFR, the banks are complaining that Federal Treasurer Scott Morrison is being too aggressive toward them. Um! As Morrison has said of the banks, ‘cry me a river!’ The banks have been like bullies in the schoolyard throwing sand at the little kids. The school principal has made them behave. So the banks have gone to their mommas on the school parents’ committee complaining that their little (bully) boys are being picked on! Spare us all!

The banks need to grow up! It’s their behaviour that is damaging themselves. But we also agree that there’s danger of political overreaction. The banks need to focus on a well functioning market economy and not their obsession with securing rorted advantage for themselves. If the banks do this, we might achieve important economic reforms!

Postscript: In November last year we said on ABC TV, The Business, “this is not something they (big business) can ignore!”

‘We’ll only do what we’re made to do!’ says bank’s legal counsel

by

Tuesday, May 16, 2017

Around 8 years ago, we (ICA) were approaching the banks about supporting the introduction of unfair contract laws for small business people. One of the big bank’s chief legal counsel said to us “We’ll only do what we’re made to do!” What a sad attitude. But, unfortunately, in our dealings with many at the ‘big end of town’, that’s our experience with them.

Unfair contract protections

It took us ten years of hard advocacy, but late last year the small business unfair contract laws took effect. Now the change is happening. In The Australian yesterday Robert Gottliebsen detailed how the ACCC has forced Sensis to fix unfair contract clauses. Sensis had concealed clauses that renewed contracts without the small businessperson agreeing. Sensis could cancel contracts but the small businessperson could not. Sensis has agreed to make refunds.

Vulnerable Workers Bill

Yesterday we released our detailed analysis of core clauses in the Vulnerable Workers Bill. Again, the big end of town—this time the Franchise Council of Australia—wants to ‘kill the bill’.  Our view is that the FCA is trying to exclude franchisors from being responsible. We strongly support the Bill and we’re asking Senators to vote for it with the current wording.

Yesterday in the Australian Financial Review, Adele Ferguson detailed the legal case being conducted by bankrupt Pizza Hut franchisees against Pizza Hut. The claim is that Pizza Hut required the franchisees to conduct a price war that resulted in the franchisees going broke. The case highlights how franchisor behaviour can create franchisee disaster.

The Vulnerable Workers Bill is about preventing underpayment of franchise workers. But the structure of the Bill is really about the 1,100 franchisors exercising their proper responsibilities towards their 79,000 small business franchisees.

Pay on time!

We’re pleased to see the campaign being conducted by the Federal Small Business Ombudsman, Kate Carnell, to get big businesses to pay small businesses on time. She’s calling for legislation and has given the example of New York’s ‘pay on time laws’ as a model. We agree with Kate that legislation is needed. Our experience is that big business will use voluntary codes to appear to do something, but in reality do nothing.

Will franchisors get away with it? Vulnerable Workers Bill

by

Sunday, May 14, 2017

It’s getting close to decision time in the Senate! Remember the 7-Eleven wages fraud scandal exposed by 4Corners/Fairfax late 2015? The scandal has spread since then with Pizza Hut, Domino’s Pizza, Caltex and United Petroleum being caught out underpaying workers.

The Federal government has put forward legislation (The Vulnerable Workers Bill) that will require franchisors to be at least partly responsible if underpayment occurs. We strongly support the Bill. It will force franchisors to properly support the 79,000 small business franchisees to prevent underpayment.

We’ve talked about the Franchise Council of Australia before. When the current FCA chair Bruce Billson was Shadow Small Business Minister, he said of the franchisors’ body: “The FCA’s advice … is quite unconscionable in its intentional omissions and misrepresentations.” This should raise ‘red flags’ about the FCA’s current opposition to the new law.

We have completed a careful analysis of the core changes the FCA is lobbying to have made to the Bill. We look at the implications of key words and how the FCA changes would neuter the Bill.

Here’s our analysis.

In summary we say:

  • The current wording of the Vulnerable Workers Bill has the practical effect of requiring franchisors to exercise their responsibility to franchisees.
  • The wording of the Bill desired by the Franchise Council of Australia would enable franchisors to avoid their responsibility to franchisees.
  • This FCA version would ‘dump’ all responsibility onto franchisees and remove franchisors from responsibility. It would weaken the Australian franchise system because it weakens the support that franchisors are supposed to supply to franchisees.
  • The FCA’s version is harmful not only to the 79,000 small business franchisees in Australia but to their thousands of workers as well.

We are putting in a strong effort asking Senators to pass the Bill substantially as is.

Some good news? Workcover NSW and Federal Government contracts

by

Wednesday, April 26, 2017

Mostly we’re complaining about bad government behaviour. And we should! And we will continue!

BUT, it makes a pleasant change to report some good news.

Workcover NSW:
As far back as 2005 we had been actively trying to defend self-employed people in NSW from the NSW WorkCover Authority. In 2012 the new government undertook a review. In our submission we stated that the workers compensation scheme is

… one of institutional oppression directed towards [the] self-employed, …has inflicted enormous harm on NSW small business people…and … the authority has a history of acting in a dictatorial manner, answerable only to itself.

We substantiated our claims with actual case studies.

Following the review, the Workcover Authority was effectively sacked. A new body was formed to handle the scheme called icare. What a difference!

We’ve had dealings with icare over the last 3 years and some recently on some touchy, difficult issues. We may not be in complete agreement with some outcomes. However, we’ve found the icare personnel and their processes open, transparent, honest, interested in facts and not presumptions and genuinely interested in fairness. icare has just undertaken a new review focused on improving customer service delivery. They deserve congratulations and we trust the improvements continue!

Federal Contracts
You’ll be aware of our work to secure unfair contract protections for small business people and the success we’ve had with that. However, what’s always ‘got up our noses’ is that government is exempt from these laws. You know—one law for the plebs and a different standard for the powerful!

We chatted with the Australian Consumer and Competition Commission about this. They conducted a review of the Federal Government’s ‘standard form contract’ and found some concerns. As a result, the government has amended its contract. This is hugely important. Massive numbers of small businesses and self-employed people provide goods and services to the federal government.

We’ll have more to say on this. There are some sensible and fair elements. Here’s the new contract.
If you do business with the Federal Government, we suggest you make sure your contract is in accord with this one.

NAB destroys its own small business brand

by

Friday, March 03, 2017

The National Australia Bank (NAB) has been caught out, in our view, in bald-faced lying to its small business customers. In so doing, it has trashed its own brand. Again, our view is that, for small business people, NAB has just declared that it can’t be trusted.

The issue arises from NAB’s issuing arguably false advice to its small business customers that it has amended its loan contracts to comply with the new unfair contract laws. We obtained a copy of the NAB advice and its new 100-page contract and forwarded them to Robert Gottliebsen of The Australian, initially thinking that this was a ‘good news’ story. But NO!!

When the NAB loan contract was checked, it was obvious that the contract breaches the new unfair contract laws in many ways. Robert Gottliebsen has written up the outcome today.
He says that by inserting the words ‘acting reasonably’ NAB asserts the power to:

(a)    Reduce any loan limit.
(b)    Introduce new fees or vary fees.
(c)    Change the way it calculates default interest.
(d)    Change customers’ repayment obligations.

These and other clauses effectively give NAB the power to change its own contracts enabling it to bankrupt any small business it chooses.

NAB has clearly breached the intent of Parliament when it passed the new unfair contract laws and we believe it has actually breached the laws. We will be lodging formal complaints with both ACCC and ASIC asking for NAB to be ‘jumped on from a great height’. If the NAB con trick of ‘acting reasonably’ proves to have neutered the unfair contract laws, we will push hard for amendments to the legislation.