Legal Updates

The High Court of Australia has handed down a landmark decision affirming that an employee was entitled to substantial damages for psychiatric injury suffered as a result of his employer’s breach of the employment contract by their conduct during disciplinary proceedings that resulted in the employee's termination. The decision overturned long-standing precedent, reflecting the changed view of society regarding injury to an employee’s mental health.

Practical steps

Given the risk that an employee may suffer compensable psychiatric injury if their employer breaches the employment contract, potentially resulting in substantial damages, not-for-profits (NFPs) will need to:

• review employment contracts to identify whether any policies or other documents incorporated by reference (expressly or impliedly) impose, or may arguably impose, binding obligations on the parties;
• when amending policies or other documents, ensure that the potential impact on employment contracts, both templates and existing contracts, is considered; and
• ensure that policies and procedures that form part of the employment contract are fully complied with by the NFP's officers, employees and agents, with particular care in the context of disciplinary proceedings and termination of employment.

Background

The case of Elisha v Vision Australia Limited [2024] HCA 50 (Elisha v Vision Australia) arose from Mr Elisha’s summary dismissal from his employment at the not-for-profit organisation, Vision Australia, following an allegation that he had been ‘aggressive and intimidating’ towards a hotel manager during a work trip (the serious complaint). Mr Elisha was informed of the serious complaint, his employer conducted an investigation and consequently his employment was terminated. After his dismissal, Mr Elisha was diagnosed with a severe psychiatric illness (the psychiatric injury) and was unable to work in the foreseeable future. He sued his former employer in the Supreme Court of Victoria for damages for the psychiatric injury arising from its breach of the terms of his employment and for negligence in breaching an alleged duty of care imposed upon employers to provide a safe system of investigation and decision-making with respect to discipline and termination of employment.

The case in the Supreme Court of Victoria^[i]

Vision Australia maintained that the investigation and dismissal were based on the serious complaint and that Mr Elisha was given the opportunity to respond to the allegation. However, the primary judge found that Vision Australia had formed the view that the incident was part of a longstanding history of aggressive behaviour which Mr Elisha was never informed of, and this was the basis for termination.

Vision Australia also argued that the disciplinary procedure was intended to be a one-sided, lawful and reasonable direction that applied to employees that it was not bound by. The primary judge determined that Mr Elisha’s employment contract included the disciplinary procedure and found that Mr Elisha’s contract had been breached as the disciplinary process adopted for Mr Elisha was ‘nothing short of a sham and a disgrace’. Mr Elisha was awarded damages of approximately $1.44 million for loss of earning capacity, pain and suffering, and, principally, from the serious and ongoing psychiatric injury on the basis that the parties should have reasonably contemplated that the risk of potential psychiatric illness was a serious possibility if the protective processes directly contemplated by the terms of the contract were not followed. The Court rejected the negligence claim on the basis that Vision Australia did not owe the alleged duty of care to Mr Elisha.

The case in the Victorian Court of Appeal^[ii]

The Court of Appeal upheld the primary judge’s findings that the disciplinary procedure formed part of the employment contract binding on both parties and that Vision Australia had breached the contract and was liable to pay damages for that breach. However, the Court found that Vision Australia was not liable for damages for psychiatric injury because on the evidence that injury was too remote, so Mr Elisha could only be awarded nominal damages for the breach of contract. It also upheld the rejection of the negligence claim. Although not required for its decision, the Court also stated its view that damages for psychiatric injury would not have been available in any event in view of Addis v Gramophone Co Ltd [1909] AC488 (Addis), in which the House of Lords held that a dismissed employee could not recover damages for breach of contract in respect of ‘injured feelings’ and loss of employment prospects arising from the harsh manner of the dismissal.

The case in the High Court of Australia‍

Mr Elisha appealed to the High Court of Australia which allowed his appeal and held that:

• the disciplinary procedure formed part of the employment contract;
• subject to the particular terms and context of a particular employment contract, liability for psychiatric injury was not beyond the scope of Vision Australia's contractual duty concerned with the manner of dismissal;
• Addis was decided in a different social context and has been overtaken by more recent legal developments in Australian law and by legislation relating to unfair dismissal;
• the scope of Vision Australia’s contractual duty was determined by the nature of liability the parties might have contemplated and accepted, not by the damage that might have been foreseen;
• remoteness of damage was a separate legal consideration from the scope of a contractual duty;
• in the specific serious circumstances of this case, liability for psychiatric injury was not too remote; and
• remoteness of damage is assessed by looking forward from the date of the contract and requires consideration whether the damage of the type suffered was a 'serious possibility' arising naturally from the breach or was within the contemplation of both parties as a probable result, rather than merely foreseeable.

The Court stated that the loss of some contractual certainty by incorporating policies and procedures that could change from time to time was not a reason to deny a clearly expressed intention that a particular policy or procedure will have contractual effect. However, it left open the question of the extent of an employer’s power to unilaterally amend policies and procedures, and if there is any constraint (such as reasonableness) on that power.

As Mr Elisha won on his first ground, it was strictly unnecessary for the High Court of Australia to consider the negligence claim. However, they did briefly address that ground and its comments suggest the view that that there is no general principle against such negligence claims and each case will turn on the coherence of the applicable employment legislation with the administrative law in the relevant jurisdiction at the relevant time.

Work health and safety legislation

In addition to the common law duties owed by the employer to the employee addressed in this case, the work health and safety legislation in the Australian States and Territories requires persons conducting a business or undertaking to manage not only risks to physical health but also psychosocial hazards. These are hazards arising from or related to the design or management of work, the work environment, workplace interactions, or behaviours, which may cause psychological harm. Factors to be considered in managing hazards include systems of work, workplace interactions and behaviours and the information, training, and supervision provided to workers. While the legislation does not mention disciplinary procedures specifically, on general principles, they are part of workplace interactions and systems of work and could potentially give rise to psychosocial hazards if not managed appropriately.

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[i] Elisha v Vision Australia Ltd [2022] VSC 754

[ii] Vision Australia Ltd v Elisha [2023] VSCA 265

The Privacy Act 1988 (Cth) (Privacy Act) has undergone its most significant reform since 2014, with the Privacy and Other Legislation Amendment Act 2024 receiving Royal Assent in December 2024. These changes, inspired by international privacy benchmarks such as the European Union’s General Data Protection Regulation (GDPR), aim to strengthen individual rights and impose clearer obligations on entities that handle personal information - including not-for-profits (NFPs) and charities.

Why it Matters to Your Organisation

Although NFPs, charities, and small organisations have historically operated under less scrutiny of their privacy obligations, the landscape is shifting. Increased regulatory powers, tougher penalties, and the expansion of responsibilities under the Australian Privacy Principles (APPs) mean that your organisation’s privacy practices must now meet a higher standard.

Our Quick Tips

Consider: 

• Data minimisation -collecting only information necessary for your purposes,
• Purpose limitation -only using personal information for the purpose which it was collected or a directly related purpose,
• Restricting access to personal information only to authorised personnel, and
• Property destroying data when it is no longer needed.

Actions you could take include: 

• Increasing training and compliance measures to educate personnel on privacy obligations, practices and data security awareness,
• Doing due diligence regarding third-parties you engage with, including: 
  
  • assessing how key third-party providers handle personal information, and
  • requiring contracts to have clear data security obligations,
• Assessing whether you use automated decisions in your business processes,
• Regularly reviewing privacy policy and procedures to adapt to changes in technology and regulations,
• Conducting privacy impact assessments to regularly assess the privacy risks of new projects and systems,
• Considering developing an internal data security policy that outlines how information is collected, used, and stored, as well as how to respond to a data breach, and
• Considering possible controls under the Children's Online Privacy (COP) Code.

Key reforms

Some of the key reforms most relevant to NFPs and charities include:

1. Stronger obligations on automated decision-making

If your organisation uses software or algorithms to make decisions that affect individuals, such as eligibility assessments, resource allocation, or even targeted communications, these processes must now be disclosed in your privacy policy. This includes detailing how personal information is used in the decision making and the impact of such decisions.

2. Mandatory technical and organisational measures

It is no longer enough to vaguely commit to taking “reasonable steps” to protect data. The revised Privacy Act now specifies that entities must take both technical (e.g. encryption, anti-virus software) and organisational (e.g. staff training, access controls) safeguards. NFPs dealing with sensitive information- such as health information, criminal records, or political data - must ensure their privacy procedures consider these technical and organisational aspects of protection.  

3. New statutory tort for serious invasions of privacy

Individuals can now sue for serious invasions of privacy, even without demonstrating harm. If your organisation recklessly or intentionally misuses personal information or intrudes on an individual’s privacy, you could face a claim. A public interest test will consider the balance between the public interest in protecting a person’s privacy with wider public interests and the organisation’s objectives.

4. Increased penalties and enforcement

The Office of the Australian Information Commissioner now has broader investigative powers under the new amendments, with penalties for breaches of the Privacy Act also increasing substantially. For example, entities may face fines up to $3.3 million for significant privacy breaches, even if unintentional.

5. Children’s Online Privacy Code

If your services include digital platforms likely to be accessed by children - such as youth programs, education resources, or social campaigns - you may be subject to the upcoming COP Code. This code will introduce stricter consent and communication standards tailored to children’s comprehension levels. This will be an important space to watch as the code is finalised and implemented.

Our recommendations: next steps for your organisation

NFPs and charities should act now to prepare for these changes, many of which are already in effect or will be binding in the coming year. We recommend:

• Reviewing or creating your privacy policy,
• Conducting a privacy impact assessment for new and existing projects,
• Assessing  how your organisation collects, stores, and uses personal information,
• Ensuring your staff and systems are equipped to meet new obligations,
• Ensuring your service providers are not placing your organisation at risk of non-compliance, and
• Auditing your data handling, especially regarding children or vulnerable groups.

In the recent case of Equality Australia Ltd v Commissioner of the ACNC [2024] FCAFC 115 (Equality Australia case), the Federal Court considered the term ‘public benevolent institution’ (PBI) as used in the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (ACNC Act) and found that for a charity to be a PBI, there must be a clear and sufficient connection between its objects and activities and the relief of distress of its target group. Equality Australia is a charity with an ongoing history of advocacy and campaigning for legislative change with regards to promoting marriage equality, eliminating discrimination on the grounds of sexual orientation, and more broadly, to improving the wellbeing and lives of LGBTIQ+ people. The Court found that these objects and advocacy activities were too general, and the connection between them and the relief of distress of LGBTIQ+ people was not sufficient to allow them to qualify as a PBI.

What is a PBI?

The term ‘public benevolent institution’ is not defined in the ACNC Act and takes its meaning from the common law. The ACNC’s definition, in the Commissioner’s Interpretation Statement on PBIs, is ‘an institution that is organised, conducted, or promoted to relieve sickness, destitution, helplessness, suffering, misfortune, disability, or distress.’¹

The main advantage of being a PBI is eligibility for the highest level of Commonwealth tax exemptions available to charities, being endorsement as a deductible gift recipient and for the fringe benefits tax exemption. However, to be eligible for those endorsements, an entity must be registered by the Australian Charities and Not-for-profits Commission (ACNC) as a charity with the subtype of PBI.

Currently, deductible gift recipient status is not open to all types of charitable subtypes but could potentially be expanded in the future to more subtypes if the recommendations of the Productivity Commission’s final report for philanthropic giving are implemented. However, substantial reform is not likely in the near future.

The Equality Australia decision

Equality Australia is a charity with an ongoing history of advocacy and campaigning for legislative change with regard to promoting marriage equality, eliminating discrimination on the grounds of sexual orientation, and more broadly, to improving the wellbeing and lives of LGBTIQ+ people. Equality Australia’s application to the ACNC for registration as a PBI was refused and the ACNC’s decision was upheld by the Administrative Appeals Tribunal (AAT).

The Equality Australia case was an appeal from the AAT’s decision. The AAT applied a ‘sufficient connection’ test to determine that Equality Australia is not a PBI. The Court accepted the sufficient connection test and held that in determining whether the objects of Equality Australia are benevolent, it is necessary to consider how its work aids LGBTIQ+ people and whether a clear line can be drawn between the aims and the provision of relief. The Court found that Equality Australia’s objects and advocacy activities were too general, and the connection between them and the relief of distress of LGBTIQ+ people was not sufficient to qualify as a PBI.

While there might be a logical connection between the aims of a charity and the relief of people in distress, this does not mean the connection is sufficient for qualification as a PBI. The Court found that it was open to the AAT to find that while it is logical to conclude that pushing for legislative reform may improve the lives of LGBTIQ+ people, the connection is too abstract and general to be considered a link from ‘point A’ to ‘point B’. This could be contrasted with entities which, for example, provide food or accommodation to the needy, where a clear and therefore sufficient connection can be identified between the provision of food/accommodation (point A) and the relief of hunger/homelessness (point B).

The Court stated that while there must be a clear chain of connection, it is not necessary for a PBI to be ‘on the ground’ in order to achieve its benevolent purpose. Relief can be provided indirectly by a charity, but they may still qualify for PBI status. An example of such an organisation is a charity whose achieves the object of the alleviation of poverty and chronic hunger by providing funds to other organisations that conduct aid projects for the same purpose (as in the case of The Hunger Project Australia v Federal Commissioner of Taxation (2013) 94 ATR 855). While the funding is not directly going to those in need, the benevolence still directly reaches them through the funded projects. The Court considered that such indirectness is not the same as an insufficient connection.

Do advocacy, education, and preventative activities make an organisation ineligible for PBI status?

The ACNC made submissions on this question in the Equality Australia case, but the Court was able to decide the case without considering them. The Commissioner’s Interpretation Statement on PBIs discusses the circumstances in which advocacy, education, and preventative activities may be considered benevolent. For example, while campaigning directed toward law reform for the benefit of a class of people generally is insufficiently connected (as in the Equality Australia case), by contrast, advocacy that is directed to securing funding and commitments to specific projects was accepted as sufficient and benevolent in the case of Global Citizen Ltd v Commissioner of the ACNC [2021] AATA 3313. Therefore, advocacy, education, and preventative activities are not automatically disqualified as benevolent activities – an important factor is how abstracted the objects are from the benevolence of the activities and whether a logical and sufficient connection can be drawn between them.

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¹ PBIs may also be eligible for tax and duty exemptions or concessions under the laws of a State or Territory. The meaning of the term ‘PBI’ in those laws will depend on the relevant legislation.

The 2025 Federal Election will be held on 3 May. In the lead up to the election, charities should be extra cautious as to how they engage in advocacy and campaigning. While some advocacy and campaigning activities are permissible, charities must not promote or oppose specific political parties or candidates. Charities must also be aware of federal electoral laws regarding electoral expenditure and gifts received for electoral expenditure.

What are advocacy and campaigning?

The Australian Charities and Not-for-profits Commission (ACNC) has published guidance for Responsible Persons on Charity campaigning and advocacy and the ACNC Commissioner has provided timely guidance for this election in the ACNC’s monthly newsletter entitled Remember to focus on issues, not party politics.

The ACNC’s definition of the words ‘advocacy’ and ‘campaigning’ in relation to the permissible activities of charities is narrower than the meaning those words may have in common use. In relation to charities, permissible activities are those aimed at promoting or opposing a change to law, policy, or practice at either a State or Territory, Commonwealth, or international level. Generally, permissible activities include:

• involvement in development of public policy,
• promoting or opposing particular laws, policies, practices or decisions of government, and
• raising public awareness, changing public behaviour, and mobilising public support.

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How can a charity engage in advocacy and campaigning?

While such advocacy and campaigning activities are permissible for charities as a general principle, each charity must consider its specific circumstances. A charity must only engage in activities that further or aid its charitable purposes as set out in its governing document (constitution or rules). They must otherwise be permitted, or not prevented, by that document, and the advocacy or campaigning must be in the best interests of the charity.

Ensuring that advocacy is factual, respectful, and lawful is also necessary for complying with the ACNC’s Governance standards such as Standard 1, which requires charities to be transparent about their purposes and ensure they are working towards these purposes.

Disqualifying political purposes

Political parties are not charities and charities must maintain independence from party politics. The ACNC’s guidance mentions three purposes and activities that are not permitted for charities (disqualifying political purposes):

• promoting or opposing a political party or candidate for political office,
• engaging in or promoting unlawful activities, and
• engaging in or promoting activities that are contrary to public policy (e.g. contrary to national security, the rule of law, or the Australian Constitution).

What activities should a charity engage in?

While a charity’s governing document may permit a charity to engage in advocacy or campaigning activities, the charity’s governing body must also consider whether it is in the best interests of the charity, which includes the potential effects on the charity's reputation and how to best engage. There is strong public interest in the area where charities and politics intersect. In principle, a charity’s policy position on a matter of concern may be similar to, or align with that of, a particular political party. The charity can still campaign on that issue, provided it does not amount to the charity having a purpose of promoting or opposing a particular political party or candidate.

However, there can be a fine line. Public perception is important, particularly during an election period where there is greater scrutiny from the community, in the media, and on social media. This may increase the risk that, in the minds of the public, a charity’s advocacy or campaigning could be perceived as support for a particular political party or candidate and result in reputational damage. Risks from engagement in campaigning and advocacy may be mitigated with careful planning about what will be said and who will deliver the message, and by adopting internal guidelines and ensuring they are communicated to and complied with by Responsible Persons, staff and volunteers.

A charity’s Responsible Persons, staff and volunteers also need to be mindful of their conduct. They are entitled to have and promote their own personal views on a political party or candidate but when doing so, they should make it clear that they are not speaking on behalf of any charity, particularly in the lead up to an election.

Examples of permitted activities

Subject to those general principles and the disqualifying political purposes outlined above, the ACNC gives some specific examples of permissible activities including:

• advocating for changes to relevant government policy, including directly to elected representatives and public officials,
• making submissions to a public consultation or enquiry into relevant legislative change,
• publishing, including assessing, comparing and ranking, the policies of political parties or candidates relevant to the charity’s purpose (provided it is done with care in a reasoned and neutral manner and complies with the electoral legislation such as the Commonwealth Electoral Act 1918 (Cth)),
• allowing members of political parties or candidates to appear at charity events, provided this does not amount to promoting that party or candidate (consider inviting representatives and candidates from a range of parties),
• holding public debate events on  relevant issues of law or policy, and
• publishing research on relevant current or proposed laws, government policies, or practices.

Donations and expenses related to advocacy and campaigning

The ACNC guidance specifies that a charity should not make a donation to a political party or candidate during an election campaign as it will run the risk of being found to have a purpose of supporting a particular candidate or party. A charity may accept a donation from a political party or candidate but must not do so in exchange for promoting or endorsing them.

Commonwealth electoral laws

Charities will also need to consider the Commonwealth Electoral Act 1918 (Cth) relating to electoral matters which are matters communicated or intended to be communicated for the dominant purpose of influencing the way electors vote in a federal election. There is a presumption that communications that promote or oppose the policies or actions of a political party, candidate, or federal MP are electoral matters. Communications that have the dominant purpose of reporting news and current affairs, educating their audience, raising awareness of, or encouraging debate on a public policy issue will generally be accepted as rebutting the presumption. Some electoral matters require authorisation from the Australian Electoral Commission (AEC).

Persons or entities (third parties), including charities, who incur expenditure for the dominant purpose of creating or communicating electoral matters (electoral expenditure) must lodge an annual return with the AEC if the expenditure exceeds the annual disclosure threshold ($16,900 for the 2024-5 financial year). This information will be publicly available on the Transparency Register for three years and the ACNC charity register will link to a charity’s entry on the Transparency Register. A third party whose dominant purpose or electoral expenditure meets certain criteria or whose electoral expenditure exceeds $250,000, is a ‘significant third party’ and must be registered by the AEC and submit an annual return.

A third party that receives a single gift or aggregated gifts from a single Australian donor with a value above the annual disclosure threshold and uses some or all of it for electoral expenditure must lodge an annual return which discloses the donor’s name and value of the gift. ‘Gifts’ for this purpose includes not only cash donations but also receiving free or discounted services or property. More stringent restrictions apply to gifts from foreign persons.

Looking ahead to future federal elections, amendments that change the rules about electoral expenditure and gifts for electoral expenditure and specifically affect charities will come into effect in 2026.

The Government released the Productivity Commission’s final report from its philanthropy inquiry, Future Foundations for Giving, in July 2024. The aim of the inquiry was to provide recommendations to the Federal Government on how to boost donations to charities to help achieve the Government’s target of doubling philanthropic giving by 2030.  

The Commission made 19 recommendations, focusing on four main areas:

• improving the system that determines which charities have access to tax deductible donations;
• improving access to philanthropic networks for Aboriginal and Torres Strait Islander people;
• enhancing the regulatory framework for charities and ancillary funds; and
• improving public information on charities and donations.

At the time of release, the Government announced that it will consider all but one of the Commission’s recommendations. On 5 December 2024, the Government announced a few minor changes as ‘first steps’ in response to the Commission’s report. However, the Government has still not responded to the more significant recommendations for overhauling the DGR system nor given any indication when it may do so.

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Overhauling the DGR system

A key principle adopted by the Commission was that all Australian taxpayers co-invest in and subsidise charities through the deductible gift recipient (DGR) system and a key finding was that the DGR system is not fit for purpose and should be reformed so it can provide the greatest net benefit to the community.  The Commission found that the current arrangements that determine which entities can access DGR status are poorly designed, overly complex and have no coherent policy rationale. They suggested that reform is necessary to increase fairness, simplicity, and transparency, and to reduce both inconsistent outcomes and the time it takes to seek endorsement.

Following these principles, the Commission assessed each of the 14 charity registration subtypes used by the Australian Not-for-profits and Charities Commission (ACNC) to determine which charity subtypes should be eligible for DGR status and recommended that charities registered under most subtypes should come within the scope of DGR system. The criteria they used were whether activities would generate community-wide benefit, whether subsidising philanthropy provides benefits over other types of government funding, and whether there is a low risk of donations being converted to private benefit for donors.

The Commission estimated that if its recommendations are implemented, the number of ACNC-registered charities with DGR status would increase from about 25,000 (about 40%) currently to about 30,000 to 40,000 (50% to 65%).

The recommendations propose to extend DGR status to charities with the following purposes:

• preventing disadvantage;
• promoting human rights or reconciliation;
• injury prevention;
• promoting public interest journalism;
• animal welfare; and
• advocacy activities in furtherance of other included charitable purposes, such as social welfare and human rights organisations that advocate for policy change.

Charities with multiple purposes such as both prevention and relief of distress and disadvantage, health promotion, harm prevention and similar activities that don’t fit neatly into an existing DGR category should become eligible for DGR status if the recommendations are implemented.  This should make it easier for many First Nations and community-based charities to become DGRs.

The Commission recommended that charities with subtypes of advancing religion and advancing industry should be ineligible for DGR status and there should be exclusions applicable to some subtypes, including:

• advancing education, including that the DGR category for religious education in government schools should be withdrawn; and
• advancing social or public welfare, including that some aged care, early childhood education and care and other education activities other than PBIs should not have DGR status.

Notably, the Commission recommended that school building funds should no longer receive DGR endorsement.¹ However, the Government has announced that it is not considering this recommendation.

The Commission recommended that the DGR system should not be extended to classes of non-government entities that are not registered with the ACNC, such as community sport organisations.

Increasing trust and confidence in the charity sector

The Commission noted that improving regulation and the ability for regulators and donors to observe how donations are used can increase public confidence and encourage charitable giving. While the Commission did not assess the effectiveness of the ACNC, it has recommended reforms to the ACNC’s enforcement powers and to create a more consistent approach to regulating charities.

The Commission recommended that the concept of ‘basic religious charity ’be removed so that all charities are regulated in a consistent manner and are required to comply with the governance standards and reporting requirements.²

The Commission recommended that the ACNC should be given power to:

• require a charity to provide information necessary to determine whether it is a ‘federally regulated entity’ (and therefore subject to the full scope of the ACNC’s regulatory powers);
• require a charity to provide evidence of distribution or intended distribution of assets upon revocation of charity registration;
• better enforce its powers such as by allowing the ACNC to make applications to state or territory courts for orders regarding the administration of charities regardless of their legal structure - this will require working with state and territory governments to pass necessary legislation; and
• issue rulings in the same manner as the Commissioner of Taxation to support certainty in regulatory outcomes.

The Commission highlighted the importance of a nationally consistent approach to fundraising regulation across the Commonwealth, States and Territories and recommended a more formal and comprehensive approach to embed coordination and cooperation between different regulators. The Commission also stated that continuing to work towards nationally harmonised fundraising is important as a means of reducing regulatory burdens for charities.

On 20 February 2025, the ACNC Advisory Board expanded its membership from 8 to 15 members. The Government announced that this serves to expand representation on the Board from all states and territories, with the goal of aligning with the Commission’s recommendations to create a consistent national approach to regulation and policy for charities.

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Ancillary funds to become ‘giving funds’

The Commission found that while ancillary funds are crucial for distributing funds to the community over the long term, enhanced regulation is needed so they more effectively encourage giving to the community. The Commission recommended that ancillary funds should be renamed to ‘giving funds’ to better reflect their purpose and that ancillary funds will be allowed to smooth their annual distributions over three years to provide greater flexibility to fund capital works or large projects. On 5 December 2024, the Government announced that it will make these changes. The Commission also recommended that that the minimum distribution rate for ancillary funds should be set at between 5% and 8%. However, sector bodies have raised concerns about the unintended consequences of such a change and the Government has announced that it will be consulting on this recommendation.

All cash donations will be tax deductible

The other minor change recommended by the Commission and announced by the Government on 5 December 2024 is the removal of the $2 threshold for claiming a tax deduction.³‍

The Commission’s recommendations, if substantially implemented, have the potential to rationalise and simplify the DGR system for the benefit of charities and the community. However, as yet, substantial reform is not apparent on the horizon.

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¹ There are about 5,000 school building funds with DGR status.

² About 17% of charities self-identify as a basic religious charity and 83% of BRCs are small.

³ This threshold has not changed since it was set at £1 in 1927, but £1 then is equivalent to about $100 today.

‍ For employers and employees affected by Cyclone Alfred in Queensland and New South Wales, the Fair Work Ombudsman has now released advice on workplace rights and responsibilities during this situation.

An organisation may be able to stand down its employees where the organisation is impacted by circumstances beyond its control. ‘Standing down’ means that an employer does not need to pay out leave to an employee, but the employee is still able to accrue leave as normal. This is notwithstanding specific provisions in employment agreements, awards, and enterprise agreements which may include extra rules about whether employees may be stood down without pay. Employees can access paid and unpaid leave options, including annual leave, sick and carer’s leave, community service leave, and Defence Reservists. Additionally, employers and employees may be able to negotiate flexibility in the workplace regarding hours and days to work and the location that their work is performed.

The full article contains further information about the details of standing employees down, the types of leave, accessing flexible working arrangements, and further concerns such as workplace health and safety. It may be accessed here.

If you have an urgent enquiry about your rights and responsibilities, the Ombudsman’s contact details may be found on this page.

If you would like specific advice on how this cyclone has affected your employees, please contact the NFP Lawyers team for more advice here.

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On 10 September 2024 the Queensland Government passed the Respect at Work and Other Matters Amendment Act 2024 (Qld) (Amending Act), which amends the Anti-Discrimination Act 1991 (Qld) (AD Act). The purpose of the Amending Act is to implement key reforms of Queensland’s anti-discrimination laws arising from the 2020 Respect@Work: National Inquiry into Sexual Harassment in Australian Workplaces Report of the Australian Human Rights Commission.  The Respect@Work Report found that sexual harassment in Australian workplaces remains prevalent and the current system for addressing sexual harassment is complex and confusing for victims and employers to understand. The reforms will include new provisions covering harassment on the basis of sex, expanded attributes protected by the law, and the inclusion of a positive duty for all organisations (including not-for-profits in Queensland) to eliminate discrimination, sexual harassment, harassment on the basis of sex, and other objectionable conduct as far possible. They commence on 1 July 2025.

Background

The Respect@Work Report recommended improvements to the Sex Discrimination Act 1984 (Cth) (SD Act) and that the Australian Government work with state and territory governments to amend state and territory human rights and anti-discrimination legislation with the objective of achieving consistency, where possible, with the SD Act. In response to the recommendations of the Respect@Work Report, the Federal Parliament has amended the SD Act.

Following the Respect@Work Report, the Queensland Attorney General requested the Queensland Human Rights Commission (QHRC) to undertake a review of the AD Act. In 2022, the QHRC released its Building Belonging: Review of Queensland’s Anti-Discrimination Act.

New harassment provisions

A key finding of the Respect@Work Report was that there was a disconnect between the protections currently in place under the SD Act and how the public understands these protections. In particular, there was a perceived gap in coverage for conduct that may not meet the threshold for ‘sexual harassment’ but is otherwise caught by the prohibition on direct discrimination on the basis of sex. The report concluded that the continuing prevalence of this behaviour in workplaces indicates the need to clarify the scope of the law.

The Amending Act amends the AD Act to include new prohibitions of ‘harassment on the basis of sex’. However, unlike similar new provisions in the SD Act, which apply in all areas of public life where discrimination is prohibited, the new Queensland prohibition will only apply to work or work-related areas.

Under the new definition, ‘harassment on the basis of sex’ will happen if a person:

• engages in unwelcome conduct of a demeaning nature in relation to another person;
• engages in that conduct on the basis of the sex of the person harassed; or
• engages in the conduct with the intention of offending, humiliating or intimidating the other person, or in circumstances where a reasonable person would have anticipated the possibility that the other person would be offended, humiliated or intimidated by the conduct.

Broadly, the prohibitions apply to harassment by a person conducting a business or undertaking, a worker in a business or undertaking or another person against other workers or persons in connection with a business or undertaking.

Work environment that is hostile on the basis of sex

As recommended by the Respect@Work Report, the Amending Act introduces a new prohibition making it unlawful for a person to subject a second person to a work environment that is hostile on the ground of sex. Conduct of this nature is likely already covered by existing prohibitions on sexual harassment or as indirect discrimination. However, the report concluded that the continuing prevalence of the conduct points to a disconnect between the existing protections and the public’s understanding of these protections. The existing protections have not been widely judicially considered. The amendments aim to clarify the scope of the law.

The new provision prohibits conduct (including making statements) that a reasonable person, having regard to all circumstances, would have anticipated would create a work environment that would be offensive, humiliating or intimidating to another person because of the second person’s sex, or a characteristic that a person of the second person’s sex generally has, or a characteristic that is often imputed to a person of the second person’s sex. This conduct does not need to be the main or only conduct of the person that makes the hostile work environment. This reduces the burden of proof on the complainant.

A person subjected to such conduct may make a complaint to the QHRC.

New positive duty

Reflecting a recommendation of the Respect@Work Report, the QHRC’s Building Belonging Report recommended introducing a positive duty to take reasonable and proportionate measures to eliminate discrimination, sexual harassment, and other prohibited conduct as far as possible. The Respect@Work Report identified the key benefit of a positive duty as shifting the burden from individuals making complaints to employers taking proactive and preventative actions.

The Amending Act introduces a new positive duty that requires duty holders to take reasonable and proportionate measures to eliminate discrimination, sexual harassment, harassment on the basis of sex and other objectionable conduct as far as possible. The duty only applies to persons conducting a business or undertaking within the meaning of the Work Health and Safety Act 2011 (Qld). The duty is in addition to, and overlaps with, the new positive duty under the SD Act but is broader in scope as it extends the duty to a wider range of contexts and conduct in Queensland.  The duty is also in addition to workplace health and safety regulations already in force.

In practical terms, the positive duty means that rather than merely waiting for complaints to be made, duty holders will be required to take proactive steps to prevent objectionable conduct. Helpfully, the Explanatory Memorandum for the Respect at Work and Other Matters Amendment Bill 2024 (Qld) included the following examples of the type of conduct that will be expected to comply with the positive duty:

• ensuring there are organisational policies in place that address the importance of respectful behaviour;
• ensuring easily accessible information is available;
• conducting workplace surveys to measure knowledge and awareness of unlawful conduct like discrimination, and the extent to which such conduct has been experienced by staff;
• engaging in informal or formal disciplinary discussions with staff who are engaging in disrespectful or unlawful conduct; and
• managers and leaders clearly and regularly articulating expectations of respectful behaviour.

The QHRC will have power to investigate suspected breaches of compliance with the positive duty and suspected systemic breaches related to contraventions on the basis of sex and is also empowered to take enforcement action in the form of compliance notices and enforceable undertakings. The QHRC may issue public reports on systemic contraventions.

Expansion of protected attributes

The Building Belonging Report recommended updates to some existing attributes protected under the AD Act and the addition of new attributes. The Amending Act has added 6 new protected attributes:

• expunged conviction: means the person has an expunged conviction under the Criminal Law (Historical Homosexual Convictions Expungement) Act 2017.‍
• homelessness: not defined
• irrelevant criminal record: means, briefly,
  • a charge against a person that has lapsed, been withdrawn, discharged or struck out, or
  • where the person has been acquitted or had a conviction quashed or set aside, or
  • where a person has a conviction for an offence but the circumstances of the offence are not directly relevant to the situation in which the record is being considered.
• irrelevant medical record: means a person’s medical record that is not directly relevant to the situation in which the record is being considered. ‘Medical records’ includes applications and claims made for workers’ compensation.  
• physical appearance: means a person’s weight, size or height, the presence of a birth mark or scar, or any other body characteristics that are not freely chosen.
• subjection to domestic or family violence: means the person is or has been subject to domestic violence within the meaning  given by the Domestic and Family Violence Protection Act 2008 (Qld).

The Amending Act has updated 6 existing attributes as follows:

• family, carer or kinship responsibilities - The existing attribute of ‘family responsibilities’ is replaced with undefined attribute of ‘family, carer or kinship responsibilities’.
• parental status - The definition of ‘parent’ is updated to include references to persons who, under Aboriginal tradition or Torres Strait Island custom, are regarded as a parent or relative.
• pregnancy and potential pregnancy - The attribute is updated to add ‘potential pregnancy’ which is defined as including  the person’s capability to become pregnant, the person’s expressed desire to  become pregnant, and the person’s likelihood, or perceived likelihood, to become pregnant.
• race - The definition of ‘race’ is updated to add immigration or migration status, and caste.
• sexual orientation - The existing attribute of ‘sexuality’ and its definition are replaced with ‘sexual orientation’.
• trade union activity - The  existing attribute is updated to add activities in relation to registered  industrial organisations.

While the amendments do not commence until 1 July 2025, Queensland organisations that conduct a business or undertaking should begin taking steps to ensure their organisation will be in a position to comply from commencement.

For financial years commencing on and after 1 July 2024, all Queensland incorporated associations will be required to disclose at the annual general meeting (AGM) the remuneration and other benefits provided to management committee members, senior staff and their relatives (relevant persons) during the previous financial year, even if the value is immaterial or no remuneration or benefits were provided.

The purpose of the disclosure requirement is to provide greater transparency and accountability within associations and enable members to understand the finances of the association.

Medium and large associations may already report to members to some extent on the remuneration and benefits of relevant persons and be better set up to implement the new requirements, although the lack of any materiality threshold will be an added challenge. Small associations may find them an added compliance burden and a potential source of member questions or concerns if there are disclosures to be made.

When a committee approves a payment or other benefit to a relevant person this will be a ‘related party transaction’ and there will often be a conflict of interest to be addressed. The new requirement does not alter the statutory and general law duties already imposed on committee members relating to conflicts of interest. Generally it is up to the committee to deal with the conflict and committees has not been required to report conflicts to members. The new requirement should prompt committees to review and update policies and procedures for identifying, recording and reporting related party transactions and conflicts of interest.

Legislative provisions

The new requirement is a statutory obligation imposed on each committee member, not the association. Section 70D of the Associations Incorporation Act 1981 (Qld) (the Act) requires the members of the management committee to ensure that prescribed details about remuneration and other benefits provided to relevant persons are disclosed at the AGM and regulation 9D in the Associations Incorporation Regulation 1999 (Qld) sets out the prescribed details (the Act Reporting Requirement). Failure to comply may result in a financial penalty being incurred by each committee member.

How to disclose

Remuneration and benefits can be disclosed in:

• the documents that the association is required under the Act to present at the AGM, including, for an ACNC-registered charity, a document that the association is required to give to the ACNC for the financial year; or
• a written remuneration statement for the financial year; or
• if no remuneration or benefits were paid or given, by oral statement made at the AGM and recorded in the minutes.

Even if remuneration or benefits provided to relevant persons have an immaterial value, or are no different to benefits provided to other persons, a written statement must be provided.

Though not required under the Act or by the ACNC to do so, if a small incorporated association, including an ACNC-registered charity, presents a financial statement to its AGM and lodges it with the ACNC to comply with the disclosure requirement, it must make the remuneration disclosure in a written statement even if the disclosure is also made in the financial statements.

Terminology

A senior staff member is a person who participates in making decisions that affect the whole or a substantial part of the activities of the association, or has the capacity to significantly affect the association’s financial standing.

A relative of a person means a spouse, parent, sibling, child, grandparent or grandchild of the person.

Remuneration includes salary, allowances and other entitlements but does not include reimbursement of out of pocket expenses. Remuneration and benefits include those defined as ‘compensation’ in AASB 124 which includes paid leave, profit-sharing arrangements, bonuses, long-term benefits and termination and retirement benefits and non-monetary benefits such as use of a car and free or subsidised goods or services.

Disclosure by ACNC-charities

Large size charities are required to report to the ACNC on the remuneration (including benefits) of ‘key management personnel’ including committee members, and related party transactions in their financial statements. Medium size charities are required to report on related party transactions in their financial statements and some are also required to report on remuneration of ‘key management personnel’. Charities of all sizes are required to provide information about related party transactions in their ACNC annual information statement. The Act Reporting Requirement covers aspects of ACNC reporting on both remuneration and benefits of key management personnel and related party transactions. The ACNC reporting requirements are different from the Act Reporting Requirement in some respects. For example:

• Both the ACNC and the Act Reporting Requirement only require disclosure of the aggregated amount of remuneration and benefits and the number of persons who received remuneration and benefits. However, if there is only one key management personnel, the amount of the remuneration and benefits does not need to be reported to the ACNC but must be disclosed to the AGM under the Act Reporting Requirement.
• The Act Reporting Requirement covers remuneration and benefits provided to ‘relatives’ of management committee members and senior staff whereas for medium and large size charities, the ACNC uses accounting standard AASB 124 Related Party Disclosures to define what a ‘related party’ is but has a different definition of ‘related party’ for small charities.

Given the differences, associations that are ACNC-charities will need to consider whether the disclosures in the financial statements provided to the ACNC will be sufficient to meet the Act Reporting Requirement. Bearing in mind that the financial statements will be publicly available on the ACNC register, charities that remunerate or provide benefits to only one person and are therefore not required to report the amount of that remuneration to the ACNC may prefer not to do so in their financial statements and instead provide a separate written statement to the AGM.

Materiality

There is no dollar materiality threshold for monetary remuneration or benefits and no value materiality threshold for non-monetary benefits. The Act Reporting Requirement, rather unhelpfully, states that whether free or subsidised goods or services constitute sufficient value to be considered as benefits depends on the following cumulative criteria:

• the overall value of the goods or services; and
• the reason the person was given the goods or services; and
• whether any other member has received similar goods or services in similar circumstances.

Committees will no doubt find it challenging to decide whether it is necessary to disclose free or subsidised goods or services provided to relevant persons, determine the value of the benefit and ensure that all disclosable benefits are recorded in sufficient detail.

Implementing the new requirement

An association with a financial year ending on 30 June will need to begin recording relevant remuneration and benefits from 1 July 2024 and make its first disclosure at the next AGM after 30 June 2025.

Committees should take steps to ensure they will be in a position to comply with, and decide how best to comply with, the Act Reporting Requirement.

If you would like assistance to work out how this change will impact your association, please do not hesitate to contact the team at NFP Lawyers.

‍Grievance procedure

Effective on 22 June 2022, the Associations Incorporation Act 1981 (Qld) (AI Act) was amended to add section 47A which, in summary, provides that:

• an association’s rules may include a procedure for dealing with member grievances; and
•  if the association’s rules do not include a grievance procedure that is consistent with the requirements set out in section 47A (a complying grievance procedure), the default position is that the association’s rules are deemed to include the provisions of the model rules providing for the grievance procedure (the model procedure), even if the association’s rules expressly state that the model rules do not apply to the association.

Up to 1 July 2024, the default position had not come into practical effect because there was no grievance procedure in the model rules.

Application of the grievance procedure

The section 47A grievance procedure is only for dealing with any dispute under the rules between:

• a member and another member; or
• a member and the management committee; or
• a member and the association.

It does not apply to disputes between the association and the management committee or between members of the management committee in that capacity. Further, the model procedure is only for disputes initiated by a member against another member, the management committee or the association.

If an association’s rules include a grievance procedure that is not a complying grievance procedure, then the entire procedure is invalid and the model procedure applies.

Court proceedings

The legislative intent of the grievance procedure is to equip associations with a formal process to handle and resolve internal disputes without the need to resort to, or at least, before resorting to, costly court proceedings.

Section 72 of the AI Act gives the Supreme Court of Queensland powers to make orders and declarations to enforce an association’s rules and the rights and obligations of members and the association. However, reflecting the legislative intent, the section provides that an association or a member cannot make an application to the court in relation to a dispute, including applications for interim orders, unless the association or member has made reasonable attempts to resolve the dispute using the grievance procedure in the association’s rules.

Complying grievance procedure

A complying grievance procedure must include the following:

• The procedure must include mediation and may provide for a person to decide the outcome of the dispute.
• A member may appoint any person to act on behalf of the member in the grievance procedure (member’s representative).
• In applying the grievance procedure, the association must ensure that:
  • each party to the dispute has been given an opportunity to be heard on the matter the subject of the dispute; and
  • the mediator, and any person engaged under the rules to decide the outcome of the dispute, is unbiased.
• If a member has initiated a grievance procedure for a dispute between the member and the association, the association must not take disciplinary action against the member or the member’s representative until the grievance procedure has been completed.

The model rules grievance procedure

The Associations Incorporation Regulation 1999 (Qld) has been amended with effect on 1 July 2024 to add new rules 12A to 12F to the model rules in Schedule 4. In summary, the model procedure is as follows:

• A member (the aggrieved member) initiates the procedure by providing notice to the other party and also to the management committee if the dispute is with another member or the association.
• If 2 or more members initiate a grievance procedure in relation to the same subject matter, the management committee may require the disputes to be dealt with in a single process and the aggrieved members must choose one of them to represent all of them in the grievance procedure.
• The parties, in good faith, must attempt to resolve the dispute.
• If the parties cannot resolve the dispute within 14 days, the aggrieved member may request the secretary to refer to the dispute to mediation within a further 21 days and the secretary must refer the dispute to mediation within 14 days of the request.
• The management committee is not required to attempt to resolve the dispute or refer the dispute to mediation under certain circumstances, including, if:
  • a procedure under the rules to take action against the aggrieved member or terminate the aggrieved member’s membership has already commenced and the dispute relates to that procedure;
  • the aggrieved member has recently behaved in away that gives the management committee grounds for disciplinary action under the rules and dispute relates to that behaviour;
  • the dispute could reasonably be considered frivolous, vexatious, misconceived or lacking in substance; or
  • the dispute relates to a matter that has already been subject of the grievance procedure.
• The mediator must be chosen by the parties. If the parties cannot agree:
  • if the dispute is between members, the mediator is appointed by the management committee, and there are no required mediator qualifications; or
  • if the management committee or the association is a party to the dispute, the mediator must be an accredited mediator or a mediator appointed by the director of a dispute resolution centre.‍
    • Accredited mediators are listed on the Register of Nationally Accredited Mediators.‍
    • Dispute resolution centres are established under the Dispute Resolution Procedures Act 1990 to provide mediation services.
• The appointed mediator must start the mediation as soon as possible after appointment and try to finish it within 28 days after appointment unless they are a director of a dispute resolution centre.
• The mediator:
  • must give each party to the dispute an opportunity to be heard on the subject matter of the dispute;
  • comply with natural justice;
  • must not act as an adjudicator or arbitrator; and
  • may see the parties together or separately, with or without representation during the mediation.
• A party to the dispute may appoint a representative. A representative must have sufficient knowledge of the subject matter of the dispute to be able to represent the party effectively and be authorised to negotiate an agreement on behalf of the party.
• The costs of the mediation are shared equally between the parties unless otherwise agreed.
• A meeting or mediation can occur electronically if agreed to by all parties and the mediator.

Former members

The complying grievance procedure requirements only apply to current members but a fertile ground for association disputes is whether a person’s membership has been validly terminated, so there is a threshold question as to whether the aggrieved person is still a member who has the right to initiate the grievance procedure. The model procedure provides that the grievance procedure cannot be used by a person whose membership has been terminated if the rules provide for an appeal process against the termination.

Mediation or arbitration

A mediator assists the parties to reach a negotiated resolution and may recommend outcomes but cannot decide the dispute. A dispute resolution procedure in which a person has the authority to decide the outcome of the dispute is called arbitration. An arbitrator’s decision is final and binding on the parties and the arbitrator’s decision is enforceable by a court.

The model procedure does not provide for arbitration so if mediation fails, the next formal step available to the aggrieved member is to start court proceedings.

What associations should do?

Queensland incorporated associations will need to consider whether the model procedure is suitable and sufficient for their needs or whether a customised grievance procedure should be developed.

If you would like our assistance to work out what grievance procedure is suitable for your association and to change your association’s rules to include a grievance procedure, please do not hesitate to contact us.

The Fair Work Legislation Amendment (Closing Loopholes) (No. 2) Act 2024 (Closing Loopholes Part 2) was passed by Commonwealth Parliament on 12 February 2024 and received Royal Assent on 26 February 2024. It amends the Fair Work Act 2009 (Cth) (Fair Work Act) and related legislation.

Closing Loopholes Part 2 is the final tranche of the Government’s reforms to Australia’s employment laws and follows on from the passing of Closing Loopholes Part 1 in December 2023. You can read our summary of Closing Loopholes Part 1 here. Key reforms in Part 2 include changes to casual employment, changes to the meaning of ‘employee’ and ‘employer’ the new right to disconnect and new jurisdiction for the Fair Work Commission to consider unfair terms in services contracts with independent contractors.

A summary of the key changes that may be relevant to your not-for-profit organisation is provided below. While some of the newly introduced laws are already in effect, all these key changes will come into effect on 26 August 2024.

Casual Employees – A new definition and changes to casual conversion process

The definition of ‘casual employee’ has been replaced in the Fair Work Act. The current definition (which will be repealed) determines whether an employee is a casual employee by reference to the terms of their employment contract. The new definition has regard instead to the substantive nature of the employment relationship. Under the new definition, an employee will be considered a casual employee where:

• there is an absence of a firm advance commitment to continuing and indefinite work; and
• the employee is entitled to either a casual loading or a specific rate of pay for casual employees under an applicable fair work instrument or their employment contract.

In determining whether there is a ’firm advance commitment’, considerations include whether there is a regular pattern of work, whether the employee can accept or reject work, the likelihood of future continuing work and if any part-time or full-time employees perform the same kind of work.

The current process for casual conversion (which requires an employer to make a written offer to eligible casual employees who have been employed for 12 months to convert to permanent employment) will be replaced with an ‘employee choice’ framework which allows a casual employee who meets the prescribed criteria to request conversion to permanent employment.

Employers may refuse a casual employee’s request for conversion on fair and reasonable operational grounds. Unresolved disputes regarding casual conversion can be referred to the Fair Work Commission.

Employers will now also be required to provide a Casual Employment Information Statement to casual employees every 6 months, or every 12 months for a small business.

Right to Disconnect

Employees will have the right to reasonably refuse to monitor, read, or respond to attempted contact from an employer, or third parties such as clients, outside their ordinary working hours.

Consideration must be given, but not limited, to the following factors when considering whether an employee’s refusal is reasonable:

• the reason for the contact;
• how the contact is made;
• any compensation received by the employee for remaining available to perform work during the period or for working any additional hours outside of their ordinary hours;
• the nature of the employee’s role and level of responsibility; and
• the employee’s personal circumstances (including family or caring responsibilities).

An employer who takes action against an employee for exercising their right to disconnect could be subject to a general protections claim.

Small business employers will have an additional 12 months before the right to disconnect applies.

A new test to determine employment status

The Fair Work Act generally governs employment relationships, providing rights and imposing obligations on an employer and an employee. It largely does not apply to independent contractors. The Fair Work Act defines the terms ‘employee’ and ’employer’ as having their ordinary meaning which is the meaning established by the courts through common law.

Closing Loopholes Part 2 inserts a new section 15AA into the Fair Work Act which requires that when considering whether or not a worker is an employee for the purposes of the Fair Work Act regard must be to the ‘real substance’, ‘practical reality’ and ‘true nature of the relationship’.

Determining whether there is an employment relationship will require:

• consideration of the totality of the relationship between the worker and the principal; and
• reference not only to the terms of the contract, but also to other factors, including how the contract is performed.

This amendment expressly overturns decisions made by the High Court in 2022 which found that in determining the nature of the working relationship priority should be given to the written terms of the contract between the worker and the principal. Now, organisations will need to consider a multi-factorial test when classifying its workers and how the relationship plays out in practice.

If a principal considers that due to the application of section 15AA, the worker will become an employee of the principal, the principal must give the worker a notice to that effect. There is a notification process by which workers who earn more than the contractor high income threshold (not yet prescribed by regulation) can opt out from the application of section 15AA and continue to be treated as an independent contractor.

A new right for independent contractors to challenge unfair contract terms

To date, there have been two statutory rights of action for independent contractors when it comes to unfair contract terms. Firstly, the Australian Consumer Law (ACL) contains prohibitions on unfair contract terms applying to consumer contracts or small business contracts that are also standard form contracts. Disputes around unfair contract terms under the ACL are heard in courts and tribunals. Secondly, independent contractors have a broader right to make an application to a court to review a services contract where it is unfair or harsh under the Independent Contractors Act 2006 (Cth) (ICA). Both of these methods require court intervention and are therefore costly and inflexible.

Under Closing Loopholes 2, the Fair Work Commission will have jurisdiction to resolve disputes between independent contractors and principals about unfair contract terms in services contracts. The purpose of this change is to provide independent contractors with a low cost, flexible and informal method for resolving such disputes. The term ‘independent contractor’ is not defined in the Fair Work Act except that it is not confined to an individual. However, the new definition of ‘services contract’ only applies to contracts relating to the performance of work by an individual. A services contact must have the requisite constitutional connection with Australia.

The dispute must be about a term or terms in a services contract which, in an employment relationship would be a workplace relations matter as defined in the Fair Work Act. This right will only be available to contractors who earn below the contractor high income threshold. The rights of action under the ACL and ICA remain available to all independent contractors.

When considering whether a contract term is unfair, the Fair Work Commission will be required to consider, among other matters it considers relevant:

• the relative bargaining power of the parties to the service contract
• whether the services contract as a whole displays a significant imbalance between the rights and obligations of the parties
• whether the contract term is reasonably necessary to protect the legitimate interests of a party to the contract
• whether the contract term imposes a harsh, unjust or unreasonable requirement on a party to the contract
• whether the contract as a whole provides for total remuneration for performing work that is less than that of comparable employees, independent contractors or other employee-like workers.

If a contract term is found to be unfair, the Fair Work Commission will have the power to change those terms of the services contract or set aside those parts of the contract, which relate to a workplace relations matter.

Not-for-profit organisations who engage independent contractors must be aware of these changes and ensure their services contracts do not contain contract terms that would be regarded as unfair in an employment contract.

If you would like to discuss these changes in more detail, including what they mean for your organisation, please do not hesitate to contact us.