The Fair Work Commission's new unfair-contracts jurisdiction for regulated workers

What changed in 2024

The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 established a new jurisdiction within the Fair Work Commission (FWC). This jurisdiction specifically addresses unfair terms found in services contracts where the contract involves ‘regulated workers’. This new power for the FWC commenced on 26 August 2024. unfair contract terms auditor

The FWC’s new jurisdiction operates independently of, but concurrently with, the existing unfair contract terms regime. This existing regime is administered by the Australian Competition and Consumer Commission (ACCC) under Australian Consumer Law. The FWC’s focus is limited to services contracts involving regulated workers, while the ACCC’s regime has a broader application.

The introduction of this jurisdiction provides a dedicated pathway for regulated workers to seek redress for unfair contract terms.

Who is a 'regulated worker'

A 'regulated worker' is defined broadly to encompass employee-like workers participating in the digital platform economy. This includes individuals engaged in activities such as food delivery and rideshare services. The definition also extends to road transport contractors who provide services under services contracts and satisfy certain income-threshold limits.

The intention of this jurisdiction is to cover workers who are economically dependent on a principal, rather than operating as independent businesses. Genuine standalone businesses are generally excluded from this definition.

To determine whether a worker falls within the definition of a 'regulated worker' and to understand any applicable high-income opt-outs, reference the Fair Work Act 2009. Confirming coverage under the Act is essential before relying on the jurisdiction.

What the FWC can do

The Fair Work Commission (FWC) now has jurisdiction to resolve disputes concerning the fairness of terms within services contracts. The FWC will assess whether a term is 'unfair', using a test similar to that applied under the Australian Consumer Law (ACL) for unfair contract terms, but specifically adapted for services contracts and regulated workers.

If the FWC finds a term to be unfair, it has the power to take corrective action. This may involve varying the term, setting it aside entirely, or making other orders deemed necessary to address the unfairness.

The FWC’s orders are generally limited to the specific parties and terms that are the subject of the dispute. However, the FWC can also grant broader injunctions where appropriate.

What principals should do

Principals engaging regulated workers should proactively review their standard audit services contracts. A key focus should be on terms that may be considered unfair, specifically those relating to unilateral termination, unilateral variation, automatic renewal, restraint of trade, and disproportionate penalties. This assessment should determine whether the terms pass the unfair-terms test.

Maintaining thorough documentation is crucial. Principals should record any negotiation that occurred regarding contract terms and the commercial reasons underpinning any provisions that might be subject to scrutiny. This record provides evidence of fairness and transparency.

Principals should establish a system to monitor decisions made by the Fair Work Commission. If FWC decisions highlight problematic contract terms within a particular sector, a process should be in place for the swift review and amendment of relevant contract templates.