The information provided on this page is general in nature and intended only to provide an introduction to the topic. This information is not to be taken as legal advice. You should not act on any information provided here, without obtaining legal advice first.
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Getting paid comes down to keeping your customers happy, providing value for money and having a good credit management system. The first 2 will work most of the time, but sometimes you won’t get paid without a good credit management system in place.
Many businesses use terms and conditions they put together themselves from examples taken from competitors or the internet. These can be completely inappropriate or out of date. We occasionally see terms taken from American contracts obtained from the internet, that are completely out of place in Australia.
Pit-falls can be avoided by adopting and applying appropriate trading terms and practices. It should be possible to control the terms on which you do business with your customers using simple processes. That may not even required your customers to sign a contract. Appropriate terms can usually be applied through practical steps that your customers should find acceptable. However, be aware that standard form consumer contracts are subject to unfair contract laws (for example where an individual acquires goods, services or financial products for personal, domestic or household use or consumption). Contract terms may be void if the terms are unfair. You should also ensure that standard terms and conditions comply with the Australian Consumer Law.
Credit management system
Having a good credit management system can in some circumstances be critical. Bad debts can create a cash flow crisis. Slow payers starve your business of cash flow. You are not in the business of providing cash flow finance to your customers. Good credit management systems ensure that you get paid in full on time.
This will include:
- having customers fill out and sign a credit application;
- making sure you identify the entity to whom you are providing credit;
- having appropriate terms and conditions and being able to enforce them;
- appropriate invoicing procedures; and
- a system to monitor your debts with prompt escalation to cost effective debt recovery where appropriate.
Employment law basics
Industrial law and award compliance
Contractors treated as employees
Unlawful terminations and adverse actions
Unlawful discrimination and sexual harassment
Industrial law and award compliance
Workers who are employees have guaranteed rights under the National Employment Standards. Permanent part-time and fulltime employees have leave entitlements that are not enjoyed by casual employees.
Some categories of employees are also covered by a modern award which guarantees certain payment levels, penalties and loadings. These entitlements can only be displaced by a Collective Agreement, an Individual Flexibility Agreement or a more beneficial written employment contract. Your business risks prosecution or claims by employees if employee entitlements are not provided in accordance with the legal requirements.
Contractors treated as employees
Treating people who work in your business as independent contractors should be undertaken with great care. Your obligations towards an employee are dramatically different from your obligations towards an independent contractor. There are significant risks that arise from classifying an employee as an independent contractor.
Unless your employees are being strictly employed under modern award conditions or are not covered by a modern award or collective agreement, we recommend that you enter into written employment contracts or individual flexibility arrangements to enliven modern award flexibility provisions and/or to confirm all conditions of employment. Any changes to employment arrangements should also be confirmed in writing so that they can be relied upon if required.
Employment contracts must comply with the Fair Work Act 2009, the Fair Work Regulations 2009, the National Employment Standards and/or the applicable State legislation.
Risk of prosecution or claims by employees arise if employment contracts are not compliant with the legal requirements, or incorrectly classify workers. You also may not be covered by WorkCover legislation.
Workers engaged as employees should have their legal status as employees unambiguously described in a written employment agreement.
The Fair Work Act 2009 and general employment law imposes requirements on lawful termination of employment. The law protects employees against unfair termination of their employment in some circumstances. The law has become very technical and advice should be sought before taking action to terminate any employment. Adopting the wrong process may leave you open to a substantial claim by the terminated employee.
Unlawful terminations and adverse actions
The Fair Work Act has a general protections provision which makes it illegal for employers to terminate or injure an employee during their employment for prohibited reasons. Some examples of this can include, but are not limited to, the employer taking an action against an employee that is unlawful discrimination, or because an employee merely exercised a right under legislation, like making a complaint about workplace harassment or reporting a workplace health and safety matter. The prohibited reason does not have to be the sole or dominant reason, just part of the reason for taking the action.
Unless you are a registered self-insurer, you must pay WorkCover premiums for a statutory compensation scheme that provides compensation to workers injured while at work. The scheme insures an employer’s legal responsibility for claims by employees for injuries at work.
Under the Work Health and Safety Act 2011 employers must ensure, so far as is reasonably practicable, the health and safety of its workers (being both employees and contractors). The health and safety of workers can be impacted by harassment in the workplace. Employers should take all reasonably practicable steps to minimise the occurrence of harassment. Such steps should include implementing and enforcing a workplace harassment policy.
Large fines can be imposed on employers (and the officers of a company) for breaches of the Work Health and Safety Act 2011.
Unlawful discrimination and sexual harassment
Under the Anti-Discrimination Act 1991 (Qld) and various federal acts, an employer must not unlawfully discriminate against an employee or allow an employee to be sexually harassed. In addition, if any of the employer’s workers or agents unlawfully discriminate against someone in the course of work or while acting as agent, both the employer and the worker or agent will be liable for any contravention. The same situation applies in relation to acts of sexual harassment.
It is a defence to any prosecution that the employer took reasonable steps to prevent the worker or agent contravening the act.
As such, it is important that all employers have an anti-discrimination and sexual harassment policy and ensure that all employers receive adequate training on the policy.
‘Whistleblowers’ should be encouraged to report fraud or other inappropriate behaviour, before the business suffers loss as a result of the behaviour witnessed. The Whistleblowers Protection Act 2001 provides some protection to whistleblowers and prohibits certain false reporting. A whistleblower policy and procedure can remove several barriers to whistleblowing, including provision of a system allowing anonymous reporting and protection of whistleblowers. This should be balanced with provision of a fair hearing for anyone identified by a whistleblower, especially if the report is anonymous.
Managers have express or implied authority to act on behalf of the business owner. Provided the Manager is acting within the scope of their employment duties, the owner of the business is likely to be held legally responsible for the actions of the Manager. You should have in place documented policies and procedures that set out limits on the authority of Managers in carrying out activities on behalf of your business. This documentation of your policies and procedures will also contribute to the effective management of your business.
Use by employees of social media can be damaging to a business. Apart from productivity issues arising from inappropriate use of social media during work hours, businesses can be damaged by comments made by employees on social media about the business or their co-workers. In some circumstances, employers could become liable for social media harassment of co-workers.
It is important that you have a social media policy to regulate the use of social media at work and outside of work.
Retention of productive employees should be part of your Human Resources planning. Retaining employees saves the ‘up-front’ cost of training new employees to effectively and efficiently undertake the duties.
Employee retention strategies include use of financial incentives, employee share schemes and the offer of equity in the business. The taxation treatment of such arrangements should be carefully considered. Incentives should be set out in an appropriate employment agreement.
Employee incentive schemes
Care is required in designing employee incentive schemes. Such schemes by their nature affect the behaviour of employees which can have unintended consequences. Employers can become liable for the actions of rogue employees motivated by incentive schemes. Some non-monetary incentives attract fringe benefits tax. However, a well-constructed incentive scheme can provide powerful positive motivation for employees to drive business profitability.
Employee share schemes
Larger corporate business may offer broad based employee share schemes to encourage employees to identify positively with activities that increase form profitability. There are tax incentives available for broad based employee share schemes.
Whilst employee share schemes targeted at specific key employees do not share the tax advantages of broader based schemes, offering equity to key employees provides major benefits to the business in some circumstances. This can be used to retain key employees, prevent them from opening up in opposition, provide a safety net if business owners are incapacitated or die and can provide the basis of a retirement plan and succession strategy.
The basics you need to know about Workplace Health & Safety
National work health and safety laws
National uniform laws (WHS law) now apply in Queensland to ensure that all workers have appropriate health and safety protection, regardless of the work they do or where they work. The WHS law imposes a duty on businesses, directors and designated managers to provide a safe workplace and systems of work.
Most workers are protected by WHS laws including employees, contractors, subcontractors, outworkers, apprentices, trainees, work experience students and volunteers. The WHS law also provides protection for the general public so that their health and safety is not placed at risk by work activities.
If not already, you need to be familiar with the basics of the new Work Health and Safety Laws. A good starting point is the Work Health & Safety information here.
You should prepare a Workplace Health & Safety Plan. You may prefer to engage the services of a qualified workplace health & safety adviser to assist you.
The WHS Regulation specifies the way in which a duty under the WHS law must be performed and prescribes procedural or administrative matters to support the WHS law (e.g. requiring licenses for specific activities and the keeping of records).
WHS Codes of Practice provide practical guidance for certain industries on how to meet the standards set out in the WHS law and the WHS Regulation. Codes of Practice detail how a hazard or risk can be controlled or managed and to determine what is reasonably practicable. Codes of Practice are not mandatory. A business may choose another way to achieve compliance which provides an equivalent or higher standard of work health and safety than suggested by the Code of Practice.
You should review the Workplace Health & Safety Queensland web site to determine if there is a code of practice applicable to your industry. If so, you should use that as the basis of your Workplace Health & Safety Plan.
Who is responsible?
Officers with management or control of a business or undertaking must exercise due diligence to ensure the person conducting the business or undertaking (PCBU) complies with its health and safety duties and obligations. An officer may be charged with an offence and required to pay a penalty under the WHS Act independently of any breach of duty by the PCBU.
Due diligence includes personally taking reasonable steps to:
- acquire and keep current information on work health and safety;
- understand the nature and operations of the work and associated hazards and risks;
- ensure the PCBU has, and uses, appropriate resources and processes to eliminate or reduce risks to health and safety;
- ensure the PCBU has appropriate processes to receive and consider information about incidents, hazards and risks, and to respond in a timely manner;
- ensure the PCBU has, and implements, processes for complying with their duties and obligations (e.g. reports notifiable incidents, consults with workers, complies with notices and provides training and instruction).
Work Health and Safety Queensland must be notified immediately upon a death, or a serious injury or illness that results in:
- immediate hospital treatment as an in-patient;
- immediate medical treatment for injuries (e.g. amputation, scalping, a spinal injury, loss of a bodily function or a serious laceration, burn, head or eye injury), or
- medical treatment within 48 hours of exposure to a substance.
In addition, there are reporting requirements for several other health and safety related matters that arise. Your Workplace, Health & Safety Plan should include an incidents procedure which includes details of these required notifications.
Workers must be consulted and their views taken into account when making decisions about:
- ways to eliminate or minimise risks;
- the adequacy of facilities for workers’ welfare;
- procedures for consulting workers;
- resolving health and safety issues;
- monitoring the health and safety of workers or workplace conditions; and
- how to provide health and safety information and training to workers.
Workers are entitled to:
(a) elect a health and safety representative;
(b) request the formation of a health and safety committee; and
(c) cease unsafe work.
Consult your workers in formulating your Workplace Health & Safety Plan. Keep notes or records of all worker responses in your Workplace Health & Safety binder.
Asbestos in the workplace
Asbestos is naturally occurring minerals made up of strong fibres that when inhaled, can lead to serious diseases, including mesothelioma (a cancer of the linings around the lungs and abdomen) which may not be detected until decades later.
Both State and Federal Government imposes obligations on the manager of a business premises constructed prior to 31 December 2003 (and particularly prior to 1990) to ensure the workplace is free of asbestos containing materials and the appropriate audit and recording of the audits are conducted.
For example, in Queensland, you must ensure that:
- asbestos at the workplace is identified;
- the location of asbestos is clearly indicated;
- audits and report results are recorded in a register; and
- there is a written asbestos management plan I place if asbestos has been identified.
From 1 January 2014, a business must keep an asbestos management plan where naturally occurring asbestos is identified or likely to be identified in the workplace under the Work Health and Safety Regulation 2011 (Qld).
At a national level, Australia now has the National Asbestos Register. This Register ensures that all of the information a business has about asbestos audits and management plans is accessible by contractors, Government departments and emergency services.
You should seek immediate advice regarding your obligations to comply with your State’s workplace health and safety laws in relation to asbestos in your workplace.
The Australian Consumer Law – some things every business owner should know
The Australian Consumer Law (ACL) is enacted under both Commonwealth and State law. It provides a broad range of consumer protections to all Australian Consumers. The ACL is administered by the Australian Competition and Consumer Commission (ACCC) and State Fair Trading departments. All businesses must comply with the ACL when they provide goods or services to Consumers. A ‘Consumer’ is a person who purchases goods or services for less than $40,000.00, or purchases any goods or services ordinarily obtained for domestic, household or personal use. The ACL also applies to the sale of a vehicle or trailer used to transport goods on public roads.
ACL obligations such as deemed product warranties must be honoured by the seller or provider of the goods and services. As a business, you may not simply refer warranty claims to manufacturers and importers, even if the manufacturer claims their warranty does not apply. Manufacturers and importers also are deemed to provide warranties for their products. These deemed warranties cannot be changed, limited or refused by a seller, manufacturer or importer. Indeed, it is illegal for a seller to do anything that leads consumers to believe their rights are limited, or do not apply. For example, they are prohibited from saying that refunds will not be given under any circumstances. Misleading claims made about consumers’ rights under deemed warranties breach the ACL and can be prosecuted by the ACCC for misleading and deceptive conduct.
Misleading and deceptive Conduct
Misrepresenting country of origin
Refusal to deal
Misuse of market power
Exclusive dealing and third line forcing
Resale price maintenance
Your business is deemed to provide consumers who buy your goods, with a number of guarantees:
- the goods are of acceptable quality, i.e. safe, free of defects, have acceptable appearance and do the things they are ordinarily used for;
- the goods are fit for the purpose they are sold for;
- any description of the goods must be accurate;
- goods must match any sample or demonstration shown prior to sale;
- sellers must abide by any express warranty that they make about goods;
- sellers must provide clear title, freedom from securities and charges, and uninterrupted possession.
Your business must honour these guarantees even if the problem was caused by the manufacturer. You can minimise your exposure by only selling goods sourced from reputable suppliers. However you are not be obliged to provide a remedy if a consumer changes their mind or has damaged the goods by using them in an unreasonable or unintended way.
A warranty is any statement about how the business will respond if their goods or services are defective. If your warranty terms are out of date, or do not comply with the ACL, your business may be liable for a fine of up to $50,000.00. You should ensure that your warranty terms comply with the ACL, including references to warranties on labeling or advertising material.
Rights against manufacturers
Your business has rights under the ACL against manufacturers or importers of goods if you are required to remedy a consumer for a problem that is caused by them. However, if the manufacturer or importer is overseas or is structured to have few assets, you may not be able to recover payment.
Manufacturers and importers
If you are a manufacturer or importer of goods, you guarantee that:-
- those goods are of acceptable quality;
- those goods match descriptions given by or on behalf of the manufacturer or importer;
- you will abide by any express warranty you make about those goods; and
- you will make repair facilities and spare parts reasonably available for a reasonable period of time, unless you make it clear to consumers that repair facilities and/or spare parts will not be available after a specified period.
The Consumer’s obligations
You may not be obligated to provide a remedy if a consumer:
- simply changes their mind, decides they do not like the purchase or has no use for it or discovers they can buy the goods elsewhere more cheaply;
- is unhappy with a service that they insisted on having carried out in a particular way; or
- has damaged the goods by using them in a way that was unreasonable or unintended.
Provision of services
As a service provider, you must:
- provide all services using an acceptable level of skill and/or technical knowledge;
- take reasonable steps to avoid loss or damage when providing the services; and
- ensure that any goods created by or provided with the service, are fit for the purpose provided for, and achieve any result the consumer made known to the provider prior to agreeing to the services.
Your staff need to understand that consumers can explain their intended purpose plainly by saying clearly what they want, or by implication from their actions or explanation.
Unfair sales practices
Your business must not issue an invoice that requests payment for unsolicited goods or services unless you reasonably believe you have a right to be paid or the invoice contains the following statement (as the prominent text): “This is not a bill. You are not required to pay any money”.
Your business must comply with the rules limiting and regulating consumer contact, such as the Do Not Call Register for sales and marketing, and disclosure requirements for consumer agreements. Generally, consumers have 10 business days to change their mind (cool off). They can cancel the contract within three or six months if the supplier has not met certain obligations.
Pyramid schemes make money by recruiting businesses or people rather than by selling a legitimate product or providing a service and are illegal. They involve a ‘participation payment’ and a ‘promised recruitment payment’ payable when a member recruits others.
Multiple pricing occurs where:
- you sell goods with more than one displayed price and the price they are sold for is not the lowest of the displayed prices (except in situations where the price is entirely obscured by another price);
- if it is expressed as a unit of measure and presented as an alternative means of expressing the price; or
- where the price is expressed in a currency other than Australian currency or is unlikely to be interpreted as Australian currency.
Component pricing is where a supplier promotes or states a price that is only part of the costs. The only time where part of the price is allowed to be stated is where it is a single figure as the single (total) price. You should ensure that any displays or posters stating the price states the whole price or states a single price as the most prominent component of that price.
Referral selling is legal in some circumstances and refers to when a consumer is induced to buy goods or services by the promise of a future rebate, commission or other than a benefit for subsequent sales, and the consumer’s receipt of the promised benefit is contingent on an event occurring after the contract is made. Therefore, you must ensure your staff are aware that if one of your customers is induced to refer a number of other buyers, your staff may be involved in referral selling.
There are strict rules that apply to all lay-by agreements. A lay-by agreement will occur where the supplier and consumer enter into an agreement where the consumer does not receive the goods until the total price has been paid and the price is paid in at least three instalments, or in two instalments if the agreement specifies that it is a lay-by. This is essentially a legal agreement and must be understood by both parties.
Proof of transaction
A supplier must provide proof of transaction, within specified time frames when a consumer:
- buys goods or services worth $75 or more (excluding GST) as soon as possible after the transaction; or
- ask for proof of transaction for goods and services costing less than $75 within 7 days.
Where consumer asks for an itemised bill, you must give them a legible and clear itemised bill, without charge, within 7 days of the request.
All standard form consumer contracts (i.e.for provision of goods, services or financial products or services) are subject to unfair contract laws and will be void if a term is unfair. For example, a term may be unfair if:
- it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
- it is not reasonably necessary in order to protect the legitimate interests of the parties who would be advantaged by the terms; and
- if would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
Penalties for engaging in unfair sales practices
If you are found in breach of the unfair sales practices provisions under Australian Consumer Law, you and your business may be subject to civil and criminal penalties of up to f $1.1 million for corporations and $220,000 for individuals. The ACCC may also take action against a business and seek orders from the Court or use its own enforcement powers and issue infringement or public warning notices.
It is vital that you understand your legal obligations as a supplier of goods or services.
Unfair business practices
Misleading and deceptive conduct
It is illegal for a business to make false or misleading representations about goods or services when supplying, offering to supply, or promoting their goods or services.
It is illegal for a business to make statements that are misleading or deceptive or that would be likely to mislead or deceive, for example by failing to disclose relevant information, or making misleading promises, opinions and predictions. Misleading information may relate to the price, value or quality of consumer goods or services.
Unconscionable conduct can arise where a business sells or supplies goods and services to a consumer and in doing so, acts so unreasonably that it defies good conscience. In some circumstances conduct could be unconscionable even if it is otherwise in accordance with legal or contractual rights. You should ensure your staff are aware of examples of unconscionable conduct to avoid potential (and nasty) litigation by your customers.
Misrepresenting country of origin
Businesses must not make false or misleading representations about the country of origin of goods and you should ensure that your business understands the ACL criteria for claims about the country of origin of goods.
The ACL imposes information standards that regulate the type and amount of information provided to consumers about goods and services. You should ensure your business understands these standards. Supplying goods and services that do not comply with an information standard, is an offence.
Product Safety Laws
Relatively new product safety laws under the ACL apply to sale and provision of all consumer goods and product related services. They apply to all levels of the supply chain. If you manufacture or import goods for sale, you need to know the product safety laws that apply to your products.
The Competition and Consumer Act 2010 (CCA) prohibits various anti-competitive practices that limit or prevent competition.
Refusal to deal
There may be sound commercial reasons – legal ones – where a customer is refused a supply of goods or services. However, agreements involving competitors that involve restricting the supply of goods are prohibited if they have the purpose or effect of substantially lessening competition in a market in which the businesses operate. Don’t refuse to supply a buyer because they sell a competitor’s product, without legal advice.
There are laws that focus on the disclosure of information. Broadly, it is illegal to:
- disclose prices to competitors in private where doing so is not in the ordinary course of business; or
- disclose information (in public or in private) for the purpose of substantially lessening competition in a market.
Don’t engage in informal price fixing with your competitors by disclosing your pricing to them.
The law provides for a civil cartel prohibition and a criminal cartel offence. Both are centred upon the existence of a cartel provision within a contract, arrangement or understanding (CAU). The definition of ‘cartel provision’ includes 4 varieties of cartel conduct:
- price fixing;
- output restrictions;
- allocating customers, suppliers or territories; and
Price fixing agreements are illegal where:
- there is a ‘contract, arrangement or understanding’ (‘the agreement’);
- two or more of the parties to the agreement are competitors;
- the agreement has the purpose or effect (or likely effect) or fixing, controlling or maintaining the price of goods or services; and
- what is fixed is the price for – or a discount, allowance, rebate or credit in relation to – goods or services supplied or acquired by the parties to the agreement.
Don’t try to reach agreements with competitors on pricing.
The law prohibits contracts, arrangements or understandings that would be likely to substantially lessen competition in the market. To arrive at this decision, a number of factors are considered:
- Is there an ‘agreement’ caught by the law?
- What is the market?
- Does the conduct lessen competition?
- Is the lessening substantial?
There are major dangers in trying to reach agreements with competitors on ‘sharing the work’.
Misuse of market power
The law prohibits powerful players from abusing their market power. The tests for misuse of market power asks:
- Does the company have substantial market power?
- Is it taking advantage of that power?
- Is it using the power for an illegal purpose?
If you use your strong position in the market to seek an unfair advantage, it may come back to bite you.
Predatory pricing conduct is illegal. Predatory pricing occurs when a company sets its prices at a sufficiently low level with a purpose of damaging or forcing a competitor to withdraw from the market. Do not use discounting or other pricing tactics to drive a competitor out of the market.
Exclusive dealing and third line forcing
Exclusive dealing occurs when one person trading with another imposes some restrictions on the other’s freedom to choose with whom, in what, or where they deal. This type of conduct is common between buyers and suppliers. Sometimes the conduct is prohibited outright, other times it is subject to a test on whether it is substantially less than the competition in the market. Be careful about exclusive trading arrangements and get legal advice where they exist.
Resale price maintenance
Any arrangement between a supplier and a reseller that has the effect of the reseller not being able to advertise, display or sell goods supplied by the supplier, for a specified price, is illegal. It is also illegal for a supplier to cut off, or threaten to cut off, supply to a reseller (wholesale or retail) because they have been discounted goods or advertising discounts below prices set by the supplier.
Be careful about trying to ‘enforce’ recommended retail pricing.