Why ‘unfair contracts’ are finally set to be dumped by Labor: Robert Gottliebsen

The Albanese government vows to finally end barbaric ‘unfair contracts’ that have dominated dealings between large and small enterprises for two centuries. Picture: Gary Ramage/NCA NewsWire

Many of Australia’s largest enterprises are set to be brought into the 21st century as the new ALP government vows to finally end the barbaric “unfair contracts” that have dominated dealings between large and small enterprises for two centuries. I have battled to end these contracts for more than 10 years.

The Liberal party in government knew these contracts were wrong but could not separate itself from the cocktail set and refused to honour its undertakings to ban the contracts.

New opposition leader Peter Dutton has to hope that the ALP does not use the banning of “unfair contracts” as a base to establish the ALP as the party of family business. If it does then Dutton is unlikely to ever be Prime Minister.

Back 10 years ago there were about eight million of these contracts but over the last decade many large companies have abandoned them but there remain many millions still in existence that now face being outlawed.

In very simple terms an “unfair” standard form contract gives the large enterprise rights that the smaller enterprise does not have. These rights may include the ability to change the price, cancel the contract and alter most other terms. Most are presented to smaller enterprises on a “take it or leave it” basis. If the contract has been properly negotiated on a one-on-one basis then the legislation does not apply. But “sham” negotiations will no longer work.

About six years ago, the Coalition passed legislation that declared unfair clauses in contracts to be void but there were no penalties. The big legal firms found ways around the act for their large corporate clients and ignored the will of the Australian Parliament.

Thanks to the work of then ACCC chairman Rod Sims a tough set of proposed rules incorporated in new legislation were set out with strong penalties. In the halcyon days after the Morrison 2019 victory the Coalition believed it could follow Robert Menzies and John Howard and become the party of family business.

It brilliantly mobilised all the state governments to embrace the Sims recommendations which also involved gaining support from the ALP. The required Commonwealth legislation was prepared and would have passed both Houses of Parliament in record time but the Liberals were heavily lobbied and succumbed.

During the election campaign the ALP took advantage of the Liberals vulnerability to intense lobbying from large enterprises and so embraced most of the proposed Liberal “unfair contracts” legislation its signature small business policy in the election campaign.

Triumphantly eating the Liberal’s lunch, Small Business Minister Julie Collins and Assistant Minister for Treasury, Andrew Leigh declared:

“The government is delivering its election commitment to make unfair contract terms illegal, protecting small businesses and the hardworking Australians they employ”.

And on one front Collins and Leigh went further than the Liberals by extending “unfair contract” protection to a larger number of small business contracts. Their legislation will increase the small business eligibility threshold for protection from less than 20 employees to less than 100 employees, and introducing an annual turnover threshold of less than $10 million as an alternative threshold for determining eligibility.

They plan to introduce legislation in the current sitting period. It will include “civil penalty provisions” (fines) outlawing the use of, and reliance on, unfair terms in standard form contracts. This will enable a regulator to seek a civil penalty from a court. The previous Liberal legislation prescribed jail penalties but fines may be sufficient.

In office, the Liberals major small business achievement was to successfully speed payment to small enterprises. Part of that faster payment thrust was an arm of the Australian Building and Construction Commission which transformed payment speed on large building contracts. It is now in danger of being scrapped when the ABCC is dismantled.

It took the Liberals a long time but in their final months they finally realised that the current tax system was grossly unfair to small enterprises and was in danger of creating civil disobedience.

Sadly for the nation, the ALP member for Paramatta Julie Owens did not stand in the 2022 election. On an all party committee investigating aspects of the tax system she realised the system needed vast improvement.

But in 2022, and the Treasurer Jim Chalmers is short of money so understandably the ALP government is in no mood to listen to tax fairness arguments. But as civil disobedience spreads and impacts revenue it is possible that Chalmers and assistant Treasurer Stephen Jones will realise that Julie Owens and the Liberal’s Jason Falinski, who lost his seat in 2022, plus their Parliamentary Committee got it right.

If they introduce fairness to family business tax collection it is highly likely that revenue will rise but the ATO will protest strongly. But if later in the ALP’s first term of government they act on tax fairness it will also go a long way to enshrining the ALP as the party for family business.