Changes to Unfair Contract Term (UCT) protections

On Friday 6 November 2020, Commonwealth and state and territory consumer affairs ministers agreed to strengthen the existing unfair contract term protections in the Australian Consumer Law. The agreed changes include:

• Making unfair terms unlawful and giving courts the power to impose a civil penalty;
• Expanding the definition of small business and removing the requirement for a contract to be below a certain threshold; and
• Improving clarity on when the protections apply, including on what is a ‘standard form contract’.

Treasury will develop exposure draft legislation for stakeholders to comment on.

What does this mean for AFTA/ATAS members?

The changes provide increased protections and clarity for small business however the introduction of penalties is a big change from the current position which simply voids unfair terms from the contract.

All members will need to ensure that their T&C’s do not contain unfair contract terms or may face penalties as a consequence. AFTA is continuing its work on a T&C template and continuing its discussions with the ACCC on this important topic which will affect all members. AFTA will continue to update members on this topic and will conduct further training on understand UCT’s and the Australian Consumer Law at the appropriate time.

Small Business Insolvency Reform

New measures, subject to the passing of legislation, will commence on 1 January 2021 which will reposition the Australian insolvency system and help more small businesses survive.

Key elements of the reforms include:

• The introduction of a new debt restructuring process for incorporated businesses with liabilities of less than $1 million, drawing on some key features of the Chapter 11 bankruptcy model in the United States.
• Moving from a rigid one-size-fits-all "creditor in possession" model to a more flexible "debtor in possession" model which will allow eligible small businesses to restructure their existing debts while remaining in control of their business.
• A rapid twenty business day period for the development of a restructuring plan by a small business restructuring practitioner, followed by fifteen business days for creditors to vote on the plan.
• A new, simplified liquidation pathway for small businesses to allow faster and lower cost liquidation.
• Complementary measures to ensure the insolvency sector can respond effectively both in the short and long term to increased demand and to meet the needs of small business.

What does this mean for members?

The reforms will help more small businesses restructure and survive the economic impact of COVID-19. If a business is distressed, the reforms will provide the necessary flexibility to either restructure or to wind down operations in an orderly manner.

AFTA will provide further guidance once the legislation has passed. For more information see the Treasury website here.

Fair Work Commission – Annual Wage Review

In June 2020, the Fair Work Commission announced a 1.75% increase to minimum wages, with new rates coming into effect in 3 stages for different groups of awards.

The increase to the second group of awards began on the 1 November 2020 and includes the Clerks – Private Sector Award.

Group 3 Awards increase begin on 1 February 2021 and includes the General Retail Industry Award.

What does this mean for members?

If applicable, check which Award you are paying staff under as both Clerks and General Retail are commonly used in the travel industry. Ensure you have identified which Group you belong to and the relevant increase date.
For more information see the Fair Work website here.

ACCC – Class exemption for small businesses and franchisees to collectively bargain

The ACCC has finalised a ‘class exemption’ that will provide an exemption from competition law for small businesses to collectively bargain with customers or suppliers, without them having to apply to the ACCC.
The exemption will allow:

1. Businesses with an aggregated turnover of less than $10 million in the preceding financial year to collectively bargain with customers or suppliers, and
2. Franchisees to collectively bargain with their franchisor regardless of their size provided the group lodges a simple, one-page notice with the ACCC and with each target business it proposes to collectively bargain with (when they first approach that target). There will be no fee for lodging the notice.

The class exemption will be available for businesses to use in early 2021 as it needs to be table in Parliament. The ACCC will release further information and a guide in early 2021. For more information see the ACCC website here.

Want to know more? Contact Naomi Menon – Head of Compliance and Operations, AFTA at naomi@afta.com.au