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The increased protection takes in more small businesses and introduces civil penalties.
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Labor moves to tighten rules on unfair contracts
27 July 2022
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9 minute read
The government will move to tighten the law on unfair contracts to protect small businesses and their workers, the responsible minister, Julie Collins, said this week.
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She said the government was serious about delivering on an election commitment to make unfair contract terms illegal with legislation set to be introduced in the upcoming parliamentary sitting.
“These reforms are a critical part of this agenda,” the Minister for Small Business said.
“These changes will improve the long-term resilience of Australia’s small businesses and help them bounce back following significant challenges in recent years.”
The amendments would introduce civil penalty provisions outlawing the use of, and reliance on, unfair terms in standard form contracts. This would enable a regulator to seek a civil penalty from a court.
The law would also widen the scope of protection by making businesses with employees eligible, raising the bar from fewer than 20 employees to fewer than 100.
An annual turnover threshold of less than $10 million was an alternative threshold for eligibility.
Ms Collins said small businesses and consumers often lacked the resources and bargaining power to effectively negotiate standard form contracts, and existing laws had failed to prevent the inclusion of unfair terms.
The move was welcomed by the Australian Small Business and Family Enterprise Ombudsman Bruce Billson, who said unfair contracts were a “real problem”.
“We see in many contracts we review, examples of unfair terms. This is an area ripe for change,” Mr Billson said.
“Power imbalances between small business and large enterprises are exacerbated by unfair business practices and unfair contract terms.
“Addressing these issues will aid in rebalancing these relationships and promote economic growth.”
He praised the government’s move to broaden the scope of the legislation and suggested big business should adopt a different tone in dealings with smaller firms.
“I encourage large enterprises doing business with smaller firms to be a kindly customer – patient and understanding, with good and generous intent, especially around contract terms,” he said.
“Small businesses are run by real people who deserve our respect and empathy every day.”
The Assistant Minister for Competition, Charities and Treasury, Andrew Leigh, said Labor would deliver on promises to safeguard small businesses and contractors from exploitation.
“Too many hard-working Australians are struggling with late payments, staff shortages and complex regulation, all while worrying about being pushed around by big clients,” he said.
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