Self Employed Australia

"Everyone needs an Advocate"

“Everyone needs an Advocate”

Unfair contracts

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.

Gig economy and unfair contract laws suit self-employed

by

Two current events occurring some 17,000km apart reveal regulatory tension over the “gig” economy. One event tears at the new economy while the other is working with this economic change.

Last weekend, Australia’s unfair contract laws covering small business people began. Late last month, a precedent-setting judgment in London declared two of Uber’s 40,000 British drivers to be employees and thus entitled to minimum wages.

The Australian event is accommodating the gig economy within a regulatory framework. The London event assaults the structural heart of the gig economy.

It’s a mistake to think that the gig economy is a technological revolution. Yes, the integration of apps, GPS location, mobile phone and related technologies facilitate the new economy, but it’s the use of those tools by people that makes this economic “thing” work. And it’s people who opt to be self-employed who are primary users of the technology. This is the cutting edge issue.

The heaviest driver of the gig economy is the willingness of people to become “businesses of one”.

The legal structure is that individuals walk away from wage-slave employment to self-employment.

Unions hate this. It diminishes their institutional power.

The Uber ruling was on a case brought by the GMB union to the Central London Employment Tribunal. In a 40-page ruling, the tribunal declared two Uber drivers were “workers” within the meaning of the British Employment Rights Act. The tribunal ignored or twisted key indicators of self-employment to reach its conclusion. No consideration was given to the fact that Uber drivers provide their own tools, a vehicle and pay all expenses.

Drivers have total control of when or if they work by turning the Uber app on or off, but the tribunal asserted that when the app was on, Uber controls the drivers because it gives directions as to driving routes through the Uber GPS map.

The tribunal dismissed much of Uber’s stated operational evidence preferring hearsay from off-the-cuff remarks by others as more reliable.

Uber intends appealing.

In comparison to the London ruling, Australia’s unfair contract law does not try to suppress self-employment but rather embraces the status.

The law is “revolutionary”. It is a likely global first in regulating the “fairness” of business-to-business contracts, but it’s light touch.

It applies only to standard-form contracts affecting small business people.

Offending clauses are void, leaving the balance of a contract intact. The law largely codifies the common law structure of a commercial contract backing the power balance inherent in commercial contracts with legislative “oomph”.

What is significant is that the unfair contract law does not go to the issue of price. Here is the big regulatory difference.

Employment regulations have institutions that define “fairness” based on determining and enforcing the price (income) that must be paid to individuals declared to be employees. The London ruling pulls Uber drivers into that framework. Compare this to competition law, of which the unfair contract law is part, where “fairness” considerations relate more to contract honesty, including preventing price manipulation.

The gig economy is regulated under competition laws because its contract structures are so dependent on people being self-employed. However, if the gig economy does not have regulation that effectively protects self-employed people, have no doubt it will be exploited by big businesses.

Here’s the tussle: employment-regulating institutions respond to the gig economy by seeking to pull individual workers into their ambit to impose price (income) controls.

This kills the creativity, innovation and wealth-creating potential of the market-dependent gig economy.

If competition regulators do nothing, employment regulators will move in to the regulation void, do their thing and damage competitive markets.

Competition laws and regulators must actively respond to this growth in self-employment by creating light-touch regulation to support the small business (of one) base of economic activity. The Australian unfair contract laws are a step in this direction.

Large businesses operating in the gig economy space should encourage such market regulation of their activity. If they don’t, the golden goose they desire from the gig economy will be attacked—potentially even killed off—by employment regulators.

[First published in The Australian, November 2016]

So there are no unfair contracts? Look again

by

Sunday, November 13, 2016

When we first started arguing for unfair contract laws for small business people in 2009 we had discussions with the Federal Attorney-General’s Department. They told us that there wasn’t a problem because no-one complained. But we campaigned persistently for seven years until the laws were passed.

The new laws started last Saturday, 12 November 2016. (Hooray!) The Australian Consumer and Competition Commission last week released a report into the 12 months’ research they have done on unfair contracts. The ACCC believes that somewhere between 8 and 10 million (yes million) contracts will need to be re-written to comply with the new laws.

The ACCC has uncovered common terms in contracts that are unfair. According to the ACCC these are:

“Terms that

  • give one party an unconstrained right to unilaterally vary key aspects of a contract;
  • that unfairly seek to shift liability from the contract provider to the small business; or
  • that provide unnecessarily broad termination rights will almost always raise concerns about unfairness.”

Businesses that rely on these types of terms should be aware that they are leaving themselves open to action by the ACCC or another party.

If you have a contract that you think could be unfair, contact us.
We were interviewed on ABC The Business explaining the importance of the Unfair Contract laws.

Victory for small business fair contracts is an economic game-changer

by

Friday, November 11, 2016

Tomorrow, Saturday 12 November, the new unfair contract laws for small business people come into effect.

At ICA we can be rightly proud of these laws because we spent seven years arguing for the laws. There’s no question that these laws have happened because of ICA.

Yes, we’re entitled to ‘bang our own drum’ on this one! But nothing is achieved on one’s own. The Australian journalist Robert Gottliebsen was central to the campaigning. He kept pushing.

Here’s his article today explaining the impact of the laws. Robert says that, according to ACCC research,

 “It appears that somewhere in the vicinity of eight to 10 million contracts will have unfair clauses when they come up for renewal” and
“While it (the laws) will annoy a vast array of large enterprises, the new legislation is vital for the nation.”

In other words, this is huge. It’s an economic game-changer and it’s all about giving small business people a fair shot at being in business.

Former Small Business Minister Bruce Billson must also be thanked. He drove this with the Abbott government. But politics is always ‘interesting’. Here’s the inside story on how the laws were pushed through in the Senate.Now the Australian Consumer and Competition Commission is in the business of enforcement. We’re working closely with them.

But we’re planning to do lots more in this space. As Winston Churchill famously said at the end of the Second Battle of El Alamein: “This is not the end… But it is, perhaps, the end of the beginning.”
ICA has major new plans to help small business achieve fair contracts and will announce these next year.

A welcome disruption to the economy

by

Wednesday, December 02, 2015

The Unfair Contracts Act for small business people was proclaimed on November 12 this year and will go through a 12-month implementation period. The Australian Consumer and Competition Commission has immediately began reviewing commercial contracts for compliance.

The Act is a significant microeconomic reform, holding promise as a driver of innovation and jobs.

Economies are experiencing on going innovation upheaval. As a taste, banks are likely to halve their costs (and staff numbers) through technological innovation over the next decade. Automated cars  will start eliminating taxi driver jobs in the near future. Kenya has revolutionised financial transactions through phone-to-phone transfer, eliminating banks.

It’s not just the type of jobs but the very structure of how work is organised that is subject to wide-ranging change. The predictions I made in Independence and the Death of Employment,  published a decade ago, are coming to pass.

But the new jobs potential is primarily with small business people. Big business innovates to create wealth, but this involves removing jobs. Small businesses innovate all the time, and this nearly always involves job creation.

In the last four years in the UK, self-employment has grown by 570,000 accounting for all new jobs in the UK (says the Bank of England). This drove the UK unemployment rate down to 5.5 per cent.

In Australia, around 45 per cent of workers are engaged in businesses with fewer than 20 workers. That increases to 62 per cent for businesses up to 50 workers. It’s with self-employed, small business people that innovation and jobs growth opportunity lies — in the ‘guts’ of the economy.

The Unfair Contract Act is similar to ‘disruptive’ technology; it forces innovation and improvement. Australian big business opposed the law, fearing constraints on them. Instead, they should welcome the law.

The command-and-control ‘employee’ model of a firm is under competitive challenge. The processes of ‘business’ are increasingly being organised through ‘outsourcing’, using ‘as needed’ networks of (mostly) skilled individuals operating through commercial rather than employment contracts. In effect, this is the free market (for labour) penetrating the internal operations of firms.

To manage the new business model, large firms use ‘standard form contracts’ offered as ‘take it or leave it’ contracts. However, it is common practice to ‘skew’ these contracts so that they give the large firm near-total control of the contract structure. For example, the large firm can change the terms or price of the contract or transfer unreasonable risk at whim without the other party’s consent.

Such ‘skewing’ breaches the structural integrity of commercial contracts found at common (and Roman) law. It’s a free-market (in labour) avoidance mechanism.

The skewing of ‘standard form’ commercial contracts was recognized as damaging to trust and market activity in the consumer space. In 2010, unfair contract laws were created for consumers. This effectively codifies common law. For example, it requires that if one party can unilaterally change the terms of a contract, the other party must have the same right. Further, one party cannot unilaterally avoid or limit the performance of the contract.

The full list of ‘fairness’ requirements is here. It’s about a power balance under the structure of the contract. This facilitates trust, in that the contract has integrity.

Commercial activity is dependent on trust between parties. The law’s role is to embed ‘trust’ in the contract structure. Common law does this. Much current practice with standard form contracts undoes this embedded trust.

The 2015 Unfair Contracts Act extends the consumer protections to cover small business. If self-employed, small business people are to thrive, innovate, create, explore and thus create jobs, they must have confidence in the integrity of their contracts and the law that supports contracts.

The law is ‘radical’. It is, to my knowledge, a world first in having fair contract terms apply to business-to-business transactions. But it does no more than embed in statute what applies in common law.

However, the law is also cautious because it is narrowly applied. The unfair contract laws reinstate trust, but in a defined way. The law only applies to businesses with fewer than 20 staff and where standard form contracts are used. It applies to contracts up to $300,000 in value or for contracts extending beyond one year, $1 million in value. The laws do not go to the price of a contract or the actual things to be done under a contract.
It’s a delicate but important balancing act. It should, over time, create for better business at the base (small business end) of the economy.

[First published in Business Spectator, December 2015}

Yes! Massive win for Australian business, small and big

by

Wednesday, October 14, 2015

Yesterday afternoon, the new Small Business Minister Kelly O’Dwyer announced that the Turnbull government would accept the Senate’s amendments to the ‘unfair contracts protections’ Bill for small business people.

ICA is DELIGHTED!

This means that self-employed, independent contractors and small business people with fewer than 21 employees will have access to the same unfair contract protections currently available to consumers. The protections will apply to contracts up to $300,000 in value for one year and to $1,000,000 in value for contracts longer than one year.

Let’s be clear about what those protections actually are. It’s about a balance in the structure of ‘standard form’ contracts. That is, one party cannot, for example, change the price of the contract without the other party’s agreement. That’s fair and sensible. Here’s a list of the contract ‘balance’ requirements under the Bill.

The Senate has proven its worth. Last month, we said that Senators ‘saved the Bill’. They have demonstrated the value of an independent Senate as a genuine house of review. Robert Gottliebsen in Business Spectator made the same point yesterday.
But, to the Turnbull government’s credit, they have responded positively, with Kelly O’Dwyer arguing the case. This is a win not only for small business people but for large businesses as well.