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What is an Interlocutory Application?

Court proceedings are complex, lengthy and commonly include twists and turns to deal with procedural matters. These twists and turns often involve interlocutory hearings, which are like mini hearings within the main proceedings. One party triggers them by making an interlocutory application, asking the court to make certain orders. Orders are a declaration made by a judge, commanding something to be done, or prohibiting certain activity. Interlocutory applications can seek a wide range of orders, such as: 
urgent assistance from the court; or orders about the procedure or timetable of the court proceedings,  including orders about obtaining or disclosing evidence.  
This article will explain why to use interlocutory applications and the benefits they bring. It will also outline the steps you use to make an interlocutory application if you are involved in a court proceeding.
Why Do You Need an Interlocutory Application?
An interlocutory application is a request made by one party, asking the court to make orders to help with their case’s preparation or procedure. Court proceedings rarely go smoothly, therefore interlocutory applications allow you to seek orders to help keep your case on track or protect your rights in some way.
Interlocutory applications stop parties from acting in an unfair or unethical way. A party will often use them when they believe the other party has not complied with its obligations under the court proceeding or timetable. Such as providing all details of a claim when requested.

Once you make the interlocutory application, the other side may consent to the orders sought, and the court will make the orders. If they do not consent, then you can hold an interlocutory hearing. This allows the court to hear arguments from both sides before making a decision.

Types of Interlocutory Applications 
There is a wide variety of types of interlocutory applications. Common types include:
Injunctive Relief
Orders that stop the other party from doing something, like terminating a contract or completing a sale purchase. They are usually urgent, requiring the orders by a certain deadline.
Orders to compel a party to provide particulars (details) that the other party has requested, seeking clarification of information in a statement of claim or defence.

A statement of claim contains the allegations against the defendant and the relief which the plaintiff is seeking.

Orders to compel a party to provide certain documents sought by the other party through the discovery process.

For example, one party may object to discovering a certain category of documents, claiming the request is too broad or that the documents are not relevant to the proceedings.

Therefore, an interlocutory application seeks orders that the documents should be discovered.
Subpoenas are orders to determine whether a party can ask a third party to provide certain documents. As above, the other party may object to documents sought by the other party because they are not relevant to the proceedings.
Orders to compel the other party to answer certain questions, required to determine a position on a matter in dispute. The questions must be necessary and to help provide a fair trial.
Medical Examination
Orders that one party submit to a medical examination. For example, this may be sought where the other party has concerns about the medical condition of that party and how it may impact the matters in dispute.
Setting Aside a Default Judgment
Orders to set aside (overturn) a judgment ordered by the court when the other side fails to lodge a defence by the deadline.

Where there was a valid reason for failure to lodge the defence, the party can seek orders that the judgment is set aside, allowing them to file the defence. 

Steps to Make an Interlocutory Application
You usually make interlocutory applications after issuing court proceeding but before the final hearing date. The procedure to make an interlocutory application is set out below. 
1. Complete An Application Form
An interlocutory application usually starts when the party seeking the orders files an application form. These vary among states and territories, for example, in New South Wales, it will be a Notice of Motion. 
2. Provide Evidence 
The application must be accompanied by evidence supporting your request. For instance, this is usually an affidavit (verified statement) of the party seeking the order and will include relevant documents. 
3. Filing and Service
You must file the application form and supporting affidavit with the court and then serve it personally on the other party, or via the other party’s lawyers.
4. Ex Parte Hearing
If the orders you seek are urgent, you may request that the interlocutory hearing be ‘ex parte’, meaning without the other party attending. 
5. Interlocutory Hearing
If the other party does not consent to the orders sought, the court will list it for an interlocutory hearing. Depending on the orders sought, this may be short and conducted in a few hours, or a full day or more. However, both parties will have the opportunity to make their arguments and question any witnesses if relevant. 
6. Reparation and Hearing
Usually, your barrister (or counsel) will attend the hearing. Preparation will involve written submissions setting out your arguments with reference to any evidence filed with the interlocutory application. Furthermore, other helpful preparation documents might be a chronology, setting out a timeline of relevant events.

Further, the hearing will only deal with the interlocutory application and will not deal with the main proceedings’ issues. Therefore, if the other party does not attend, the court will make the orders that you applied for.

7. Orders 
Depending on the application’s and matters complexity, the court will either make orders immediately after the hearing or reserve its judgment and provide it later. Further, the court will usually make an interlocutory order at the same time it gives the judgment.
Key Takeaways
Interlocutory applications, and hearings, are an important part of court proceedings. Above all, they allow the parties to correct any unjust behaviour by the other party and keep the proceedings in line with the court’s timetable. They can add significant time and expense to a court proceeding. You should consider the potential for common interlocutory applications when estimating your legal costs at the start of a hearing.
If you have any questions about interlocutory applications, the process of court proceedings or would like other legal advice, contact LegalVision’s litigation lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
What is an interlocutory application? It is an application to ask the court to make certain orders. Orders are commands by a judge, declaring something to be done or prohibiting something from being done.  When should an interlocutory application be used? You can use an interlocutory application to help keep a case on track or to protect your rights. They stop parties from acting unethically and are often used when one party believes the other has not complied with their court procedure obligations.  What is an interlocutory hearing? An interlocutory hearing is held if a party does not consent to the orders sought by an interlocutory application. The hearing allows for both sides to present their arguments so that the judge can make a decision. 

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Dealing With Proceedings in the Small Claims Division of the NSW Local Court

If you are involved in a dispute with another person or company worth $20,000 or less, then the term Small Claims Division may come up when you think about potential court action. You may want to prepare for another party to file a lawsuit, or you may want to take a dispute to litigation but wonder how to navigate the court system in New South Wales (NSW). Most certainly, you will be trying to understand the costs of going to court and the possible outcomes. This article will discuss the purpose of the Small Claims Division of the NSW Local Court and how to begin or respond to proceedings commenced in the division.
What is Classified as a ‘Small Claim’?
Civil court cases (that relate to money or property owing) with a value in dispute of up to $20,000 are ‘small claims’. Therefore, you can deal with them in the Small Claims Division of the NSW Local Court.
The table below shows a simple breakdown of the appropriate NSW state courts for dealing with monetary disputes:

Court (Division)

Value of Civil Dispute

NSW Local Court (Small Claims Division)

Up to $20,000

NSW Local Court (General Division)

$20,00 to $100,000

NSW District Court

$100,000 to $750,000

NSW Supreme Court

More than $750,000

Commencing Proceedings
To commence court proceedings in the Small Claims Division, you will need to know the amount in dispute for any liquidated claim and put it on the statement of claim. This is a document that will specify the basis for your claim (allegations of wrongdoing by the defendant). Additionally, it will also outline the outcome sought by the plaintiff (typically compensation for financial loss or recovery of any assets/equipment).
Contrary to a liquidated claim, an unliquidated claim is where wrongdoing by the defendant is alleged, but the financial loss is not specified on the statement of claim. If you do not know this amount beforehand, then you can use your judgement to estimate whether the total amount will likely be below or above the $20,000 limit. 
During Proceedings
During the course of proceedings in the Small Claims Division, the court may revise or re-calculate the amount in dispute to be above the $20,000. Subsequently, the court may refer the case to the General Division of the Local Court, which can hear civil disputes up to $100,000.

Tip: if you are claiming the value of any equipment or assets, the appropriate value to claim may be their original value, current market value or future value, depending on your circumstances. Therefore, having a clear understanding of this before the court case will help everything run more smoothly.

Features of the Small Claims Division
The Small Claims Division is designed to allow parties (plaintiffs and defendants) to run court cases themselves, without having lawyers doing it for them. Consequently, to achieve this, it has a slightly different structure and set up to the other courts.
Fewer Formalities
Cases in the Small Claims Division are more often than not run by the parties themselves and not by their lawyers. Therefore, the rules and procedures of these cases are less strict than in other courts that more heavily involve lawyers.
The notable features of the Small Claims Division cases are that they:
always begin with a pre-trial review between the judge and the parties, with the aim of trying to find a compromise solution to resolve the dispute without the need for further court hearings;have fewer formalities when it comes to corresponding with and appearing in the court directly;do not follow formal rules of evidence (which can be quite complex and restrictive);avoid technicalities getting in the way of the correct outcome (depending on the circumstances);do not automatically require third-party witnesses to provide evidence in court (unless the court requests so);do not automatically allow witnesses to be cross-examined (questioned by the opposing side) except in limited circumstances; andare typically done without lawyers present.
A Court Case Without Lawyers?
By not having lawyers participating in the court process, parties can save a lot of money that they otherwise would have spent on legal fees. In turn, this allows for the court to deal with claims with relatively smaller amounts of money in dispute, without the parties spending more on legal fees than the dispute involved.
Parties involved in a matter in the Small Claims Division can still engage lawyers to provide advice outside of the court environment. However, lawyers will typically take a more backseat role in these kinds of matters. In certain circumstances, lawyers may be able to be more hands-on in the case. However, permission or special justification may be necessary, particularly if the other party does not have legal representation.
Can I Claim Interest, Court Expenses or Legal Fees?
The Small Claims Division allows the winning party to claim some of these additional costs, but with several conditions and factors that vary these amounts. 
Any amount of interest claimed may be:
determined by a contract or agreement between the parties (such as a commercial agreement or loan document); orcalculated using interest rates set by the court (which you can view here).
The amount of interest will accrue from when the debt first became due and when the statement of claim is filed. This is referred to as ‘pre-judgment interest’ because it is before the judge has made a decision. 

Tip: Prejudgment interest does not contribute to the $20,000 limit on the Small Claims Division. Meaning, for example, a dispute worth $18,000 with $3,000 in pre-judgment interest will still be below the $20,000 limit.

Interest cannot be sought for claims for less than $1,000.
Court Expenses
There are certain administrative expenses of commencing a case in the Small Claims Division. For example, some typical expenses which a plaintiff will incur are:
the filing fee, paid when submitting the statement of claim to the Local Court; any services fees for sending the statement of claim to the defendant(s); andother related litigation costs, such as: 
issuing subpoenas to obtain information or documents from third parties; fees for conducting searches of company and property registers; and reports from professional experts.
Requirements for how legal documents are ‘served’ will depend on whether the recipient is a company or an individual. However, the claimable amount is capped per address of the defendant(s). Similarly, the filing fee is more expensive for a plaintiff that is a company, as opposed to just an individual. Other claimable fees (such as expert reports) can be capped per document.

Tip: Like interest, the limit on the claim amount for the Small Claims Division does not include these expenses, but can still add to the total amount you seek to be recover.

Legal Costs
The Small Claims Division deals with legal costs (lawyer’s fees) quite differently than in other courts. The court can decide if the parties should simply pay their own costs of the court proceedings, even if one party ‘wins’ the case and the other ‘loses’.
The amounts of legal costs that you could claim also differ depending on:
the claim amount; how far the proceedings progress; andwhether a reasonable compromise solution was offered but not accepted.


Impact on Tiers of Legal Costs Recoverable

Claim Amount

The base caps for legal costs are split into three tiers relative to the claim amount:

tier 1: claims of less than $1,000.
tier 2: claims between $1,000 and $5,000; and
tier 3: claims between $5,000 and $20,000.

The claim amount is the amount in dispute (not including interest or other expenses), which is listed in the statement of claim. However, the plaintiff typically seeks to have the relevant tier of legal costs included as a separate recoverable expense.

Stage of Proceedings
Pre-judgement The maximum legal costs awardable for each tier increase further once the court proceedings are underway but are not completed. For example, each tier increases in circumstances where the: proceedings commence but are discontinued or stopped before an actual trial occurs; court proceedings are deferred or delayed due to one party’s failure to follow instructions; or court deals with additional interim requests (known as motions). In any of the above circumstances, each tier may be approximately 1.5 times the base amount. Post-judgment If the case goes ahead to trial and the judge makes a decision, then the tiers will increase in further value, to approximately two point five times the base amounts.
Rejected Reasonable Offer

In certain circumstances, the court can increase the tiers of legal costs to be over three times the base amounts if:

during the proceedings, one party makes an offer to settle the case and resolve the issue;
the other party rejects the offer; and
it was ‘unreasonable’ to reject the offer.

A court will be likely to deem a rejection of an offer ‘unreasonable’ if the offer was:

genuine or well-intentioned;
commercially just or fair; 
a realistic estimate of the debt in dispute; or
a suitable compromise which could have saved the parties and the court time and expense by ending the case early (and resulting in a better outcome for all).

Tip: The amounts for each tier of legal costs for the Small Claims Division are found on the court’s website.

Steps Involved in Small Claims Division Proceedings
The steps in commencing and running proceedings in the Small Claims Division are similar to what parties will do in other courts.


Steps Required by the Plaintiff

Steps Required by the Defendant


Correspond with the to-be-defendant with any letters of demand. Try to negotiate a settlement agreement.
Prepare the statement of claim (with or without assistance from lawyers).
Conduct searches to appropriately identify the contact details of all defendants (and if required, their assets/property).
Seek professional or legal advice (optional).

Correspond with the to-be-plaintiff. Try to negotiate a settlement agreement (if possible).
Seek professional or legal advice (optional).

Filing and Service

File the statement of claim with the court. 
Pay the filing fee.
Provide a copy of the filed statement of claim to each defendant.

Prepare a defence that responds to the allegations in the statement of claim (with or without assistance from lawyers).
File the defence.
Provide a copy of the filed defence to the plaintiff according to the address details on the statement of claim


Attend a pre-trial review where the plaintiff and the defendant meet and try to find a compromise suitable to all parties.
If an agreement to settle the proceedings is reached, follow the agreed steps.
If no agreement is reached, prepare for a hearing.


Prepare arguments and evidence to support the allegations in the statement of claim and disprove the defence (where contentious).
Call witnesses in support (optional).

Prepare arguments and evidence to support the allegations in the defence and disprove the statement of claim (where contentious).
Call witnesses in support (optional).


The judge will make a decision regarding the outcome of the proceedings.


Take appropriate measures to enforce the conditions of the judgment against the opposing party. There are several enforcement methods that may be available.

Appeals and Review
The decisions made by the judges and other personnel in the Local Court are binding and enforceable, regardless of the merits of any counter-arguments. After all, court cases are risky. However, there are some mechanisms to ask for certain decisions to be re-evaluated in limited circumstances.
Certain procedural decisions made by the court’s administrative staff at the filing and pre-trial review stages may be eligible for review by a judge if you are unhappy with the outcomes.
However, a review application must be submitted within 28 days of the procedural decision.

Tip: Losing a review application will likely resort in you having to pay the legal costs of the opposing party.

A judgment given in the Small Claims Division can be appealed to the District Court only if the:
party requesting in the appeal was not afforded the opportunity to fairly argue their case according to normal procedure; orjudge made decisions that they did not have the authority to do so.

You cannot appeal a judgment simply because you were unsuccessful and disagree with the ultimate decision.

You must submit an appeal to the District Court within 28 days of the judgment. After that, the opposing party will have an opportunity to respond to your appeal and argue against your new allegations. The District Court judge may then decide to re-make the decision or refer it back to the Local Court to be re-done.

Tip: Losing an appeal will likely resort in you having to pay the legal costs of the opposing party.

Key Takeaways
The Small Claims Division of the NSW Local Court allows people and companies with debts in dispute of $20,000 or less an opportunity to have the disagreement resolved by a judge. Dealing with proceedings in the Small Claims Division can be a little bit easier than other courts because of the division:
is more informal than other courts and accessible;allows self-representing parties without lawyers present to handle cases; andincentivises parties to resolve the dispute without further court proceedings.
When preparing for proceedings, you should keep in mind that there are limits on what costs the court can recover or award to either party (whether successful or not), including: 
interest on the debt; court-related expenses; and lawyer’s fees. 
These amounts further vary based on: 
the debt being claimed; how far the proceedings progress; and if settlement negotiations are unreasonably rejected.
Although lawyers do not typically play an active role in the Small Claims Division, they can still assist you with preparing for the court proceedings and advising you on your strategy. If you require assistance with proceedings in the Small Claims Division, contact LegalVision’s Dispute Resolution lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
When is the Small Claims Division used? The Small Claims Division may be a relevant court action if you are involved in a dispute with another person or company worth $20,000 or less. You may be the one taking the dispute to court, or you may be preparing for another party to file a lawsuit against you.  What are the benefits of the Small Claims Division? Cases in the Small Claims Division are often run by parties themselves, without the aid of lawyers. This means that you can save a lot of money on legal fees, which allows for claims with smaller amounts of money in dispute to still be dealt with by the court. The rules and procedures are also less strict compared to other courts.  What is the monetary limit of disputes in the Small Claims Division? The Small Claims Division of the NSW Local Court allows people and companies with money in dispute of up to $20,000. Interest cannot be sought for claims for less than $1,000.

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What is the National Minimum Wage I Need to Pay My Employees?

As an employer, you must ensure that you understand your obligations to your employees and their legal rights to earn a minimum wage. The Fair Work Act 2009 (Cth) sets out the obligations that you have as an employer to meet this minimum payment. You should determine your employees pay by either: 
an applicable award; an enterprise agreement; or the national minimum wage. 
This article will discuss the differences and how they may apply to your employees.
National Minimum Wage
If no award or enterprise agreement is in place, the national minimum wage will cover your employees. As of the 1st July 2020, the national minimum wage increased by 1.75% to $19.84 per hour or $753.80 per 38-hour workweek. Casual employees must also receive at least a 25% casual loading.

If you have employees that you were previously paying the minimum wage, you must review and update their employment agreements. You should ensure the agreements reflect this increase to their wages to meet the new minimum requirements.

Further, failure to comply with paying the minimum wage means your company will be open to legal proceedings from your employees or the Fair Work Ombudsman. Additionally, you will be liable to pay any outstanding wages to your employees.
Each year a Fair Work Commission Expert Panel reviews the national minimum wage. Any changes come into effect on the 1st of July each year. Therefore, it is important to keep track of changes to the minimum wage to ensure you are complying with current legislation.
Modern Awards
Does an Award Cover My Employees?
A modern award may cover employees. A modern award sets out the minimum terms and conditions that you must meet within a contract, one of which is pay. Employees covered by an award may be entitled to a different minimum wage and entitlements than covered by the national minimum wage.

Therefore, it is vital to understand which award(s) cover your employees to ensure that you pay them correctly.

Awards are industry and occupation based, and you should determine the relevant award by each employee’s industry and employment duties. When deciding on which award may apply to your workers, it is important to focus on the following clauses:
1.  The Coverage Clause
The coverage clause sets out which industry the award applies to.

For example, the restaurant award covers employers in the restaurant industry.

Some of the types of employers the restaurant award covers include:
businesses whose primary focus is selling food and beverages to eat on the premises;restaurants;tea rooms;night clubs; andreception centres. 
2.  The Job Classification
Within the industry award, there will also be a job classification clause that covers your employees’ specific duties. Consequently, your employees’ job classification will depend on their:
duties;skillset; and level of experience, including training requirements for each role.
For example, some of the classifications within the restaurant award include:
waiters and waitresses;baristas (in mainly eat-in cafés);kitchen hands, cooks and chefs including apprentice chefs;clerical and office employees; andsecurity and storeroom employees.
Furthermore, your employees may work in different roles. Therefore, more than one award may cover your business.

If you are unsure of which award(s) cover your business, you can use the find my award tool on the Fair Work Website. 

New versions of awards are released regularly, and some changes are being made to existing awards due to industries being affected by COVID-19. It is essential to keep up to date with these changes, and if you are unsure of your obligations as an employer, it is important to seek legal advice.
What Does the Award Cover?
Each award will cover several conditions you will be required to meet for each employee, such as:
pay: specific rates will apply to different employees, depending on their experience and duties. This will include casual loading for casual employees;overtime and penalty rates: the figure you need to pay your employees may differ if they are required to work overtime, on the weekends or public holidays; andallowances: you may be required to pay your employees for allowances such as uniform and travel.
Changes to Award Payments
The 1.75% national minimum wage increase also applies to all award wages. These increases were put into practice in 3 stages:
group 1 awards – from 1st July 2020;group 2 awards – from 1st November 2020; andgroup 3 awards – from 1st February 2021.

To find out which group your award(s) fall into, you should refer to the full list of awards on the Fair Work website.

Enterprise Agreements
An enterprise agreement is an agreement that you can enter into with your employees, allowing you to differentiate from the terms outlined in their applicable award. Moreover, the enterprise agreement covers the entitlements your employees receive, including pay rates and allowances.

This allows businesses to decide on their staff entitlements without having to navigate the award system, which can be complex and confusing.

When creating an enterprise agreement, you should be aware that:
the Fair Work Commission must approve them;they should leave the employee better off overall than they would have been under the applicable award;a majority of the employees that will be covered by the agreement must be involved in the negotiation process; anda majority of applicable employees must approve of the final agreement.
Key Takeaways
Your employees are entitled to receive the relevant minimum wage. Each employee must be either covered by: 
an applicable award; an enterprise agreement; or the national minimum wage. 
Understanding and deciding which award(s) may apply to your employees can be a complex and time-consuming process. If you would like assistance with understanding your obligations as an employer, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
What is the national minimum wage? The national minimum wage will cover your employees if there is no award or enterprise agreement in place. The national minimum wage as of the 1st July 2020 is $19.84 per hour or $753.80 per 38-hour workweek.   What is a modern award? A modern award identifies the minimum terms and conditions you must meet within a contract, including pay. Further, your employees covered by an award may be entitled to a different minimum wage and entitlements than the national minimum wage.   What is an enterprise agreement? It is an agreement between you and your employees that allows you to differentiate from the terms outlined in their applicable award. The enterprise agreement will cover your employees pay, allowances and entitlements. 

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What Happens Once My Company Is Incorporated?

Incorporating your company is crucial to beginning and growing your business. A company structure has many benefits and can be a suitable structure if you have long-term business growth plans. When you incorporate a company with ASIC, you will receive a registration certificate and an Australian Company Number (ACN). After this, there are a few essential steps to consider to begin trading and conducting your business. This article will explain what happens once you incorporate your company and the further steps you should take. 
Company Documents
When you incorporate your company, you will need to maintain a Company Register. This is a compulsory set of documents that all companies need under the Corporations Act 2001 (Cth). These documents should include:

the certificate of registration of the company;
share certificates;
a register of members or share register;
company officer consent forms;
opening meeting minutes;
a register of option holders (if necessary);
a register of debentures (if necessary);
copies of forms lodged with ASIC; and
if the company does not occupy the registered office, consent to use it.

To comply with the Corporations Act requirements, you will need to keep these documents in a safe and accessible place at the company’s registered office or place of business. They must also be available for inspection by members of the company. You must keep these documents up to date. Any changes to members or shareholders, for example, must be reflected in the company share register. You also need to notify ASIC of these changes.
At the time of incorporation, you will receive Corporate Key. This eight-digit number authorises all communications between your company and ASIC. You should keep this Corporate Key information safe with the other company documents.
First Company Meeting
The next step you should take after incorporating your company is to hold the first company meeting. There are a few essential steps to take during this meeting.
You must ensure you or the director(s) sign:

the consent form to act as director;
the application for shares; and 
record of the first meeting minutes. 

You should record the minutes of the first meeting in the minute book. Keeping a record of meeting minutes allows for ease of location if someone requests inspection later. You must record all subsequent members meetings in the minutes book.
You must collect the amount agreed upon to be paid per share. This can be a nominal amount. Additionally, you must issue receipts and note financial records of the transaction. After this, you must sign the share certificates.
You should keep all signed documents in the company register after this meeting.
Additional Registrations – ABN, TFN, PAYG. And GST
Following the incorporation of your company with ASIC, there are four additional registrations you need to consider:

Australian Business Number (ABN): Along with being issued with an ACN at the time of incorporation, you should simultaneously register for an ABN. You will need to register this if you intend to carry on business through your company. The Australian Taxation Office (ATO) requires an ANB to identify your business for taxation purposes.
Tax File Number (TFN): Your company will need to register for a TFN for tax purposes. You can register for a TFN when registering for an ABN.
Goods and Services Tax (GST): If you will be or likely to be turning over $75,000 annually, you must register for GST. You can calculate turnover on your company’s gross income, not its net profits.
Pay As You Go (PAYG): If your company is employing, you must register for PAYG. You are legally obligated to keep a portion of your employees’ payments for payment to the ATO on their behalf.

Shareholders Agreement
If there is more than one shareholder in the company, it is essential to draft a shareholders agreement. A shareholders agreement governs the relationship between shareholders and the company directors.
A shareholders agreement should include provisions which cover:

Issuing and Sale of Shares: A shareholders agreement should outline the process for issuing new shares and the sale of shareholders’ existing shares. This clause should include the method for valuing the shares and the option for existing shareholders to purchase shares first.
Directors Duties: The Corporations Act sets a range of directors duties. However, your shareholders agreement can also set out any additional duties required by your directors. These can include representing the shareholders’ interests, not causing detriment to the company, and discharging duties with care and diligence.
Shareholders and Board Meetings: The shareholders agreement should outline the issues and matters that can be decided by shareholders and by directors.
Dispute Resolution: A shareholders agreement should set out how disputes between shareholders, and shareholders and directors should be handled and resolved.

Ongoing Maintenance of Records and Compliance
ASIC and the Corporations Act require you to maintain and update company records at a reasonable time. You should keep minutes of all company meetings up to date and signed by all in attendance. Further, if any changes to shareholders or directors occur, you must update company records in a reasonable time and inform ASIC about this change to company details.
ASIC will send your company an annual statement at your annual renewal date. This date is when you incorporated your company. An annual renewal statement will include the fee for renewal of the company and your company’s current details. You will need to pay the renewal fee to ensure the company continues in operation for the following year.
Key Takeaways
As outlined above, after you incorporate your company, you should take further steps to get your business ready for trade. You should:

ensure your Company Register is up to date and in a safe place at your registered office;
hold your first company meeting;
register for ABN, TFN, GST, and PAYG if necessary;
draft a shareholders agreement; and
ensure registers are maintained and plan for annual renewal fees.

If you need assistance to incorporate a company, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on the page.

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What is a Notice to Show Cause?

Being issued with any formal legal document can be alarming. Receiving a notice to show cause is no exception. This is a formal document issued to one party in a dispute. It sets out details of an alleged offence and gives the receiving party the chance to explain itself or otherwise face some further consequences. Therefore, it is important to respond promptly and thoroughly to a show cause notice. You should also understand the implications for failing to adequately respond. This article will explain when a notice to show cause can be used and guide you through the steps to take if you receive one. 
Why Have I Been Issued With a Show Cause Notice? 
A notice to show cause may be used in a wide variety of situations, from court case proceedings to workplace disciplinary proceedings. It allows the receiving party to tell their side of the story and explain why further action should not be taken. In other words, it offers procedural fairness to the party receiving the notice.

In many cases, is an important step to attempt to avoid or mitigate the need for further legal action. 

A notice to show cause has many forms. All types have a similar effect, being some form of disciplinary process. For instance, a punishment or penalty if you do not reply within the deadline or in an adequate manner. Additionally, it is usually issued to bring a matter to a head and prompt a decisive response. 

For example, it may be issued by a court to a party for not complying with the court timetable.  

Types of Show Cause Notices 
There are a wide variety of show cause notices. Common types are set out below.
A court may issue a show cause order during proceedings. This may require one or more of the parties to justify, explain or prove something to the court. Common requests include providing more information to the judge, before deciding to issue an order requested by one party. 
An employer may issue a show cause notice to an employee concerning their conduct or behaviour. It may signal the employer’s intention to take disciplinary action if the employee does not provide suitable reasons for the behaviour. A notice usually relates to serious misconduct or matters such as workplace bullying or underperformance.
Consumer Law
Bodies that regulate consumer law, such as NSW Fair Trading, may issue a notice to any business it believes has breached consumer laws. The notice gives the receiving party the chance to make submissions to explain its conduct and potentially avoid disciplinary action. 
Regulatory bodies like the Australian Securities and Investments Commission (ASIC) and the Australian Financial Security Authority (AFSA) use notices to investigate and discipline insolvency practitioners. ASIC and AFSA can issue a notice to show cause where they have reason to believe an insolvency practitioner has breached their duties, such as by:
committing fraud or misconduct;failing to have the correct insurance; or failing to show the required skill and experience of a practitioner. 
A party to a construction contract may issue a notice to show cause. Generally, if it believes the other party has breached the contract in some way and wishes to terminate the contract. Failing to issue a notice may leave that party at risk of an unfair dismissal claim by the other party. 
Local Council
Homeowners or landowners may receive a notice from their local council about a non-complying building or structure on the property. For example, your council may issue a notice relating to a retaining wall or fence it deems hazardous. Or additionally, if you are using the building for a purpose outside any development consent. 
How to Respond to a Notice to Show Cause
Failing to respond to any type of notice to show cause will usually result in some sort of damage or penalty. You should take the following steps if you receive a notice:  
note the deadline for response: It will usually be between 14 and 28 days but may be sooner. If you cannot meet the deadline, you should contact the issuing party as soon as possible and request an extension;check the details. If any facts are not accurate, notify the issuing party as soon as possible; get legal advice if the matter is complex or has the potential to do serious damage to your business or professional standing, such as losing an insolvency practitioner licence; prepare a response: Check the requirements for responding to the notice and respond as directed. That may require additional documents as evidence or a supporting statement from any witness or other parties; challenge the notice: If you are clear that the notice was incorrectly issued or the alleged offence has not occurred, you may wish to challenge the notice. This may be included in any general submissions. However, you should read any terms carefully to confirm if a challenge is to take a different form; andgive notice of any action taken by you in response. For example, if you have arranged to have a hazardous boundary fence repaired, notify the council to inform it that you have complied with the notice. It may wish to re-inspect the property to confirm the correct action has been taken. 
Key Takeaways
Receiving a notice to show cause may be shocking. However, it also gives you an essential ‘heads-up’ of a potentially damaging claim. Further, it provides the opportunity to respond and tell your side of the story. If you fail to respond to a notice, the resulting penalty may be more damaging. You should take any notice seriously and should respond quickly and thoroughly. If you have any questions about a notice to show cause, contact LegalVision’s litigation lawyers on 1300 544 755 or fill out the form on this page.  
Frequently Asked Questions
What is a notice to show cause? A show cause notice is a formal document given to a party in a dispute. It outlines the details of the alleged offence and gives the receiving party an opportunity to explain themselves.  What will happen if I do not respond to a show cause notice? If you do not respond to a show cause notice, you may face consequences such as some sort of damage or penalty. Therefore, you should always note the deadline for a response to ensure you do not miss the response date. What should I do if I have been incorrectly delivered a show cause notice? You may challenge the notice to show cause. You can do this if you are certain that the notice was incorrectly issued or the alleged offence has not occurred. 

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What Happens if My Company Does Not Qualify for the Startup ESS Scheme?

As a startup owner, you may wish to incentivise your employees with equity. To do so, you should find a plan that minimises your employees’ tax consequences. Likewise, you want to minimise the amount that your employees must pay upfront for that equity. Although the startup ESS scheme addresses these needs, only startups who meet certain eligibility criteria can access these rules. This article sets out some alternatives to the ESS scheme that your startup may consider if it does not qualify. 
This article is Part 2 of Alternatives to Startup ESS Tax Concessions. You can read Part 1 here.
Startup ESS Tax Concessions 
One of the most common ways startups and early-stage companies will offer their staff equity is using an option plan or share plan. These schemes are compliant with the Australian Taxation Office’s startup tax concession rules. 
Your startup must first meet certain eligibility criteria before it can use an option plan or share plan. If eligible, your startup may also rely on certain valuation methodologies. These are known as the ‘safe-harbour valuation methodologies.’ The result is that your employees can pay a low price for their options or shares. Likewise, your employees will only be taxed when you make a financial gain from your equity interest (usually when selling that interest).
You can read more about the ESS tax concessions rules in our Employee Share Schemes guide. 
However, startups can only rely on these rules if they meet the relevant eligibility criteria. It may be the case that your startup is not eligible because it fails to meet one or more of the requirements. For example, your company may not qualify because it was incorporated more than ten years ago. As such, your company may have to consider alternatives to the ESS scheme discussed below.
Premium Priced Option Plan
A premium priced option plan involves the company issuing options with an exercise price. The price is usually sufficiently above the market value of the underlying shares. This will result in the options having no intrinsic market value. Hene, the value of the options for tax purposes is nil.
Your tax advisor can help you determine the appropriate exercise price following the relevant tax rules to obtain a nil valuation for the options. 
One issue is that the 12 month holding period to access the capital gains tax (CGT) discount restarts when you exercise options. Hence, employees may not want to have a long vesting period which delays their ability to exercise their options.
You will need to consider the potential exercise prices under a premium priced option plan. Ask yourself whether such prices are financially feasible for your employees.
Limited Recourse Loan Plan
Under a limited recourse loan plan, you provide employees with a limited recourse loan to acquire shares at their market value. You can apply any dividends which your employees pay on those shares against the outstanding loan balance.
If a liquidity event occurs (for example, an IPO or a trade sale), or if the employee ceases employment, the employee must either:
forfeit the shares; orfully repay the outstanding loan balance (in which case, they can retain the shares).
Suppose the employee is an existing shareholder. You will need to consider that private companies’ loans to their shareholders may be treated as a dividend for income tax purposes. You will also need to consider whether the loan to the employee will give rise to fringe benefit tax issues.
A key consideration is that your employees obtain all their shares upfront under a limited recourse loan plan. This is unlike an options plan. As such, be aware that your employees will have full legal ownership of their shares. Further, they will be entitled to exercise their share rights (subject to the terms of the company’s constitution or shareholders agreement).
Partly Paid Share Plan
A partly paid share plan involves your startup or company issuing shares to an employee at the shares’ market value. However, the shares are partially paid. Hence, your employees do not need to pay the full value upfront).
The employee is liable to your company for the unpaid balance on the shares. Any dividends paid on the shares can be applied against the outstanding amounts on the shares.
As with the limited recourse loan plan, under a partly paid share plan, the employees obtain all their shares upfront. Therefore, they will have full legal ownership of their shares and be entitled to exercise their share rights. Again, this is subject to the terms of your company’s constitution or shareholders agreement.
Key Takeaways
Some alternatives to the ESS scheme are premium priced option plans, limited recourse loan plans and partly paid share plans. Suppose you intend to issue equity to employees using a plan which does not rely on the startup tax concessional rules. In that case, you must obtain tax advice because different equity plans will have different consequences for income tax, CGT and fringe benefit tax. These rules are complex. Ensure you understand the different implications of these plans on your company before proceeding with any.
If you would like to discuss startup option or share plans, contact LegalVision’s startup lawyers on 1300 544 755 or fill out the form on this page.

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What Is a Deed of Release and When Do I Need One?

If you are an employer, protecting your business and taking care of your employees is a priority. If you want to settle a dispute with an employee or formalise the end of an agreement that has not yet come to an end, you might start thinking about taking legal action. However, legal proceedings can be quite expensive and time consuming. You might first consider settling disagreements or disputes with a commercial solution. If you do so, you will want to document the decision using a deed of release.
This article will:
explore situations where you would need a deed of release; and cover some of the key considerations to think about before using this deed.
What Is a Deed of Release?
A deed of release is a legally binding document used to formalise the end of an agreement or settlement between different parties. When you sign a deed of release, you are agreeing to bring a dispute or agreement to an end. A deed of release is commonly used in the employment setting but it can be applied in other commercial arrangements.
It is very important that both you and your employees understand:
what you are signing; and the obligations you will face. 
When Will I Need a Deed of Release?
Employment Contract
You may find yourself in a position where you have to make the tough decision of ending the employment of a staff member. In this situation, you can provide your employee with a deed of release which notes the specific terms that end the relationship. This can prevent any further claims from arising from your employment relationship and “releases” you both from further obligations. Remember, you cannot force your employees to sign this deed or to get out of any obligations that you legally owe to an employee (e.g. redundancy payment). 
A deed of release will be especially important where your employee:
is claiming they have been unfairly dismissed; orhas made allegations about you in the workplace following their termination.
In these situations, you could consider providing your employee with a deed to prevent your employee from filing claims with the Fair Work Commission or commencing other legal proceedings. The deed should be carefully drafted to state that your employee “releases” you from any future claims in relation to their employment or the termination. 
By signing the deed, the employee can: 
agree to release your company from any claims they have made; and indemnify you in respect of any damage that resulted from these claims. 
You can also agree with the employee not to make any new claims. The deed will also set out the value of any payments you owe your employee (and additional benefits that you want to include) in exchange for signing the deed. 
For example, you could offer your employee an additional ex-gratia payment on top of their outstanding entitlements as incentive for them agreeing to sign the deed.
Dispute Between Employer and Employee
You may find yourself in a position where your employee has commenced court proceedings following:
a disagreement or allegation that occured in the workplace; or termination of their employment.
In this case, a deed will be useful where the employee agrees to discontinue any court proceedings that they have commenced against you. You can enter into a deed with the employee, agreeing to stop any current or new proceedings in exchange for a commercial settlement.
How Do I Get a Deed of Release?
It can be tempting to download a template deed of release off the internet, but a deed of Release is a legally binding document. As such, it is best to have a lawyer carefully draft and review the deed before you sign it. Your lawyer will draft it to include the provisions that you and your employee have discussed. Your lawyer will also draft the deed in such a way to protect you and your business from any ongoing issues concerning the employee involved.
Franchise Agreement
You can also use a deed of release outside this context. A deed can also be used where parties to a commercial agreement wish to finalise a contract that has ongoing obligations on those parties. A good example is when the term of a franchise comes to an end. As a franchisor, you could enter into a deed of release with the franchisee to release you both from any obligations and claims you may have against each other. You should enter into this deed before you enter into a new Franchise term.
What if My Ex-Employee Breaches the Deed of Release?
There are several ways your ex-employee can breach the deed. These include:
breaching a confidentiality clause within the deed; and commencing new proceedings after agreeing that they will not file any more proceedings against you.
If your ex-employee breaches a confidentiality clause, you may get court orders to stop the person from disclosing any further confidential information. You may be entitled to compensation for any loss or damage resulting from the disclosure of confidential information. If the employee has kept any confidential information, you may also get a court order to return this information.
After the employee has signed the deed, it will be difficult for them to try to commence proceedings. You can use the deed to stop the employee commencing any new proceedings.
Key Takeaways
You may think that a deed of release is an unnecessary document, and that a simple written agreement between you and your employee is sufficient. However, a deed of release is a legally binding document. Therefore, using one provides you and your business with significant protection and certainty that your employee will not renege on their promises. If you have any questions regarding Deeds of Release, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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Can I Exclude the Consumer Guarantees?

The consumer guarantees in the Australian Consumer Law (ACL) give consumers access to a detailed list of rights for the goods and services they buy. You must not exclude consumer guarantees. Consumer guarantees are the basis for consumers to access a remedy when goods or services do not meet their expectations. This article provides an overview of how the consumer guarantees operate.
How Do I Provide a Guarantee to My Customers?
The ACL consumer guarantees automatically protect your customers or clients. Consumer guarantee rights exist regardless of any warranty you provide in relation to: 

goods you sell, lease, or hire; or 
services you provide.

The ACL consumer guarantees cover goods and services which are sold to consumers in trade or commerce. Trade or commerce means in the normal course of a supplier or manufacturer’s business, including a not-for-profit organisation or activity. A person who buys goods or services is a consumer if the:

goods or services cost less than $40,000 (or any future amount the ACL determines);
goods or services are more expensive than $40,000 but are used for personal, domestic or household purposes; or
good is a vehicle or trailer used primarily for transporting goods on public roads, irrespective of the cost.

The consumer guarantees also safeguard second-hand, leased or hired goods.
What Are the Consumer Guarantees?
There are nine guarantees relating to goods and three which are specific to services.
If you are selling, leasing or hiring goods, you must guarantee that goods meet the following guarantees:

When sale takes place the goods are of acceptable quality. ‘Acceptable quality’ is what a reasonable consumer, fully aware of the goods’ condition, would think taking into account the nature, price, any statements about the goods on any advertisement or packaging and any representations you have made about the goods. The reasonable person must find the goods fit for all common purposes, acceptable in appearance, free from defects, safe and durable.
Description of goods prior to sale is accurate. 
You must honour any promises or express warranties relating to the goods, such as performance or characteristics.
The goods are to be fit for any purpose disclosed by the seller or the buyer. It is reasonable for consumers to often lean on the know-how and expertise of the sales person. Goods must be fit for the purpose the consumer discussed with the seller prior to purchase.
The goods must accurately match any description, sample or demonstration provided. The consumer is allowed reasonable time to assess the goods in comparison with the sample.
Goods are sold with clear title, unless otherwise specified, meaning that the seller has the right to sell the goods.
No other party will attempt to repossess, take back, or prevent the use of goods purchased by a consumer.
Goods are not subject to undisclosed securities or charges.
The manufacturer of goods guarantees that repairs and spare parts will be available for a reasonable timeframe.

Where you provide services, you must guarantee that you provide your services: 

with due care and skill;
so as to meet for any stated purpose; and 
within a reasonable time.

What if I Fail to Meet a Consumer Guarantee?
If a good or service you provide fails to meet a consumer guarantee, you must provide a remedy to fix a fault, deficiency or failing to meet an obligation. A remedy might include:

a repair, replacement or refund;
service cancellation; or
compensation for damages and reasonably foreseeable consequential loss.

Consumers may ask you for a remedy directly or a consumer protection agency may take action against you on behalf of consumers.
What Can I Say to My Customers About Consumer Guarantees?
Neither you nor anyone who works for your business may exclude, limit or modify the guarantees in the ACL. You should not ask:

consumers to agree to surrender their consumer rights; or 
to apply the law of another country to the sale or provision of your goods or services.

Take care with what you say to consumers when producing signs, advertisements or other documents. Certain signs or notices, such as ‘no refunds’, may be unlawful. This is because they limit, or are seen to restrict, the consumer guarantees.

For example, a ‘no refunds’ sign suggests that a refund is not available in any circumstance. However, the consumer guarantees mean that a refund may be available if there is a major problem with the goods. A better sign might say, ‘no refunds for change of mind’.

You might like to alert customers of their rights to the consumer guarantees at your point of sale counter or reception desk. The state and territory consumer protection agencies and the Australian Competition and Consumer Commission (ACCC) encourage businesses to display a sign they jointly developed informing consumers of their rights and remedies under the ACL.
If a consumer takes you to court, you may receive an order to pay a monetary penalty. If the court finds you provided false or misleading information about consumer guarantees, the maximum payable amount at time of writing is: 

$1.1 million for a body corporate; and 
$220,000 for an individual.

Key Takeaways
It is important to understand your responsibilities to the consumers you interact with. The way in which the consumer guarantees affect you will vary depending on the nature of your business. Failing to meet the consumer guarantees can be costly and negatively impact your business’ reputation. Make sure you seek appropriate legal advice and comply with the consumer guarantee requirements. If you need advice on how to comply with the consumer guarantees, contact LegalVision’s regulatory and compliance lawyers on 1300 544 755 or fill out the form on this page. 

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Acceptance Testing in Information Technology Contracts

If you want to ensure that an IT product you are purchasing is up to scratch, you can use acceptance testing. The type of testing you should use will depend on your circumstances. This article looks at what acceptance testing is, why it is important and what to look out for in your IT development contracts. 
What is ‘Acceptance Testing’? 
Acceptance testing is testing used to determine the acceptability of a product based on the agreement between the parties. 
Generally, if a product is found not to be acceptable, the customer has a right to ask the developer or seller to repair or modify the product so that it is satisfactory. 
Types of Acceptance Testing
There are lots of different types of testing which focus on various issues, including: 
user acceptance testing. This is testing by you, the end-user, to determine whether the product works and does what was agreed without faults or issues. The purpose of these tests is to replicate the intended use of the product. This will verify that it is fully functional and complies with the agreed specifications;    business acceptance testing. This is testing to see whether the product will meet the business’ needs; contract acceptance testing. This as the name suggests, is testing to ensure that a product meets all of the requirements in a contract; regulation acceptance testing. This is testing to ensure the product meets certain regulatory requirements. This kind of testing may check whether certain safety features or quality controls meet the mandated government specifications; andoperational acceptance testing. This is testing to determine operational readiness. It might include testing recovery, reliability and technical support availability.
There is also:
alpha testing, which is testing by the developer to identify all possible bugs and issues before the release of the final product to the customer; andbeta testing, which is testing performed by real users in a real environment. This is considered a form of user acceptance testing, and it enables developers to collect direct feedback from customers. This is very valuable.
Why is Acceptance Testing Important? 
When you buy an item of office furniture you can see straight out of the box that it is the wrong item or the wrong colour. It can be hard to tell whether an IT product (such as software) does what it says on the tin and is fit for purpose. Acceptance testing is a way to get some certainty around this. 
How important testing is, and how involved the testing should be, depends on how business critical the IT product is. You should keep in mind that a poorly functioning system can be expensive to fix. Make sure you consider the costs of downtime. It can also affect your reputation with customers and can get you into trouble with the regulators. This often occurs where it causes gaps in information, deficient records etc.  
Key Contract Considerations
If acceptance testing is important in relation to an IT product purchase, an acceptance testing clause must be clearly set out in your contract. This clause will outline what testing needs to take place and how it will occur. Below are some points to keep in mind at the contract negotiation stage: 
Your Needs and Concerns
Your needs and concerns will drive what should be tested and how. If you are concerned about: 
the technical specifications of the product, for example, how fast it processes data. Then, it may make more sense to agree in advance on the tests that they need to run and provide performance reports on;  how secure the product is. Then, you might want to include a requirement in the contract that the supplier ensures the product is tested by an independent and qualified security specialist. We recommend as a  requirement they provide you with the report produced as a part of this testing; orhow the product looks and feels and whether it has all of the agreed features. Then, end-user or beta testing will be most appropriate, as you will be the best person to confirm this.
You will want to make sure that the type of testing, who does the testing and the process for testing, reflects your needs and takes into account your concerns. 
What Happens if Acceptance Testing Fails?
Do you want a right to repairs or modifications? Do you want to be able to reject the product entirely or to reject it if the issue can not be fixed? Which option or combination of the two is better will depend on your circumstances. It may also depend on the product, the kind of defect and the severity of the defect. 
Time Sensitivity 
If time is important to you, ensure there are clear timeframes in your acceptance testing clause. The clause should set out when the product should be ready for testing, how long they have to do the testing and where they are doing the testing. It should also state how long they have to fix any issues and conduct subsequent testing. 

For an early indication of whether the product is going to be appropriate for your purposes, you can consider building in the testing of certain features earlier on in the development process. 

Quality of The Scope And Specifications
Acceptance testing, by its very nature, is testing against an agreed standard. As a result, your scope and specifications must be complete and sufficiently detailed. 
You must set out in the contract any particular use or specific features you had in mind. This will allow acceptance testing to pick up that they are not there or not performing as intended. We recommend including a combination of specific and outcome focussed requirements to ensure that the product meets your expectations. 
Naturally, where you are buying something off the shelf, you may not have a say as to the specifications. Instead, the testing will be more focussed on ensuring that the product meets the provided specifications and representations made to you. Wherever possible, you should get these in writing and make certain they form part of the contract.
Decide What You Are Willing to Accept
Sometimes the benefit of acceptance testing is in knowing that there is a defect and what it is. That way, you can decide what to do about it. 

For example, some acceptance test cases might reveal a glitch. If the glitch is not vital to use but time is critical, you may decide to accept the product on the condition that the supplier provides a patch within the next couple of days.

Alternatively, knowing a defect exists and what it is may give you the leverage to negotiate a price discount. 
Key Takeaways
Acceptance testing can seem daunting as there is a lot of technical jargon that goes with the territory. Therefore, we recommend having a think about your needs and your key concerns. Let this be the focus of any testing contract requirements. 
Acceptance testing clauses are often undervalued and can have a huge impact on the success of your business. If you have any questions or would like to know more about how acceptance testing works or what should be included in your contract, please get in contact with LegalVision’s information and technology lawyers on 1300 544 755 or fill out the form on this page. 
Frequently Asked Questions
What is acceptance testing? It is testing used to determine the acceptability of a product based on the agreement between the parties. There are many different types of acceptance testing that focus on different issues so you must choose the type most suitable in your circumstances. What is an acceptance testing clause? This clause will outline what acceptance testing needs to occur and process for how it will take place. It should be clearly outlined in your contract. What happens if acceptance testing fails? If the acceptance testing fails then you may have a right to repairs or modifications. Alternatively,  depending on the circumstances, you could be able to reject the product entirely if the issue can not be fixed.

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How Can I Conduct a Wage Audit For My Business?

Significant media coverage of widespread underpayments has highlighted its financial and reputational risk. To address this, you should conduct a wage audit to understand the applicable minimum pay rates and employment conditions. This will assist in identifying and rectifying any past underpayments as well as ensure compliance moving forward. If you choose to voluntarily disclose underpayments to the Fair Work Ombudsman, this may also reduce the risk of prosecution by the Fair Work Ombudsman. It could also speak to the question of penalty if prosecuted. Conducting a wage audit is a substantial and complex exercise, and this article provides an overview of how to conduct a wage audit.
Does an Enterprise Agreement Cover the Employee?
Enterprise agreements (EA) are collective agreements between an employer and employees that modify employment terms that otherwise apply. EAs are typically introduced because they are simpler to administer than modern awards but must be beneficial to employees by adhering to the Better Off Overall Test. Employers who breach an EA commit an offence under the Fair Work Act (Cth). 
Does an Award Capture the Employee?
Many underpayments stem from employers incorrectly interpreting awards, applying the wrong award or ignoring awards altogether, so it’s important to get award coverage right. Modern awards are quasi-legislative instruments which set out minimum pay rates and terms of employment such as:
minimum rates; overtime; penalty rates;loadings; allowances; and the right to the consultation if a major workplace change occurs, such as a redundancy. 
If employees are award-covered, employers must comply with the terms of the award failing which they commit an offence under the Fair Work Act 2009 (Cth).
There are over 120 awards to consider, and each includes a ‘Coverage’ clause setting out the scope of the award. You should consider the specific language of each ‘Coverage’ clause, although typically, there are three parts to a ‘Coverage’ clause:
the type of employers which is specific for industry awards and broad for occupational awards; which employees generally by reference to the classifications; and any exclusions.
Industry vs Occupational Awards
Employees are covered by an award if they work within a particular industry or if they have a particular occupation.
For example, the Fast Food Industry Award 2010 is an industry award which covers employers throughout Australia in the fast-food industry. In comparison, the Clerks Private Sector Award 2010 is an occupational award that covers employers in the private sector throughout Australia regarding their employees engaged wholly or principally in clerical work.
Classifications set out a non-exhaustive list of criteria to determine employees’ appropriate level based on longevity, qualifications, and duties. Applying the correct classification level to each employee is important because:
if the classifications do not capture an employee, the award may not apply. For example, this could occur if the employee is more senior than the highest level set out in the classifications; and it will determine the employee’s entitlements, including their rate of pay.
When it is unclear which classification applies, the more prudent approach is to apply the more senior classification level to avoid underpayment.
‘Coverage’ clauses typically also include exclusions. Such exclusions may assist with overlapping awards. 
For example, this may be where an occupational and an industry award may apply. The Clerks Private Sector Award 2010 says “the award does not cover: (a) an employer bound by a modern award that contains clerical classifications”. On that basis, if an employee performed clerical duties in the health industry as defined in the Health Professionals and Support Services Award 2010, this award would likely apply as it includes clerical classifications.
Another example is where there may be overlap between two industry awards. The General Retail Industry Award 2010 specifically excludes employees who are otherwise captured by the Fast Food Industry Award 2010.
An Award Captures the Employee. Now What?
Each award provides additional entitlements to employees, and you should review the applicable award in detail to determine these. Some of the common terms relevant to underpayment include:
minimum rates as set out in the award and the corresponding pay guides; entitlements specific to their type of employment. For example, if they are casual, they may have minimum shifts (e.g. 4 hours); overtime, where they receive an additional rate to their base rate for hours worked that qualify as overtime. Each award defines overtime differently to be coherent with the industry. For example, in the Clerks Private Sector Award 2010, overtime includes (but is not limited to) work performed outside the ordinary hours of work which are 7.00 am to 7.00 pm Monday to Friday and from 7.00 am to 12.30 pm Saturday; penalty rates: an additional rate to their base rate for hours worked on Saturdays, Sundays or public holidays; leave loading which entitles employees to an amount (typically 17.5% of their base salary) during periods of annual leave in addition to their base salary; and allowances, such as a travel allowance, a tool allowance or a uniform allowance.
Considering the employee’s entitlements, you should consider employees’ rates including because they increase each year. You should also review rosters that you use, which may inadvertently create rights to:
minimum lengths of engagement; overtime; or  penalty rates which you are not paying.
Is the Employee Award-Free?
If no EA or award applies, then the employee is award-free. Here, the National Employment Standards in the Fair Work Act 2009 (Cth) apply with respect to:
leave entitlements; and  minimum wage.
There are no requirements with respect to:
overtime; penalty rates; loadings; allowances; or consultation, as is the case in awards.
However, this does not eliminate the risk of underpayment. You need to consider the minimum wage and whether the hours worked over 38 hours per week for a full-time employee or over the agreed part-time hours are reasonable given the nature of the role, wage and circumstances.
Is There an Underpayment?
Once you have determined the employee’s entitlement under an EA, an award or the National Employment Standards, conduct wage audits. You can do this by comparing what they are entitled to with the actual payment made to the employee and determine whether there is an underpayment or not.
Key Takeaways
Conducting an internal audit, without an external auditor, is a complex and involved exercise which requires the employer to determine the source of each employee’s entitlements. Specifically, determining award coverage and how the award applies can be a headache. However, once all entitlements are determined and compared with actual payments made to the employee, you will have clarity on any liability. You can take informed steps to conduct a wage audit and resolve any underpayment. If you have any questions about conducting a wage audit, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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What To Do If You Identify Wage Underpayment

As an employer, you may identify areas of non-compliance, such as finding out your business has underpaid employees. If so, you need to manage this issue promptly and correctly. There is not only money at risk, but also potential damage to your business’s reputation and the morale of your employees. This article explains the steps you can take after identifying an underpayment.
Calculate the Amounts Precisely
Once you have identified an issue with underpaying your employees, you need to accurately calculate the underpayment amount. You can either:
calculate the amounts internally; or engage forensic accountants to conduct a comprehensive external audit.
An employment lawyer can also help you interpret any modern award or enterprise agreement that applies to your business. They can also confirm the entitlements that you owe to your employees. Involving forensic accountants or employment lawyers is likely to be more expensive than conducting an internal review.
However, it has the benefit of being an unbiased and reliable examination of your historical and current records. An external audit can also help to validate your calculations of underpayment amounts.
Steps For Calculation
Work Out the Duration of the Underpayment
Your employees may have been underpaid for a single pay period, or for months or even years depending on how long the employee has worked for you and when the mistake occurred. Depending on the reason for the underpayment, you may need to review your employees’ pay records for a short period or the entire period of employment.
You can check the pay records for a short period of employment if you know the exact duration of the underpayment and are confident that you paid your employees correctly during the rest of their employment.

For example, you may identify that an underpayment occurred because of a single payroll error, and therefore you only need to check that pay period. A payroll error can arise due to:

computer or human error;
paying the wrong number of hours;
not applying penalty or overtime rates; and
not paying entitlements such as leave or allowances.

You may also discover that you missed a pay increase from a specific event or change in your employees’ conditions. In this situation, you can review the pay records starting from the date of the change. Events that can result in a pay increase include:
an increase in the national minimum wage; your junior employee has a birthday; your employee’s duties or responsibilities change; the employee obtains a job-related qualification; and your apprentice or trainee completes their course and moves to the next pay level.
You will need to check the pay records for the entire period of employment if you paid your employees less than the minimum pay rate and you’re not sure how long you may have underpaid them for.
Work Out How Much Your Employees Should Have Been Paid
You can determine how much your employees should have been paid by reviewing the number of hours worked by the employees (including the times and days that those hours were worked) during the underpayment period.
You should also check if your employees were entitled to any other entitlements, such as: 
penalty rates; overtime; allowances; leave payments; and leave loading.
You will need to consider if there are any additional tax and superannuation that should have been paid during the underpayment period. 
Work Out How Much Your Employees Were Actually Paid
Work out how much your business paid employees during the underpayment period by reviewing your payslips and pay records. The relevant amount is the gross amount before deducting tax. It is not the amount that your employees received in their bank account.
Calculate How Much Your Employees Have Been Underpaid
The underpayment is the difference between the amounts you calculated in steps two and three.
Fix Systems to Ensure No Further Non-Compliance
Your internal and external audits into the underpayments will help identify the root causes of the issue.

For example, you may discover that you have misinterpreted the modern award or enterprise agreement that applies to your employees. You might also discover that you have not kept accurate and clear time and wages records for your employees.

You will need to rectify these sources of underpayment and implement changes to processes or systems that may have contributed to the issue to prevent further non-compliance.
An ongoing automated system (such as payroll and workforce management software) can help you to maintain employee records and make discrepancies easier to see and rectify. 
However, you should not over-rely on technology, and you need to ensure that the systems are configured and updated correctly. Payroll systems can become outdated and incapable of identifying infringements of entitlements.

For example, when pay rates change or actual hours worked by your employees deviate from the roster and aren’t recorded.

You can use the following (non-exhaustive) checklist to help review and improve your systems. Here, you should check whether you:
have adequate payroll processes and internal controls to ensure there is one source of truth and limited re-inputting of data; have good timekeeping practices; undertake regular audits of workplace compliance; have up to date payroll systems and record-keeping procedures; have human resources and payroll staff adequately trained and resourced; established easy and clear methods for your employees to communicate suspected issues with you; have subscribed to Fair Work’s email updates to stay informed about annual minimum wage increases and changes to modern awards; have made notes in your calendar regarding increases in pay for your employees, such as junior birthdays or yearly apprentice progression; and have kept employee records for at least seven years.
Remediate and Back Pay the Amounts
You need to back pay your employees as soon as possible after calculating the underpayment amounts. You can make the back payment as part of the normal pay cycle or as a separate payment, and it must be recorded in your employees’ pay records.
If you cannot afford back paying your employees in a single payment, you can negotiate a payment plan with your employees to pay the amount over a few weeks or months. The agreed payment plan should be written down and signed by you and your employees.
Notifying the Fair Work Ombudsman (FWO)
You are not required to notify the FWO of the underpayment. However, disclosing the issue to the FWO can be an important step to rectify the underpayment and advise the FWO that you are taking steps to correct your mistakes. 
 The FWO may choose to investigate the matter if it involves serious issues or is in the public interest, even if your affected employees have been repaid. 
The FWO’s powers of investigation include: 
entering your premises; interviewing any person (with their consent) about the suspected issue;  requiring you to produce records or documents such as rosters, timesheets and payslips; and inspecting records and documents.
The FWO has a range of enforcement options for non-compliance, including to:
ask you to enter into an enforceable undertaking (a written agreement) to agree to fix the underpayment and commit to future compliance measures. Such as, to implement a new payroll system, to apologise to your employees, and to continue self-auditing your pay in the future; issue you a compliance notice to rectify the issue and provide evidence of compliance; issue you an infringement notice (similar to an on-the-spot fine); require you to attend training on compliance with applicable workplace laws; require you to publish a written public apology; and commence legal proceedings to prosecute you and obtain a penalty.

The maximum penalty for each breach of the Fair Work Act for a body corporate is $63,000 or $630,000 for a serious contravention. A serious contravention occurs when you know that you are breaching workplace laws, and the contravention was part of a systematic pattern of conduct.

Notifying the FWO of the underpayment is not a legal requirement and will not necessarily protect you from the FWO enforcement action or commencing legal proceedings. However, it may reduce the risk of prosecution and the penalty amount.
Internal and External Communication
The way you handle communication of the issue will depend on the scale of the underpayment. The communication process will be different if you only underpaid a few employees and have rectified the issue quickly with systems established to prevent it from happening again, compared to identifying underpayments of hundreds of employees or millions of dollars.
You can consider communicating with the entire business, not just your affected employees, that you have discovered a potential underpayment and that you are working on back paying the amounts owed to those impacted.
You can also take a proactive approach to handle public relations by releasing a public statement to take responsibility for the issue and your plan to remediate before a third party breaks the news.
Honest and transparent communication of inadvertent underpayments can improve the trust of your employees and the public in your business and reduce negative media scrutiny. The communication should be ongoing until the issues are fully resolved.
Key Takeaways
A proactive approach to dealing with an underpayment issue can help minimise the potential financial and reputational damage to your business. After you have identified an underpayment, you need to calculate the underpayment amount internally, or you can enlist the help of a forensic accountant or employment lawyer. You need to back pay your employees as soon as possible and establish a plan to fix your systems to prevent any further non-compliance.
You should also carefully consider how to communicate the issue with your employees and the public. While you do not have to notify the FWO of your underpayments, but taking this step can show the FWO that you are taking the matter seriously. The FWO has broad powers to monitor and investigate non-compliance, and a range of enforcement options. If you have any questions about dealing with an underpayment issue, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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What is a Managing Contractor Model?

If your business is thinking of undertaking a construction project with a high level of complexity or an uncertain scope, you may want to consider engaging a skilled contractor involved early on in the project, known as a managing contractor. Using a managing contractor model can save costs if complicated design issues are resolved towards the beginning of a project. This article explores:
what the managing contractor model is;how it differs from traditional construction models; andwhen it is the right fit for a particular construction project.
What Is a Managing Contractor Model?
The managing contractor model is a procurement method that has been traditionally used for government construction projects. The model involves a principal (or client) engaging a highly experienced contractor from early in a project. They then collaborate with the management contractor throughout all stages of the project, including the feasibility, design, procurement and construction. The model allows for the principal to obtain the contractor’s input on design related items, and collaborate with design consultants engaged on the project, including:
architects; andengineers.
When it comes time for construction, the contractor is responsible for engaging its own subcontractors to carry out the construction works. This contractor, however, typically takes on more of a project management role, as opposed to carrying out the works itself. The principal controls choosing which subcontractors the managing contractor engages.
The scope of the managing contractor’s engagement will depend on the project. It can include involvement in the following stages:
feasibility: the managing contractor may coordinate a feasibility study in relation to the proposed construction project. This can involve engaging a design team and providing advice to the owner on the viability of the project;design: the managing contractor will usually prepare a design brief and tender out the design work. The owner is involved in approving designs and tenders;construction: the managing contractor will manage the tender process for subcontractor worker. They will then engage them directly for the construction work, supervise the construction works, and manage construction costs; andcompletion: the managing contractor will coordinate the final handover of the project. It also ensures its subcontractors rectify any defects during the defects liability period.
How Does This Differ From Traditional Procurement Models?
The managing contractor model varies from traditional procurement models (including design and construct engagements) in a number of ways. This model is similar to a design and construct model, in that the managing contractor takes on the legal responsibility for the design and construction of the project, but it differs as their key role is to be a project manager. They also have less exposure when it comes to time and cost than a design and construct contractor.
Stage of Engagement
The managing contractor is engaged much earlier than a design and construct contractor. In contrast, they would typically be engaged only once the design brief has been prepared.
When it comes to selecting subcontractors, the principal will be able to make the ultimate decision on which subcontractors are engaged under the managing contractor model. This is not always the case in a design and construct engagement. 
Cost Risk
Unlike design and construct engagements, which are more often than not on a lump sum basis, the managing contractor will typically be reimbursed for amounts it incurs in engaging subcontractors. We discuss this further below. 
Time Risk
Under the managing contractor model, there will often be a targeted date for completion. For the most part, the managing contractor will not be liable for failing to complete the project by this date.
This contrasts with a design and construct engagement. Here, the contractor will may liable for liquidated damages if it fails to complete the work on time.
What Is the Cost Structure?
The cost structure under the managing contractor model is a mix of fixed amounts or rates and reimbursements. The managing contractor will usually receive a fixed price for the project management services it carries out and any facilities that it sets up on-site.

For example, a site office.

The managing contractor will then receive reimbursement for the amounts its subcontractors or consultants receive (provided that they are reasonably incurred). There are certain restrictions on costs that the managing contractor can incur. This effect of the cost structure is that the cost risk is ultimately borne by the principal.
What Are the Advantages of This Model?
The model is appropriate for projects involving complex design issues, where input from an expert design and construct contractor will assist in identifying issues and attempting to establish solutions early on in a project timeline. It can result in innovations and alternative ideas that can result in cost and time savings when it comes to the construction phase. 
The level of control over the selection of subcontractors throughout the tender process is a further advantage for a principal.
The model is collaborative in nature. Given that the contractor is not solely responsible for time and cost risk, it generally attracts high quality and reputable contractors. It also can generate increased cooperation and less antagonism between the principal and the managing contractor than a traditional construction model.
What Are the Disadvantages of This Model?
As mentioned above, the cost and time risks generally shift to the principal. This model is not suitable where a principal wants certainty on time and cost, or for projects where the scope of work is relatively uncomplicated.
Key Takeaways
A managing contractor model is a method of procurement common in government and complex private-sector construction projects. The model allows for the early involvement of a design and construct contractor in the feasibility and design stages. The principal retains a considerable amount of control during the project, including to approve designs and the engagement of subcontractors by the managing contractor. However, the principal bears the time and cost risk on the project. If you have any questions about the managing contractor model, contact LegalVision’s construction lawyers on 1300 544 755 or fill out the form on this page.

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What Are The New Unfair Contract Terms Reforms?

In November 2020, the federal Treasury announced that the Unfair Contract Terms laws would undergo significant reform. This announcement followed on from a meeting of the Ministers for Consumer Affairs, who agreed that consumers needed increased protection. 
The Unfair Contract Terms laws protect consumers and small businesses from unfair contract terms. The laws apply to standard form contracts, where consumers or small businesses cannot negotiate the terms. For example, when a consumer must click ‘I agree’ to the terms of an online purchase.
The anticipated reforms will expand who the laws apply to and allow courts to issue severe penalties for non-compliance. 
The draft legislation for the reforms is expected in the first half of 2021. As a small business owner, you need to be aware of the changes so you can ensure that your contracts are compliant, or you will risk severe penalties. This article explains the:
current legislation;forthcoming changes; andtheir implications for businesses.
Current Unfair Contract Terms Laws
Under the current laws, standard form contracts cannot contain unfair terms. If they do, a court can decide that the unfair term can be ignored and not enforced by the business that imposed it.
The Unfair Contract Terms laws apply to standard form consumer contracts and small business contracts. Consumer contracts are contracts for products, services or land acquired for personal, domestic or household use. Small business contracts are contracts where small business owners are likely to be involved, and where the upfront price payable under the contract is no more than $300,000 (or $1 million if the contract is for more than 12 months). 
Under the current laws, a term may be unfair, and therefore unenforceable, if:
the rights and obligations are significantly imbalanced;it does not protect both parties and their business’ legitimate interests; or it could cause either party’s business damage.
Some standard unfair contract terms include:
the contract renewing automatically, without approval;unilateral rights to change the contract without notice or negotiation; andindemnities or limitations of liability that are one-sided in favour of the business issuing the contract. 
What Reforms Are Expected To Unfair Contract Terms Laws?
The timeframe for the reforms is not yet confirmed. However, it is essential to know what the reforms include to ensure your business is ready. You can also avoid reputational damage and the risk of going to court by ensuring your contracts are fair.
What is a Small Business?
Under the changes, the definition of a small business will change. As a result, the number of businesses eligible for compensation will increase significantly. Under current law, a small business has fewer than 20 employees; this will increase to businesses with fewer than 100 employees. The laws will also introduce an annual turnover threshold of less than $10 million to replace the upfront contract price thresholds of $300,000 upfront or $1 million if the contract is for more than 12 months. These price thresholds will no longer apply.
What Remedies are Available?
A remedy is a consequence that a business faces for having unfair contract terms in their standard form contracts. This consequence is usually in the form of a financial penalty.
Currently, courts are unable to discipline businesses that breach the Unfair Contract Terms laws. Under the new reforms, courts will have the power to impose consequences such as significant civil penalties.

These are likely to be the higher of: 

$10 million; 
three times the value of the money earned by the business that imposed the unfair contract term (i.e. earned as a result of the unfair term); or 
where the court cannot determine what benefit that business obtained, then 10% of the business’ annual turnover in the preceding 12 months.

The reforms will also require businesses to demonstrate why they believe a contract term was not unfair. This requirement will apply where a court has previously found the same or a substantially similar term to be unfair when used in the same industry. 
How Will Standard Form Contracts Change?
Under the reforms, standard form contracts will include contracts where: 
consumers and small business can negotiate minor amendments to terms;only certain types of customers can negotiate the terms (for example, enterprise customers but not smaller businesses); andthe customers can select from a pre-existing list of possible terms when negotiating a contract (i.e.choosing one of three options for early termination of a contract).
Some clauses may also be exempt from the Unfair Contract Terms laws, provided they meet ‘minimum standards’ or other industry-specific requirements.

For example, if certain legislation allows all waste management contracts to have 90 day termination periods, the courts will not regard the equivalent term in a contract as unfair. 

Key Takeaways
The Unfair Contract Terms laws protect consumers from unscrupulous contracts. The proposed changes to these laws, once brought into force, could result in significant penalties if your business is not compliant. For this reason, you must review your business contracts (including the terms and conditions). While the time frame for these changes is not confirmed, ensuring your current contracts are fair will help protect your business’ reputation and reduce the likelihood of a court action. It will ensure you are ready to go once the changes start. 
If you need legal assistance in having your contracts reviewed in light of these changes, LegalVision’s experienced contract lawyers can assist. Call us on 1300 544 755 or complete the form on this page. 

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Common Standard Form Construction Contracts in Australia

If you are undertaking building work, you should ensure that you have a construction contract in place. There are a number of different types of standard form contracts and you must make sure that the terms of the agreement are fair and reasonable. This article will explore:
common standard form contracts used in Australia;why they are often used; andwhat you should look out for when entering into a construction contract.
When Do I Need a Construction Contract?
A construction contract is a legally binding agreement between a principal or owner, and a contractor or builder. The contract is in relation to a project involving building or construction works. 
Importantly, the law requires you, as a builder, to have a written contract with a homeowner for any residential or domestic building work. You should also have a written contract in place for any commercial construction works. This way, the parties to the contract are aware of their obligations and reduce the chance of disputes. A construction contract outlines the key commercial and legal terms of the arrangement between the parties, including:
cost;time;quality-related matters;specifications; andscope of work for the project. 
A well-drafted construction contract is helpful to provide certainty for both parties in relation to a construction project. Construction works involve a unique risk profile which makes them different from other commercial arrangements. A construction contract will allocate these construction-specific risks and liabilities between the parties. 
Why Are Standard Form Contracts Used?
Standard form contracts are industry standard and are often used because most participants in the construction industry will have some familiarity with them. Standard form contracts are able to be used without requiring substantial change. However, they are often amended by parties, often extensively. 
When receiving a standard form contract, it is worthwhile requesting from the other side a Word compare. This sets out any amendments made to the standard form contract. You should also have a lawyer review the contract to ensure it protects your interests.
What Types of Standard Form Contracts Are Used?
The type of standard form contract that you may opt to use will vary depending on the:
type of work (whether that be commercial, residential, design or design and construct;value and size of the project;complexity of the work;state legislative requirements; andparty who administers the contract (architect, superintendent or builder). 
There are some commonly used standard form contracts in the Australian building industry:



When it is Used

Australian Standards Contracts

Prepared by Standards Australia, an independent not-for-profit organisation recognised by the Australian Government. Types of contracts are:

AS4300 – General Conditions of Contract for Design and Construct;
AS4902 – General Conditions of Contract for Design and Construct);
AS4000 – General Conditions of Contract for Construct only;
AS2124 – General Conditions of Contract; and
AS4906 – Minor Works Contract Conditions (Principal administered).

Used mainly for commercial projects, however, they can be used for larger residential projects.

Masters Building Association Contracts

These contracts are weighted towards the builder (often quite heavily).

Used for both residential and commercial projects.

Australian Building Industry Contracts (ABIC) 

Prepared by the Australian Institute of Architects and Master Builders Australia Limited.

Used mainly for projects involving the architect as Superintendent.

Housing Industry of Australia- HIA 

These contracts are weighted towards the builder (often quite heavily).

Used for residential projects.

Government Contracts

GC21 – General Conditions of Contract.

Mainly used for government funded projects.

What Are the Key Inclusions in a Standard Form Construction Contract?
The clauses in standard form construction contracts break down the delegation of risk between the principal and the contractor. Construction contracts contain:
time;cost; andquality considerations. 
The allocation of risk varies between the different types of standard form contracts.

For example, the standard form contracts prepared by the Master Builders Associations, HIA and the ABI, generally allocate risk in a way that is favourable to the contractor. The Australian Standard contracts (in their unamended form) are generally more balanced documents.

Construction projects almost always involve delays and differ from other general commercial arrangements when it comes to time-related matters.

For example, most Australian Standards construction contracts contain the concept of practical completion and a defects liability period which runs for a period (usually 12 months) following practical completion.

Standard form contracts may have different pricing structures. Generally, a construction project will either be priced:
on a lump sum, like a fixed price;through a schedule of rates; orcost-plus, meaning the actual costs of the works plus the contractor’s margin.
It is important to understand the pricing structure of a project. This will determine the type of construction contract you should use.
Construction contracts also contain provisions dealing with the quality of the workmanship and materials. These provisions will vary depending on the standard form contract.

For example, for commercial projects, it is common for the contractor to provide security for the performance of their obligations under the contract. This is typically in the form of bank guarantees or retention money.

Most Australian standard construction contracts allow for this. However, security is less common in a residential setting, so Master Builders Association and HIA contracts will not contain security provisions.
Key Takeaways
It is recommended to have a written contract in place when embarking on a construction project. Using a standard form agreement can be useful where the other party has familiarity with the contract. The allocation of risk between the contractor and the principal will differ depending on the standard form contract used. You should have your construction contract reviewed before signing it to ensure that the distribution of risk is fair and reasonable. If you would like help in having a construction contract drafted or reviewed contact LegalVision’s building and construction lawyers on 1300 544 755 or fill out the form on this page.

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Are Late Payment Fees Legal in Australia?

Late payment fees may seem like an attractive way to ensure that your clients pay their invoices on time; however, it is important to understand the restrictions around late payments and how much you can actually charge for late payment fees. This article discusses the options you have to implement late payment fees in your business model.
Terms and Conditions
Your business terms and conditions set out the relationship between yourself and your customers. It should clearly document the goods and services you are offering and how you will provide the service. Terms and Conditions should always include a payment clause that sets out how and when your clients should make payment to you. Typical payment clauses will set out:
how your customers can make payment;how you receive payments;when you do not accept or allow payments;that your customer agrees to pay the price that you advertised plus any additional charges, such as delivery; andthe currency.
If you would like to include a late payment fee, then you should include this information in the payment clause of your terms and conditions. The conditions should outline how long the client has to pay the invoice once it has been issued and then the cost of the late fee or interest accrued due to failure to pay.

If you have not included details of the late fee in the contract, then you cannot choose to add this on at a later date.

Are Late Payment Fees Reasonable?
Although late payment fees are legal in Australia, the amount you charge your clients must be reasonable to cover the loss your business has incurred by not being paid on time. If the late payment fee is unreasonable or excessive, then the client may refuse to pay. Including an exorbitant late payment fee in your contract is known as a ‘penalty clause’. This is unenforceable in an Australian court.
To ensure that the penalty rate is enforceable, you must be able to prove that it was a genuine pre-estimate of loss and not just a punishment. Examples of loss due to late payments may include:
additional time taken to chase up the payment; or the cost of paying outside help such as lawyers or debt recovery agents.
Example 1
A business running a monthly food delivery subscription bills their clients after they have made the delivery. If a customer does not pay by the date stated on the invoice, then they will incur a $5 per week penalty fee. This fee is to cover the cost of the additional administration required to follow up on the late payment. This example is likely to be determined as fair and reasonable.
Example 2
A separate food delivery business works under the same model as example one, except they charge $50 for every day that the payment is overdue. This example is likely to be determined to be a punishment and, therefore, would not be enforceable in court.
Should I Charge Late Payment Fees?
Late payment fees can ensure that you get paid on time and that any additional costs incurred due to the late payment are covered. On the other hand, charging late payment fees may be off-putting to your customers. 
It is best to approach late payment fees on a case by case basis. Just because you have set out in the contract that late fees may occur, pursuing this without consideration may cause you to lose clients. Before handing out a fee, you may wish to:
ensure you have provided the invoice with reasonable time for the client to pay;regularly remind the client that the payment is due before the due date;send the client a letter the first day they are overdue on payment as a reminder; andkeep an open mind to flexible payment options with your customers.
What if the Client Continues Not to Pay?
If the client continues to ignore your reminders for payment, then you may be able to proceed with legal action. This usually occurs in two stages.
1. Send a Letter of Demand
The letter of demand will be a more formal notice than your previous reminders. Letters of demand set out the:
the claim you are making against the customer;the timeframe the customer has to respond and make payment; andthe consequences of not making payment.
2. Go to Court
If all other responses fail, you may wish to start court proceedings. Going to court can be a costly and timely process, so it is best to avoid this route wherever possible. Further, due to the costs of legal fees, it is usually only worth pursuing high-value cases.
Key Takeaways
Although late fees are legal in Australia, you still need to ensure you are considering the legal and commercial implications of charging these fees. Late payment fees must be reasonable and be agreed upon in your terms and conditions. The purpose of charging late fees is for them to act as an incentive to pay on time; they should not act as a punishment for your customers.
If you are unsure of the enforceability of your late fees, or you would like assistance with drafting your terms and conditions, you should contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
Are late payment fees legal in Australia? Yes, late payment fees are legal in Australia as long as they are reasonable. You must also clearly outline the terms of the late payment fee in a payment clause in your terms and conditions. What should a payment clause include? A payment clause should set out how and when your clients should make payment to you. It should additionally specify circumstances where you will not accept or allow payment and establish any fees applicable for late payment. How much can I charge for a late payment fee?  The amount you charge must be reasonable and a genuine estimate to cover the loss your business has incurred by not being paid on time. You cannot use late payment fees as a punishment. Excessive or unreasonable late payment fees may allow the client to refuse to pay.  What can I do if a client refuses to pay?  If a client refuses to pay, even after you have sent them a late payment fee, you may be able to take legal action. Firstly, you would send a letter of demand, which is a formal notice of the payment due. Secondly, if the other responses have failed, you could start court proceedings.

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What is a Brick and Mortar Store?

A brick and mortar store refers to any physical store offering face to face services or products to customers, as opposed to online shopping. Examples of brick and mortar stores include clothing stores in your local shopping mall, convenience stores, supermarkets and other physical locations. Although opening a physical shopfront can have higher overheads than starting an online business, having a physical presence may draw in more customers and increase your sales revenue. This article will set out some important considerations when opening a brick and mortar store.
Business Structure
One of the first things to consider when starting a new business is how you want to structure it. The structure you choose can have implications on tax, asset protection, set up costs and flexibility. Common business structures include:
Sole Trader
Registering as a sole trader is relatively cheap and straightforward to set up. As a sole trader, you would own all of the business’s assets personally, meaning you would take all the profits but also be responsible for all of the debt.
If you have a business partner, you may consider entering into a partnership. A partnership is very similar to setting up as a sole trader, except the profits and debts will be split between partners.
A company is a separate legal entity, and therefore your liability is limited, and your personal assets are protected. However, a company can have higher setup and maintenance costs than being a sole trader or in a partnership.Each business structure has tax implications; it is important to seek tax and accounting advice before deciding which structure is right for you.
Rent can be one of the most significant overheads for any brick and mortar business. Therefore, you must pick the right space for your business. You should take time to select a location for your store that is going to be convenient for your customer base and bring in a lot of foot traffic. Once you have chosen the ideal location, you will need to ensure that you can get the correct licences to run your business. These include approvals to:
conduct commercial business on those premises;carry out development work; and certify that the development meets council requirements.
You should contact your local council to determine which planning permissions you need.
If you are leasing the premises, you should also make sure you are doing thorough due diligence before signing. You should look to make it a condition of the lease that you can get the correct licences to run your business.
If you open up a brick and mortar store, you will need to understand your legal obligations when it comes to insurance. Common types of insurance include:
Public Liability Insurance;Workers Compensation Insurance; andRevenue and Assets Insurance.
The exact types of insurance you will require will depend on the type of business you are running. You should speak with an insurance broker to determine your specific insurance needs.
Depending on the type of business you run, you may need to apply for additional licences and permits before opening your store. The licences you need will depend on your location, and you should check your state or territory’s requirements before commencing operations.
Common licences for brick and mortar stores include:
food licences for eateries;liquor licences for bottle shops or bars;tobacco licences for convenience stores; andpoison licences for pharmacies.
If you are unsure which licences your business needs, you should contact the Australian Business Licence and Information Service (ABLIS). ABLIS assists business owners in finding the relevant government licences and permits concerning the services they are offering.
If you are hiring people to work at your store, you must ensure you understand your legal obligations to your employees. The Fair Work Act sets out your rights as an employer, including: 
pay rates; allowances; overtime; and penalty rates.
Your employees may be covered by a modern award which sets out the minimum terms and conditions that must be met within the employment contract. The award your employees are covered by will depend on the industry you work in and the employee’s role. If you are unsure which award your employees are covered by, you should visit the Fair Work website or seek legal advice.
Key Takeaways
Setting up a brick and mortar store is an exciting venture but can take a lot of planning and work at the beginning. Understanding your obligations as a new business owner can be overwhelming and confusing. If you would like assistance with understanding your legal obligations, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
What is a brick and mortar store? A brick and mortar store is any business with a physical presence, offering face to face products or services to customers. Examples of brick and mortar stores include retail stores, coffee shops and supermarkets. What are the business structures for a brick and mortar store?  The most common business structures include registering as a sole trader, entering into a partnership or creating a company. Each business structure has varying tax implications, asset protection, set up costs and flexibility, so it is essential to choose the one that is most suited to your circumstances.  What are the considerations when opening a brick and mortar store?  There are a few key considerations when opening a brick and mortar store. Firstly, your choice of premises is important as the location should be easily accessible. Secondly, you must examine the types of insurance available. Thirdly, you need to consider any licenses that may be required. What is the benefit of opening up a physical store? There may be higher overheads when opening a physical store, compared to an online business. However, having a physical presence may increase your sales revenue by drawing in more customers through foot traffic.

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What Information Must a Business Collect from Customers During COVID-19?

Due to the COVID-19 pandemic, Australian states and territories are introducing legislation that requires businesses to collect personal information about their customers. Each state and territory has its own legislation in regards to what information businesses must collect. This article sets out guidelines about collecting information from customers in each state and territory. The information below is correct at the time of writing. However, it is essential to keep up to date with your state and territories current guidelines.  
Australian Capital Territory (ACT)
All non-essential businesses must collect the:

first name and contact number of any customer or visitor; and
date and time of visit. 

You can also do this using the CBR app, which is a secure way for customers to sign into Canberra venues.
New South Wales (NSW)
Certain businesses, such as restaurants, pubs, and beauty studios, must collect personal information from anyone entering the premises. In this case, personal information means the person’s: 

email address or phone number; and 
time of entry. 

You must store the information you collect for 28 days.
Northern Territory (NT)
There are no guidelines in the Northern Territory at the time of writing.
Restricted businesses must collect and keep the contact information of guests and staff for 56 days. This information must include the person’s: 

phone number; 
email address; and 
date and time of the visit. 

Restricted businesses include restaurants, cinemas and hairdressers, among many others.
South Australia (SA)
Certain businesses and events must make and retain records of their customers. For example, this includes fitness classes, weddings and property auctions. Details must include the person’s: 

date and time of visit; 
name; and 
phone number or email address.

There are no guidelines in Tasmania at the time of writing.
Restricted businesses must collect and keep the contact information of guests and staff who visit the business for more than 15 minutes. This information must include the person’s: 

phone number; and 
date and time of visit. 

You must store this information for 28 days.
Western Australia
If your business chooses to collect information, it must be reasonable to help with the spread of COVID-19. For example, you may choose to collect the person’s name and contact information.
Why Do I Need to Collect Customer Information?
When a person is diagnosed with COVID-19, the state public health unit will commence contact tracing. By collecting customers’ personal information, along with the time and date of the visit, you can inform your customers if they have potentially been in close contact with an infected person. Being informed early means a person can self-isolate and get tested earlier. Accordingly, this will help to reduce the spread of COVID-19.
Compliance With the Privacy Act 
When collecting information from customers, you must ensure you do not breach the Australian Privacy Act. To meet your privacy obligations, your business must:

only collect necessary information necessary for contact tracing, such as name, contact details and time and date of visit;
inform the customer that you will be collecting information and the reason why;
securely store the information (the information should only be seen by staff in the business who need to see it and should not be visible to the public);
only share with the necessary health bodies when they require it for contact tracing purposes; and
dispose of information once you no longer need it (if your state or territory requires you to keep the information for a specified time, then you should dispose of it after this time has surpassed. If no timeframe has been given, you should destroy it after a reasonable time).

What Happens if I Do Not Collect Personal Data?
Breaching COVID-19 legislation, including record-keeping obligations, may result in significant fines for your business. Fines and punishments for a breach will vary depending on which state and territory you are located in.
What Happens if a Customer Refuses to Provide Information?
If legislation in your state or territory states that you must collect information, you must refuse entry to any visitor who refuses to provide this information. If a customer is found on your premises without having provided their details, your business will be responsible for paying the fine. 
Key Takeaways
The specific information your business must collect from customers during the COVID-19 pandemic will depend on your state or territory’s legislation. It is important that your business collects information necessary to reduce the spread of COVID-19. If you are unsure of your privacy obligations, contact LegalVision’s privacy team on 1300 544 755 or fill in the information on this page. 

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Common Mistakes When Selling a Business

Selling a business is far more complicated than most buyers and sellers expect. You, as the seller, may have set up systems and processes that help run the business with minimal input from yourself. This can include automated payments, client management software and everything else used to run the business. Even simple businesses are composed of many elements. You must transfer all of these elements to the buyer, which can make the selling process far longer than you initially anticipate. This article discusses the common mistakes people often make when selling a business. 
Elements of a Business 
Businesses have several essential elements which help make the business run smoothly. As part of the sale process, you will need to transfer the following: 
intellectual property (IP) – you must consider what intellectual property you use in your business and how you will transfer this to the buyer. IP can include trade marks, domains and data about your customers. If you use client management software, you must also transfer this licence;contracts – you will need to transfer all of the contracts you use in the operation of the business, including your contracts with clients. The technical legal term to transfer contracts is assigning or novating. Ideally, your contracts will allow you to assign them without your clients having to consent to the transfer. If each of your client’s consent is required, it can cause a massive headache or frustrate the sale; andfinanced or leased equipment – this type of contract is more restrictive and requires the equipment finance provider to approve the buyer. If you have these arrangements in place, then you must speak with the equipment finance provider as they may require substantial documents to transfer this arrangement to the buyer or require that the equipment is paid out.
Below we will explain some common mistakes people often make when selling a business.
Rushing the Sale
By far the most common stressor in a business sale is having to rush the transfer process and scrambling at the last minute. As we can see above, there are several elements that you must transfer, such as the lease or software subscription contracts. Depending on the way you draft your sale agreement, these transfers can be conditions to the sale completing (i.e. conditions precedent). Alternatively, the incomplete transfer of all essential elements can be a breach of contract if you do not transfer these elements by a set date. While both situations are frustrating, not satisfying the conditions precedent within a certain amount of time can allow the buyer to terminate the contract. Consequently, you will potentially lose the sale. Before agreeing to a timeline with the buyer, it is essential to have a thorough discussion with a business lawyer to understand the process and set a realistic timeline. 
Recording the Correct Structure 
There are many different ways in which you can own or operate a business. For example: 
as a sole trader; through a company; through a partnership; orthrough a trust.
As a seller, you should have a good understanding of your business structure. However, businesses can have very complex structures. You may need to speak to your accountant or lawyer to confirm the legal entities that own the business assets, IP and hold the contracts. 
It is relatively common that sellers do not understand their structure. A typical example is where the business is set up as a trustee with a corporate trustee (i.e. a company). Just listing the company as the seller and not the trust is incorrect. This can be a breach of contract that will be messy if not picked up before the sale agreement is signed. Where a holding company owns a business (holding the IP) and trading company, you must list both of these companies on the sale agreement. 
Having All Security Interests Released 
There are several situations in which other people or companies will have securities registered over the assets of your business. You make these registrations on the Personal Property and Securities Register (PPSR). There are various types of registrations, and these can be over specific assets, such as financed machinery. The registrations can also be over all assets of the business. 
You make PPSR registrations when you lease or finance equipment, obtain a loan from a bank or even where you have payment terms with suppliers. Having PPSR registrations restricts your ability to transfer the legal ownership of the assets. Business sale agreements will typically state that you must unencumber all of the assets of the business at completion. Therefore, you must speak with the entities that hold PPSR registrations over the business assets. In doing so, you understand the requirements to have the registrations removed. This is an area that can cause significant delays when discovered late in the piece. Your lawyer can assist you by searching the PPSR to determine the current registrations. 
Not Engaging Appropriate Advisors
It is always essential to engage and speak with qualified professionals early on when selling your business. While you may have current advisors, they must have experience dealing with business sales. As well, it is best if they have experience with the specific type of business you are selling. Typical advisors that you can engage, include: 
accountant or tax advisor; lawyer; and business broker. 
Your accountant or tax advisor can assist you with the valuation of the business and determining the tax implications of the sale. A lawyer will assist you with the contracts, negotiations and completion of the sale. While a business broker can help you to find a qualified buyer. You should not underestimate the importance of a qualified buyer. This is because the buyer will need to be approved by the landlord (if applicable) and may also require finance to pay the purchase price. It is vital to engage these professionals early in the process as their advice will guide the process and timeline. 
Key Takeaways 
Preparation and having a realistic timeline is one of the easiest ways to avoid unnecessary stress throughout the sale process. Common mistakes when selling a business include:
rushing the sale;not understanding your business structure;not releasing all your security interests; andfailing to engage a qualified professional.
If you require assistance with the sale of your business, contact LegalVision’s sale of business lawyers on 1300 544 755 or fill out the form on this page.

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What Should I Consider Before Signing an International Contract?

More than ever, Australian businesses are connecting and interacting with businesses all over the world. If you are signing a contract with a business located overseas, you may be signing an international contract. Before you sign any contract, you should review it. Additionally, a lawyer can help you to identify and manage the legal risks to which you may be exposed. 
This article will discuss the particular considerations to take into account when signing an international contract. There are different situations where your business might sign an international contract. There are also a handful of laws that differ from country to country. Before signing an international contract, you should note how the governing law and dispute resolution clauses may affect the interpretation of your contract.
Situations Where You Might Sign an International Contract
There are several situations where you might sign an international contract. The following instances highlight some common examples of when you might do so:
when buying or selling goods;when engaging a manufacturer to manufacture products;if you are an employee signing an employment contract with a business based overseas;if you are a business hiring an overseas employee; orwhen licensing intellectual property to a business overseas, or, conversely, when receiving an intellectual property licence from an overseas business. 
In these examples, you might be the party giving the contract to another party sign, or you might be the recipient of the contract. 
If you are the party giving the contract, make sure you engage a lawyer to review the contract before sending it. Doing so can mean that the contract is signed quickly, without lengthy, tedious negotiations, and the business relationship can begin. 
If you are the party receiving a contract, you too should have the contract reviewed before you sign it. Your lawyer can help to negotiate any dealbreakers or any clauses which may put your business in a bad position if left unchecked. 
Laws Affecting International Contracts 
There are several laws or legal issues which will affect international contracts. 
Free Trade Agreements
Australia is a party to free trade agreements (FTA) with other countries and regions. FTAs can have an impact on the importing and exporting laws and can affect the tax payable in contracts. One of these agreements is the China-Australia Free Trade Agreement. This FTA gives Australia access to the restrictive Chinese market via tariff (tax) reductions and removals. Practically speaking, free trade agreements mean that Australian businesses can enter into contracts with overseas parties.
Where there is a free trade agreement in place between two countries, you (when signing an international contract) can access the benefits of the agreement. If you are an Australian business selling goods overseas, you may be able to get your goods certified. Therefore, when it arrives in the other country’s ports, the tax payable on the goods is at the appropriate rate under the FTA. 
Employment Laws
If you are a business engaging overseas employees, you will need to be aware of the employment entitlements owed to those employees. Employment laws and entitlements differ from country to country. The Fair Work Act (FW Act) will apply to certain overseas employees. This includes those who are based overseas but are employed by an Australian business. Also, if your Australian business employs someone overseas, both the FW Act and local employment laws will apply. 
Consumer Protection Laws
In Australia, the Australian Consumer Law protects consumers. If you are selling goods or services overseas, there may be consumer protection laws in your customer’s country which you may need to comply with. 
Intellectual Property
Whether you are buying or selling, establishing intellectual property ownership is key. The lines can get blurry because international property laws differ from country to country. If you expect to receive the intellectual property rights to what you are purchasing, this will need to be clear in the contract. Also, the intellectual property clauses and definitions will need to take into consideration intellectual property laws in the other country. 
Governing Law and Dispute Resolution 
Governing Law
The governing law clause in a contract is particularly important when the parties are from two different countries. It will set out which country’s laws apply to the contract, and against which laws each clause will be interpreted. Ideally, you will want the governing law to be something that you (or your legal team) are familiar and comfortable with. 
Dispute Resolution 
When reviewing an international contract, lawyers will always look to see how, and where, disputes will be resolved. If a dispute arises that needs to be determined by a court outside of Australia, the dispute may be more expensive and more difficult to resolve. Ideally, a person familiar with the governing law should resolve the dispute. This is beneficial to speed up the process of resolving the dispute, and also to ensure that the final decision is binding and enforceable.
Additionally, the contract should specify the method of dispute resolution, such as mediation or arbitration. Arbitration may be chosen in international contracts because there are several international forums and rules of international arbitration. Choosing an international arbitrator may be a comfortable choice for the parties, as they know that any dispute will be dealt with by a non-biased, third-party arbitrator. 
Key Takeaways
International contracts cover more than just contract law. If you need assistance in drafting a contract with an overseas party, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page. 

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What Is Adverse Action in the Workplace?

As an employer, you may face disputes with your employees. These disputes can be about employee misconduct, unsatisfactory performance, non-compliance with policies or breaches of contract. If a workplace dispute escalates, you may consider taking adverse action against an employee. Alternatively, an employee might take adverse action against you. If you are an employer, this article will explore some of the key considerations to think about before you take action against an employee.
What Is Adverse Action?
Adverse action is any action that is prohibited by the Fair Work Act 2009. Actions can adversely affect employees due to it occurring for particular reasons, such as discrimination. This includes actions such as dismissing an employee, refusing to employ a prospective employee, altering an employees position or refusing to engage in business relations with a contractor.
Commonly, adverse action occurs because of an underlying motive to discriminate through certain decisions. Discrimination occurs when an employer unfairly treats an employee due to specific attributes, such as:
race;sex; sexual orientation; age; religion; political opinion; appearance; marital status; family or carer’s responsibilities; pregnancy; or disability. 
For example: 

George has been working at a construction company for three years. He decides to apply for a promotion to a management position. During the interview process, he mentions that his father is ill and will likely be needing extra carer’s assistance into the future. Therefore, George plans to make use of his carer’s leave entitlements. Despite being qualified for the job, George’s employer tells him that he has not received the promotion. George’s employer mentions they want someone who will be working as much as possible, not someone who plans to take carer’s leave days regularly. 

Here, George’s employer has taken action against him for reasons unrelated to his employment (his carer’s responsibilities). Consequently, adverse action has occurred, and his employer may be subject to penalties under the Fair Work Act 2009. 
Types of Adverse Action
Adverse action is not solely actions made by an employer against an employee. It can also occur between: 
employee to employer, such as an employee threatening to take industrial action against their employer because of their political opinion; prospective employer to prospective employee, such as an employer refusing to employ a prospective employee because of their carer’s responsibilities or an employer amending the terms and conditions of an employment offer due to the prospective employee’s plans for pregnancy; principal to contractor, such as a principal terminating a contractor’s contract because of their sexual orientation; principle to proposed contractor, such as a principal refusing to engage a contractor because of their age; andcontractor to principal, such as a contractor taking industrial action against, or ceasing to work, for a principal because of their race.
What Can an Employee Do if They Are Facing Adverse Action? 
If one of your employees is facing adverse action, they can file a General Protections Application with the Fair Work Commission (FWC). Alternatively, they can report the adverse conduct to the Fair Work Ombudsman. The bodies will then investigate the claim. If the bodies determine that adverse action has occurred, you can face penalties of up to $13,320 as an individual or $66,600 as a corporation. Where a court determines that you have contravened the general protections provisions of the Fair Work Act, the court may also order an injunction, reinstatement of your employee and compensation (which is uncapped).
Two types of applications can occur:
disputes not involving dismissal; or a dispute which involves a dismissal. 
Dispute Not Involving Dismissal
A dispute not involving a dismissal occurs where your employee has not been dismissed. However, they claim that you have taken adverse action against them for some unlawful reason. For example:

Sally’s child is unwell, and she needs to take carer’s leave to care for her child at home. When Sally returns to work, her employer gives her a written warning. Sally suspects that the real reason for the written warning was a result of her exercising a workplace right to take carer’s leave. Thus, she can report this dispute to the FWO or file a general protection application with the FWC.

Dispute Involving Dismissal
A dispute involving a dismissal occurs where your employee is dismissed from work. For example: 

At a work event, Ben’s manager discovers his sexual orientation. The following week Ben is told that he can no longer work for the company. The reasons for dismissal seem suspiciously out of the blue and appear to be fabricated. If Ben suspects that this dismissal has underlying motives, he can report this to the Fair Work Ombudsman or file a general protections application with the FWC.

How You Can Avoid Adverse Action
As an employer, you have the right to take adverse action against your employees. Taking adverse action is commonly in response to matters such as:
misconduct; unsatisfactory performance; non-compliance with policies; or breaches of contract. 
However, the law provides that you cannot take adverse action against an employee based on matters protected under the general protections provisions of the FW Act. For example, based on an employee exercising a workplace right or discriminatory grounds.
Of course, there are strategies which you can use to mitigate the risk of such claims. Importantly, always ensure that actions taken against your employees are in good faith. This means you are taking action against your employees for work-related reasons, such as underperformance, not because of underlying discriminatory reasons.
If your actions are in good faith, ensure that you have evidence of the misconduct that caused you to take adverse action. In the case of an underperforming employee, this may include reports of their poor work quality or client complaints. You should also provide evidence that you have made the employee aware of these allegations and given them appropriate time to improve.
Key Takeaways
As an employer, you may face disputes which cause you to take action against an employee. Before doing so, it is important to consider whether that action has been taken because of a legitimate reason that relates to employment. If you are not cautious and engage in adverse action, you could be liable to pay hefty penalties of up to $66,600 as a corporation or $13,320 as an individual. 
If you have any questions about the right time to take adverse action, contact LegalVision’s employment dispute lawyers on 1300 544 755 or fill out the form on this page.

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