A HUGE step forward for small business
31 August 2021
In 2015 the Coalition government passed unfair contract laws for small business people. As Self-Employed Australia was the primary (often the only) advocate for the laws (we campaigned for seven years) the laws achieved about 70 per cent of what we wanted. That was also thanks to Labor, the Greens and independents in the Senate forcing good amendments to the original Bill.
Six years later we have a new Bill ‘beefing up’ the laws. And it’s a ripper.
The new Bill comes after the Australian Consumer and Competition Commission had a frustrating five years trying to get big business to comply with the laws. The big business lawyers used every technical trick in the book to avoid complying with the law. Watch out, high-paid lawyers: that’s not going to be the case once this new law passes.
The Morrison government has negotiated this new Bill with the states and is moving forward with agreement with the states. The Bill is in the Draft Exposure stage and subject to further consultation. We will be making a submission supporting the Bill BIG TIME!
Summary of the Exposure Draft Bill
- Applies to consumers and small businesses.
- Expands the definition of small business. To apply to businesses of up to 100 full- or part-time employees (excludes casuals) or less than $10m in turnover. Currently only 20 employees.
- No limit on the value of the contract (currently restricted to contracts up to $300k).
- A ‘standard form’ contract is one if the contract has been used before.
- If minor changes have been made to a contract in negotiations this does not stop the contract being ‘standard form’.
- Imposes fines for breaches (up to $500k for individuals). There are currently no fines.
- A person breaches the law if they propose to or seek to apply an unfair clause.
- Multiple unfair clauses create multiple breaches.
Court orders: (This will close lots of loopholes in the current laws)
- If a clause has been declared unfair by a court, all similar clauses in other contracts are taken to be unfair. A party must disprove the unfairness if they want to use the clause.
- An order can be made to stop loss or damage from an unfair clause. Loss does not have to be proven but only that loss may Such an order can apply to a ‘class of persons’ to stop loss.
- An order can be made to stop someone from engaging in contracts with unfair clause/s. A public warning can be issued about such a person.
- Persons can be disqualified from ‘managing a corporation’ due to the use of unfair clauses.
Orders can be made within six years of a clause being declared to be unfair.
The Bill/Act is enforced (proposed and currently) by the
- ACCC, covering contracts for goods, services and sale of land.
- ASIC, covering financial products and services, and insurance contracts. (This started in April 2021)
Excluded clauses: Any clause required by legislation is not ‘unfair’.
Starts: 6 months after Royal Assent.
From the Explanatory Memorandum:
The rebuttable presumption therefore acts as a disincentive for companies to reuse terms they know are likely to be considered unfair.
The rebuttable presumption is intended to encourage contract‑issuing parties to maintain thorough monitoring and record keeping of their contracts to ensure that unfair terms are removed from or not included in standard form contracts.