Calls for Australia to follow “home of free enterprise” New York on strict late payments laws

Royal Commission

Small business ombudsman Kate Carnell. Source: Supplied.

A chorus of business groups and independent contractors are calling on the Australian government to follow the Big Apple’s lead on regulating payment times, with new laws to protect New York City contractors coming into effect this week.

In November 2016 the city’s mayor, Bill de Blasio, signed off on a series of tough new laws for payment terms, aimed at stopping independent contractors and freelancers from being fleeced by the city’s big businesses through late or non-payments for work they had completed.

The “Freelance Isn’t Free” law imposes stringent requirements on businesses that engage contractors, including requiring written contracts for work worth more than $800, mandating 30-day payment terms and allowing freelancers to file complaints with the city’s Department of Labor Standards if a business doesn’t pay.

A company can also be fined $25,000 when there’s evidence it is engaging in practices which breach the laws.

There are 1.3 million freelance workers operating out of New York City, and government officials said last year they are focused on protecting vulnerable contractors.

“This law also provides us with an opportunity to examine the trends in New York City’s gig economy and to promote policies that will benefit our evolving workforce,” the city’s Department of Consumer Affairs Commissioner Lorelei Salas said when the bill was signed off.

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell says New York City’s move shows late payment times are clearly not only a significant issue in Australia.

“I think what this shows is that this is a global problem. And here we’ve still a situation where many big companies, probably like those big corporations operating in New York, who are moving to 120-day payment times,” Carnell told SmartCompany this morning.

Read more: Victorian Small Business Minister Philip Dalidakis “working tirelessly” to stamp out late payments for SMEs. 

Carnell was disappointed that the 2017 federal budget ignored widespread calls for legislation on maximum payment times for Australian businesses, saying her research, conducted through a self-directed inquiry into the area, revealed late payments are having a significant impact on Australia’s overall economy.

“We will continue to push on this and talk further with the government on the benefits of businesses gaining the economic benefits of being paid faster, which frees-up cashflow and stimulates jobs, investment and growth,” she said on the issue last week.

While there doesn’t seem to be much momentum at a federal government level to legislate, Carnell says New York City’s move to act on the issue is telling.

“We’ve called for regulation, the EU have regulated as well, and it’s interesting that the home of free enterprise, New York, has done the same,” she says.

Nina Hendy, a freelance journalist and founder of Australian freelance community The Freelance Collective, says independent contractors in Australia are as much affected by late payments as SMEs are.

“I know of a freelancer now waiting 53 days for another freelancer to pay an invoice for $2,000, who can’t pay because her clients haven’t paid her. It’s a vicious cycle,” she says.

With more and more Australians moving away from traditional employment and starting their own enterprises, the need for a New York City-style framework to prosecute those that don’t pay is more important than ever, Hendy says.

“We’re often a one-man-band up against a multinational, and they hold all the cards,” she says.

“Freelancers are already out of favour with the banks as we rarely have a stable income, which makes securing a loan difficult, then on top of that you’ve got late payers to grapple with.”

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