25/08/2009

It’s easy as a contractor to believe that you have very few rights when it comes to the contract you’ve signed with your principal.  You’re not an employee and you believe that you have none of the usual rights that apply to employees in the same circumstances. But you may not be as helpless as you think.

 The Independent Contractors Act 2006 (Cth) (“ICA”) allows a Court to determine that a contractor agreement is “unfair” or “harsh”, and gives the Court the authority to make an order setting aside the whole or a part of the contract or even to vary the contract. This legislation may be an independent contractor’s best avenue of relief if the contract is unfair or harsh, particularly a contractor whose services are contracted through a private company, which is usually the case.

The Federal Magistrates Court has recently handed down its first substantive judgments under the ICA. In the case of Keldote Pty Ltd & Ors v Riteway Transport Pty Ltd [2008] FMCA 1167 the Court was asked to adjudicate on an application by several owner / drivers who had long-standing contractor agreements with Riteway. The contractors where notified by Riteway that they were required to upgrade their trucks from single trailers to B-doubles. In compensation for the additional expense, Riteway would pay the contractors an extra $218 per delivery. However, the contractors calculated that the upgrade would cost them at least $300 per delivery and sought to negotiate acceptable terms with Riteway. The negotiations failed and Riteway informed the drivers that if they were unwilling to upgrade their vehicles, that their services would no longer be required.

The Contractors brought an action under the ICA claiming that their contract with Riteway was unfair. Although, the contractors advanced several reasons for the proposition that the contract was unfair, the Court found that only one of their arguments succeeded; i.e. the fact that there was no requirement for Riteway to pay compensation if it required the type of truck to be changed was unfair.

The case is important as it is the first time the Court has had the opportunity to consider the provisions of the ICA and how they will compare, operate or interact with other relevant legislation such as the “unfair contracts” jurisdiction under s.106 of the Industrial Relations Act 1996 (NSW) (“IRA”).

The Court is yet to rule on the claim for damages, however, the case highlights important differences between the ICA and State based unfair contracts legislation such as the IRA. For instance, when bringing an action under the ICA, it is important to look at the unfairness that existed at the time the contract was made, rather than any conduct of a party subsequent to the making of the contract which may make the contract unfair.

While contractors and those engaging them may now look to the ICA as the main legislation dealing with unfair contracts, it is important to note that there remain other significant legislation such as the Trade Practices Act 1974 (Cth) or the State based Fair Trading Acts which contain potentially significant other legal rights and obligations for contractors and principals.

If you have any questions or would like advice on unfair contracts, and/or contractor agreements, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.