On Friday, the Morrison government said it will further strengthen protections to all small business from unfair contract terms (UCTs).
In a joint statement dated 28 March, and issued by Assistant Treasurer Stuart Robert and Small and Family Business, Skills and Vocational Education minister Michaelia Cash, the government pledged to introduce amendments strengthening the current laws, subject to the outcomes of a Regulation Impact Statement (RIS) process.
In late 2018, a review of the existing legislative protections provided to small businesses in relation to UCTs was undertaken. “The review found while the current UCT regime has improved protections to small business in certain industry sectors, it does not provide strong deterrence for businesses to not use UCTs and therefore does not afford appropriate protections to many small businesses,” according to minister Cash and Mr Robert.
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, welcomed the proposed UCT changes by the Coalition, but said she expects the Regulation Impact Statement process to involve proper consultation and engagement with the sector.
“The proposed changes would remove the imbalance of power between large and small businesses,” Ms Carnell said.
She explained that small businesses do not have the power to negotiate terms that are unfair for “fear of retribution or afford costly legal proceedings that could send them broke”.
“In our assistance function, which deals with small business disputes, the majority of contracts still contain clauses the Australian Competition and Consumer Commission and Australian Securities and Investments Commission (ASIC) have already identified as unfair,” Ms Carnell noted.
“Making UCTs illegal and attaching civil penalties to breaches would level the playing field as there would be a greater incentive not to include them in standard form contracts offered to small businesses.”
She added that the ASBFEO welcomes redefining small business to employers of less than 100 people at the time of contract or with an annual turnover less than $10 million, “as it better reflects the capital requirements of small businesses”.
“Removing the value threshold would include the majority of loans taken by a small business to grow, and capital intensive small businesses such as primary producers,” Ms Carnell concluded.
“We commend the proposal to extend UCT protections to government contracts and those of the insurance sector.”
