In August 2024, the Fair Work Commission (FWC) gained a new unfair contracts jurisdiction. This change means that independent contractors earning below the high income threshold (currently $183,100 per annum) will be able to challenge the terms of their services contract directly via application made to the FWC with respect to unfair contract terms.
If the Commission finds a term to be unfair, it can amend or set aside that part of the contract. In deciding what’s unfair, the Commission will consider:
- the relative bargaining power of each party;
- whether the term is reasonably necessary to protect a legitimate business interest; and
- whether the term is harsh, unjust or unreasonable in its effect.
Importantly, this new jurisdiction sits alongside the existing unfair contract term protections under the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (Cth), which already apply to standard form contracts with consumers or small businesses.
Why It Matters for Businesses
The expansion of the FWC’s powers is likely to trigger a rise in disputes and litigation involving contractor agreements, particularly in industries that rely heavily on gig, consulting, or freelance arrangements. These changes also build on the tougher penalties and expanded scope introduced to the unfair contract terms regime under the ACL in November 2023. The combined effect is a substantial increase in legal and compliance risk for businesses engaging contractors.
What Employers and Advisors Should Do
Now is the time for employers, accountants, and business advisors to:
- Audit existing contractor agreements to identify any clauses that might be seen as one-sided or overly protective of the business.
- Review template contracts to ensure they reflect fair and proportionate obligations, especially for contractors earning below the high income threshold.
- Seek legal advice early to amend or replace any agreements that could attract challenge or expose the business to risk.
Get in touch to discuss your options with our team.