Unfair Contracts (Section 106) Claims:

Contracts under New South Wales industrial relations laws can often be considered by the Industrial Relations Commission for unfairness. These can include employment contacts, purported franchise agreements which may not in fact be franchise agreements, licence contracts and other contracts where it might be established that the New South Wales Unfair Contracts (Section 106) Jurisdiction might apply to the Contract. The authority under which the contract is assessed by the Commission for unfairness is section 106 of the Industrial Relations Act1996 (NSW), which reads as follows:

Power of Commission to declare contracts void or varied

(1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract.

(2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason.

(2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as:

(a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and

(b) the performance of work is a significant purpose of the contractual arrangements made by the person.

(3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time.

(4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force.

(5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case.

(6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss.

This section makes it clear that the Commission has the authority to make determinations concerning allegations of unfairness in an industrial relations contract. The Commission's powers extend to:

• Declaring the contract is partly void.
• Declaring the contract is wholly void.
• Varying the contract so as to cure the unfairness.
• The making of orders in relation to payments being made between parties.

These declarations or determinations can be made in relation to the contract so that the order is to have effect from the date the contract was executed or was purported to be executed, or from some other time after the parties entered into the contract.

Contracts that unfair can be considered by the Commission, as to whether the alleged unfairness occurred at the time the contract was entered into and/or when the contract came into operation and the alleged unfairness became apparent at some later point in time. Likewise, the provisions of section 106 apply to what is known as a “collateral contract”. These are contracts that are related to the contract under which the person is performing work in an industry and the performance of the work is substantially the objective of the contract. 

The Commission will turn its attention to whether or not the aggrieved party may have taken any action to “mitigate its loss” meaning, whether or not the party making a complaint did anything to reduce the damage or loss, or prevent damage or loss from being suffered. Policy considerations can also be taken into account by the Commission. 

Generally speaking, the Commission appears to have broad powers to make orders in relation to unfair contracts. The unfair contract solicitor will need to collate all evidence and facts before legal advice can be offered to the prospective litigant in relation to an application under section 106. The unfair contract lawyer will need to consider the unique facts of the case when preparing submissions to the Commission. Unfair contract litigation under the provisions of the Industrial Relations Act 1996 (NSW) can only be commenced if the jurisdictional threshold is reached:

• The contract must relate to work in an industry; and
• The contract must concern the performance of work; and
• The work must have an industrial flavour.

It is important to ensure that any case is commenced in the right forum. The unfair contract and industrial law litigator will need to investigate the provisions and requirements of any industrial code under the Australian Consumer Code or any other relevant Statute and then assess whether or not there may be any jurisdictional issues before proceedings are formally commenced. This is because the Industrial Relations Act 1996 (NSW) is a state Act but there are provisions in federal legislation which provide relief for unfair contracts as well, such as the Independent Contractors Act 2006 (Cth).

In the event that the disputed contract which is subject to an allegation of unfairness, is an independent contractors agreement, it may in fact need to be assessed under the provisions of the federal legislation. This can cause problems because the federal legislation has its own criteria and jurisdictional thresholds. It is essential that these matters be first investigated by the unfair contract litigator before any action is taken to sue a party for unfair contracts.

If you require advice in relation to an unfair contract and you are contemplating commencing proceedings in the Industrial Relations Commission under s 106 of the Act, you should consult with one of our lawyers and seek legal advice before you commence proceedings. Our Employment Law Team is highly experienced in this area of the Law. Please contact (02) 9233 4048 or send an email to info@navado.com.au to arrange an appointment. 

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