From 26 August 2024, changes to the Fair Work Act 2009 will occur in respect of independent contractors and unfair contract terms. In substance, these changes enable independent contractors who earn below the high income threshold to dispute unfair contract terms in the Fair Work Commission, offering a more efficient way for contractors to pursue redress. The Commission will have the power to vary or set aside contractor agreements, and this change should be noted by all businesses who use the services of independent contractors.
Threshold Requirement
The changes are intended to offer a faster and cheaper way of obtaining relief against unfair contract terms for independent contractors. To this end, two routes are offered to independent contractors to challenge the validity of unfair terms in their contract, depending on whether they earn more or less than the high income threshold (currently $175,000):
- Above High Income Threshold – an applicant will still have to apply to the Federal Courts under section 12 of the Independent Contractors Act 2006.
- Below High Income Threshold – an applicant may apply to the Fair Work Commission under section 536ND of the Fair Work Act 2009.
Independent contractors who are classified as consumers or small businesses will maintain access to the unfair contract terms regime under the Australian Consumer Law, including the right to raise complaints to the ACCC and to commence legal proceedings.
What's New for Independent Contractors
The new section 536ND of the Fair Work Act outlines that an independent contractor earning below the high income threshold may apply to the Commission for a remedy on the basis that the services contract contains a term that is unfair, provided the term relates to a "workplace relations matter".
Unfair Term
In determining whether a term in a services contract is unfair, the Commission will take into account:
- The relative bargaining power between the parties to the services contract;
- Whether there are significant imbalances between the rights and obligations of parties;
- Whether the term is reasonably necessary to protect the legitimate interests of a party;
- Whether the term imposes a harsh, unjust or unreasonable requirement on a party;
- Whether the services contract provides for a total remuneration
for performing work that is:
- Less than regulated workers performing the same or similar work would receive under a minimum standards order or minimum standards guideline; or
- Less than employees performing the same or similar work would receive; and
- Any other matters the Commission considers relevant.
Workplace Relations Matters
The Commission can only review a services contract for unfair terms if they relate to a workplace relations matter. This is defined under section 536JQ to include any of the following:
- Remuneration, allowances or other amounts payable;
- Leave entitlements;
- Hours of work;
- Enforcing or terminating contracts;
- Making, enforcing or terminating agreements;
- Disputes, or the resolution of disputes;
- Industrial action; and
- Other matters that are substantially the same as matters that relate to employees or employers dealt with by or under the Fair Work Act 2009 or state or territory industrial laws.
Remedies
Under section 536NC of the Fair Work Act, the Commission can make an order to either:
- set aside all or part of the services contract; or
- amend or vary all or part of the services contract.
Penalties
In addition, the contravention of an order made by the Commission in this jurisdiction is punishable by a maximum penalty of 60 penalty units (currently $11,855.30).
Conclusion
This new framework applies to services contracts entered into after 26 August 2024. Businesses that utilise the services of independent contractors should review their current contractor agreements to identify potential unfair terms.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
