From Lexology, Michael Selinger and Julia Wyatt discuss recent laws that increase protections for independent contractors from unfair contract terms. Michael and Julia write:
Under the recent Closing Loopholes laws, new protections have commenced for independent contractors alleging unfair contract terms. This is one of the key reforms that came into effect on 26 August 2024.
Organisations that engage independent contractors should take steps to ensure the relevant contracts are compliant. In particular, the changes regarding the unfair contract regime in the Fair Work Commission (FWC) will likely bring an increase in contractor disputes.
Unfair contract regime for independent contractors
What’s changed?
For the first time, the FWC will be able to intervene regarding terms of engagement between principals and independent contractors. A new unfair contract regime has been introduced in Part 3A-5 of the Fair Work Act 2009 (Cth) (FW Act), targeting independent contractors who earn below the contractor high-income threshold (as at the date of this article, $175,000 per annum). The provisions allow eligible contractors to apply to the FWC to vary or set aside all or part of a contract if it is deemed unfair.
To be eligible to make an application, the sum of the contractor’s annual rate of earnings must be less than the contractor high-income threshold – currently $175,000 per annum. The FWC specifies that the contractor high-income threshold should not be confused with the ‘high income threshold’ which only applies to employees. At this stage, there is limited guidance on how the contractor high-income threshold and the contractor’s annual rate of earnings will be worked out and/or whether it will be pro-rated across the year.
Notably, only terms that would relate to “workplace relations matters” in the context of an employment relationship can be challenged due to unfairness. It is yet to be seen how the FWC will interpret this limitation, but according to section 536JQ of the FW Act, workplace relations matters include without limitation remuneration, hours of work and termination.
When determining whether a term in a contractor agreement is unfair, the FWC will consider:
- the relative bargaining power of the parties to the contract
- whether the contract as a whole displays a significant imbalance between the rights and obligations of the parties
- whether the contract term is reasonably necessary to protect the legitimate interests of a party to the contract
- whether the contract term imposes a harsh, unjust, or unreasonable requirement on a party to the contract
- whether the contract as a whole provides for a total remuneration for performing work that is less than what employees performing the same or similar work would receive
- any other matters the FWC considers relevant.
For example, terms which provide a unilateral right to vary the terms of the contract or terminate the contract may be deemed to be unfair by the FWC.
Read the full story at New rights for independent contractor in unfair arrangements – Lexology