The federal government will consider whether to outlaw unfair contract terms (UCT) in a bid to “strengthen protections” for small business ahead of the upcoming election.
Assistant Treasurer Stuart Robert and Small Business Minister Michaelia Cash said yesterday afternoon current unfair contract term laws aren’t providing a “strong deterrence” and needed to be improved.
“While the current UCT regime … has improved protections to small business in certain industry sectors, it does not provide strong deterrence for businesses to not use UCTs and therefore does not afford appropriate protections to many small businesses,” the pair said in a joint statement.
The government will employ a regulatory impact process to consult on options for changing the law, including making UCTs illegal and attaching civil penalties.
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It will also consider redefining the scope of UCT laws, broadening the businesses and types of contracts covered, as well as clarifying ambiguities in the current law.
Labor has already committed to outlawing unfair contract terms with reforms which would put big businesses on the hook for fines of up to $10 million for non-compliance.
The small business ombudsman and ACCC have been arguing for stronger UCT laws for some time, complaining big businesses are getting away with exploiting SME suppliers.
Corporate giants such as Visy Paper, Cleanaway and Suez have committed to changing their standard form contracts since the current UCT laws came into effect in 2016, but the competition watchdog is currently unable to pursue financial penalties for wrongdoing.
The government has just finished a review of the current laws, which identified a series of issues with the status quo but will conduct another review process before making any final decisions on possible reforms.
The government said a regulatory impact statement process will include considering whether to extend the definition of small business to those with less than 100 workers and under $10 million in turnover at the time a contract was signed.
Consideration will also be given to removing the contract value threshold under current law, which would increase the number of commercial dealings covered.
The current law applies only to businesses with fewer than 20 employees and contracts worth less than $300,000 (or $1 million if the term is more than 12 months).
Labor’s policy will increase the contract threshold to $1 million under a year and $5 million for contracts over a year.
Shadow Assistant Treasurer Andrew Leigh said the government has failed to “take proper action” on UCTs by not committing to outlawing them outright.
“Weasel words offering options — which may or may not be implemented after further delays — are not enough,” he said.
Robert did not respond to questions on Friday morning about the timeline of the RIS process and whether it will take place prior to the May election.