Unfair contracts

The Commonwealth Independent Contractors Act empowers the Federal Magistrates Court and Federal Court to review the contracts of independent contractors. If appropriate, the Court can vary the contracts to render them fair.

If appropriate, the Court can vary the contracts to render them fair.

In 2006 the Commonwealth government enacted the Independent Contractors Act. The ICA empowers the Federal Magistrates Court to examine contracts between independent contractors and principal contractors to determine if, on their terms, the contracts are fair and reasonable. In the event that the Court determines that the contracts are harsh or unfair, the Court can then vary the contract so as to render it fair. It then has power to consider any breach of the contract as amended and award damages for that breach.

The process under the Independent Contractors Act

A claim seeking relief under the Independent Contractors Act can be brought by an individual or corporations (where the corporate entity operates a for a single person (or family) undertaking work.

The claim initially seeks a declaration from the court that the contract between the independent contractor and the principal was an unfair contract at the time of its inception. The court will consider a number of factors in making a determination as to whether a contract is unfair including whether the contract is:

• harsh or unconscionable;
• unjust;
• against the public interest;
• designed to provisions of the Fair Work Act;
• provides for remuneration at a rate less than a comparable employee would receive;
• otherwise unfair.

In the event that a Court makes a determination that a contract is unfair, it is then permitted to vary the contract from the point of the creation of the contract. The variation may be to delete, add or amend terms that will remove the harshness or unfairness that previously existed in the contract. A claim may then be brought for breach of the contract as varied.

Turner Freeman’s experience

To date, few claims have been brought under the Independent Contractors Act. Only one claim has been successfully run, to completion under that Act. In that claim, Turner Freeman acted for the applicants.