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Changes to unfair contract terms…we live in interesting times

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by Lisa Johnson

over 1 year ago

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I read an interesting article in Shortlist today.  The RCSA’s (Recruitment & Consulting Service Association)  legal advisor, Adam Wood made some very interesting comments about recruiters needing to ensure that their terms of business do not risk running afoul of new legislation coming into place later in 2016. In summary, if recruitment companies are transacting business with small companies (those with less than 20 staff) then we need to take care that our terms of business do not contain unfair clauses that operate in a 'take or leave it' frame of reference. It's a good article and if you are signed up to Shortlist you should read it, but my first thought was this: 

Most recruitment companies operating in Australia fall into this small business definition (eg they have less than 20 employees) and this is particularly true of companies who predominantly transact in the permanent recruitment market. And considering that small companies are just as likely to be considered / engaged for Preferred Supplier Arrangements with large businesses...is it not a reasonable argument to claim that in these situations, the larger business (the client) holds the power in terms of setting the terms of engagement for that agreement? 

Do small companies have any room to negotiate on major agreements around such things as payment terms or liabilities? In my experience, some large businesses can offer a take or leave it opportunity and there is no room for negotiation.  On looking at the meaning of 'unfair' the ACCC includes the following definition: "To be 'unfair', a term must: ...cause financial or other detriment (such as delay) to a small business if it were relied on." Now, I am NO lawyer or expert on contracts or contract law, but wouldn't the spirit of this legislation mean that a large business who has extended payment terms (say 60 days) in their agreement with a small recruitment business, and these terms would place financial hardship on the recruitment company, and there was no opportunity to negotiate these terms...then that large business is offering an unfair contract? 

I am not against this legislation in any way; it’s obviously intended to meet a need for small businesses who so often have  less negotiating ability in a business arrangement, and it is certainly very important that recruiters consider THEIR terms of business for ‘take it or leave it’ clauses that could be deemed unfair with their clients. 

But it is also an interesting point to consider when considering our arrangements with large businesses offering very strict PSA terms, that may, in fact, be financially burdensome for a small business. Lastly, considering the legislation only applies to small businesses...does this mean it is going to be harder for smaller businesses to reach agreement with large companies for PSA tenders / contracts? We live in interesting times...  

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