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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Small firms need a fair go

Thursday, August 22, 2013

Of the seven million Australians who work in small businesses few probably understand what Tony Abbott proposes for them if he becomes prime minister. But Abbott's small business policy is a game-changer.

Abbott has committed to introducing contract fairness for small businesses in their dealing with big business and big government. This significant initiative demonstrates a wide difference between the two parties.

In Kevin Rudd's first term he had the chance to put in place contract fairness for small business people. The legislative process was started by the Howard government but importantly was supported by Labor which put in place fair contract laws for consumers. However, after big business lobbying Rudd's Labor denied the same rights to small business people. The theory of commercial contracts is that two parties freely enter a contract on equal terms. But the theory breaks down in dealings between big and small business.

Big business put together contracts that entirely favour them. If challenged they hire expensive lawyers to protect their position. Small business people cannot afford the lawyers and so give in. Frequently government is the worst offender. Most government contracts I've reviewed are appalling. Big business takes the lead from government.

Look at how big supermarkets treat their small business suppliers. In construction the big duopoly builders structure their businesses around unfair contracts. They take the profit and pass the risk on to subcontractors who actually do the work.

Take this example. A big brand name company distributes its products using small business owner-drivers. The standard contract the company uses requires the drivers to buy a certain type of truck. Yet the company can terminate the contract at any time. If terminated, the contract requires the driver to sell the truck to the company at a price the company chooses. How's that for unfair?

If Abbott becomes prime minister his fair contract policy would ban this owner-driver contract. Big business has been lobbying the Coalition to drop this policy. But the Coalition has stood firm. It has just released policy package and fair contract laws are top priority.

Fair contracts is not about giving small business people an advantage over big business. It's about applying the same contract rights for small business people as consumers.

Abbott's policy will be a quiet business revolution. Good business relies on trust. But that trust must be reflected in fair contracts. These will improve the risk profile for small businesses making finance easier to obtain.

On this issue Abbott has marked himself as pro-small business in a practical way. Sensible big businesses will back this. In comparison, Labor has sided with big businesses that want unfairness.

[First published in The Australian, August 2013]

 

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