Telehealth Providers Beware: TGA Cracks Down on Prescription Drug Advertising

Telehealth Providers Beware: TGA Cracks Down on Prescription Drug Advertising

medical law

With the recent Therapeutic Goods Administration (TGA) guidelines in March 2024 honing in on advertising cosmetic health services involving injectables, it’s clear the TGA is focusing on a number of different industries when it comes to advertising. A laser focus on compliance is more important than ever before.

So what laws apply to telehealth services and providers?

The Medical Board of Australia defines ‘telehealth consultations’ as “consultations that use technology as an alternative to in-person consultations between a patient and medical practitioner (doctor)”.  This is a broad definition and includes video, internet and telephone consultations, the electronic transmission of digital images and data, and the electronic prescribing of medicines.  

And the Therapeutic Goods Administration (TGA) is now flexing its muscles when it comes to telehealth and prescription-only medications. 

In a recent move in late 2023, they fined InstantScripts Pty Ltd a hefty $742,500 for allegedly promoting prescription-only medicines through their telehealth services.

This significant fine sends a clear message: telehealth providers need to be extra cautious about their advertising practices. 

Here’s a breakdown of what you need to know:

Why the Crackdown?

The core concern is protecting consumers. The TGA emphasizes that decisions about prescription drugs should be made by a qualified healthcare professional and discussed in a private patient consultation, and not influenced by misleading advertising. Direct-to-consumer advertising of these medications could lead to patients pressuring doctors for unnecessary prescriptions, potentially causing harm.

The Rules of the Game

Pursuant to s 42DLB(1) and (7) of the Therapeutic Goods Act 1989 (Therapeutic Goods Act), advertising substance or goods containing substances which are included in Schedules 3, 4 or 8 to the current Poisons Standard (but not in Appendix H of the current Poisons Standard) other than a reference authorised or required by a government or government authority, is prohibited. 

This means advertising prescription-only medicines like insulin, antibiotics, and blood pressure medication as well as substances such as botulinum toxin type A (often known as ‘Botox’) directly to consumers is strictly prohibited. 

This applies to telehealth providers as well. Section 42DLB of the Therapeutic Goods Act is a civil penalty provision – companies that breach this provision can receive large fines if they are found to be in breach, with the maximum penalty being 5,000 penalty units (currently $1.565 million) and 50,000 penalty units for companies (currently $15.65 million).

What Does This Mean for Telehealth Providers?

Here are some key takeaways and steps to take to ensure compliance:

  • Review your promotional, social and advertising content. Make sure it doesn’t advertise prescription-only medications in any way, even implicitly.
  • Focus on the service, not the drugs. Promote the benefits of your telehealth consultations without mentioning specific medications or treatments if it involves prescription medicines.
  • Brush up on regulations. Familiarize yourself with the Therapeutic Goods Act as well as the Therapeutic Goods Advertising Code, the legislative instrument was made under section 42BAA of the Therapeutic Goods Act.

Beyond the TGA:

TGA isn’t the only regulatory body keeping an eye on telehealth. The Australian Health Practitioner Regulation Agency (AHPRA) and the Medical Board of Australia are also focused on regulating this area of health services.

The new Telehealth Guidelines issued in September 2023, developed by the Medical Board of Australia under section 39 of the Health Practitioner Regulation National Law Act (the National Law), highlight the increased scrutiny on telehealth practices.

Not Just InstantScripts

The TGA has been busy enforcing regulations across the board in 2023. 

The TGA issued 20 infringement notices totalling $159,840 to Mode Medical Pty Ltd (trading as Drip IV Australia) and an executive officer of the company, for the alleged unlawful advertising of intravenous infusion products to Australian consumers on a company website and social media. There were multiple alleged breaches, including alleged prohibited and restricted representations, as well as advertising that referred to ingredients that are prescription only, such as glutathione. 

They’ve also issued fines and prosecuted various entities for offences like:

  • Unlawfully advertising nicotine vaping products.
  • Promoting unapproved treatments for serious diseases.
  • Selling unregistered sports supplements.
  • Manufacturing and advertising illegal performance-enhancing drugs.

The Takeaway

The recent enforcement actions show the TGA is prioritizing regulating the intersection of telehealth and prescription-only medications. Telehealth providers should take a proactive approach by regularly reviewing their practices and advertising materials to ensure compliance. Remember, avoiding hefty fines and protecting your patients’ well-being should be top priorities and engaging in best practice will help you stand out as an industry leader.

Need guidance in relation to compliance with TGA laws? Here at Law Quarter, our lawyers offer advice to clients in many areas and industries, including beauty and skincare, aesthetic medicine, cosmetic clinics and healthcare. We also run a sister business, Compliance Quarter so we can help you implement compliance programs in your business.You can also reach out to Jacqui Jubb, Partner at Law Quarter at jacqui@lawquarter.com.au or 0411 659 671 to discuss your concerns. We’d love to help.

Influencer Marketing: The Legal Essentials for Influencers and Product-Based Businesses

Influencer Marketing: The Legal Essentials for Influencers and Product-Based Businesses

Commercial Law, Private Law, Regulatory Updates, Social Media Law

There are more than 64 million influencers’ accounts on Instagram all over the world. 

And it may seem like a sparkly, selfie-obsessed, sunkissed swathe of inspirational posts and weight loss tips where the only rule is that there are no rules.

But, of course, there are rules. Knowing what could land you in hot water (for both influencers and product-based businesses reaching out to influencers) will mean you’re a legally savvy influencer and not just there for the hype. 

Ready to dive into the wild and wonderful world of influencer marketing? Grab your virtual popcorn as we explore the drama, glamour, and the legal intricacies of influencer marketing.

The Legal Framework

A number of laws apply to influencers in Australia. Firstly, the Australian Association of National Advertisers (AANA) has a Code of Ethics that applies to all advertisers which sets the standard for advertising in any medium.

The Code of Ethics is the cornerstone of the AANA self-regulatory system and is supplemented by a Code of Advertising and Marketing to Children, Food and Beverages Code, Environmental Claims Code and Wagering Advertising & Marketing Communication Code. 

The self-regulatory system is underpinned by an independent, transparent and robust complaints-handling system administered by Ad Standards. Its’ object is to ensure that advertisements and other forms of marketing communications are legal, honest, truthful and have been prepared with respect for human dignity, an obligation to avoid harm to the consumer and society and a sense of fairness and responsibility to competitors.

The Code applies to all kinds of content, cinema, internet, outdoor media, print, radio, telecommunications, television or other direct-to-consumer media including new and emerging technologies. Which means Instagram, Tik Tok, Snapchat and all social media platforms are all fair game.

Influencers are also bound to comply with the Competition and Consumer Act 2010 (Cth) known as the Australian Consumer Law (ACL), which prohibits businesses from misleading or deceiving consumers. This applies to influencers engaging in trade or commerce, as well as brands and marketers using influencers to advertise online. The Australian Competition and Consumer Commission is the competition regulator, watchdog and national law champion (ACCC).

And don’t forget that if you’re in the therapeutic goods game, section 24 of the Therapeutic Goods Advertising Code 2021 (TGA Code) sets out the specific requirements for using endorsements and testimonials in advertisements about therapeutic goods. (Watch this space for our comprehensive to the TGA Advertising Code in the next week.)

So let’s take a look at some of the key legal areas influencer should wrap their head around:

1. Disclosure Dazzle: Let’s Play ‘Spot the Sponsorship’

Let’s talk about sponsored posts. If a brand offers you free products or pays you to post about them, you have to disclose it to your audience. Think of disclosure like a secret handshake – only cooler. 

Of the 118 social media influencers reviewed in the ACCC’s influencer sweep, 81 per cent were found to be making posts that raised concerns under the ACL for potentially misleading advertising

The ACCC is due to release guidance in early 2024 for influencers and businesses to remind them of their obligations under the ACL to disclose advertising in social media posts.

So be transparent about those sponsored posts, gifts, or any cash flowing into those influencer pockets. Think of it as a trust exercise for your followers. Your influencers have gotta spill the beans with a nod to the laws so hashtags like #Ad, #Sponsored will denote that they know their legal game.

2. Influencers and the Deceptive Mirage: Don’t Mislead Your Fans

Let’s talk about the FYRE Festival Fiasco of 2017. 

Picture this: a luxurious three-day music festival on Pablo Escobar’s private island, promising A-list celebrities such as rapper Ja Rule and models Kendall Jenner and Bella Hadid, 5-star cuisine, and non-stop celebration. And festival goers forked out thousands for it. 

What could possibly go wrong? Well, as it turns out, everything. The FYRE Festival, orchestrated by the infamous Billy McFarland (aged 26), became the epitome of a party that never happened. Disgruntled festivalgoers found themselves stranded in the Bahamas, facing hurricane tents, cancelled performances, and a scant supply of cheese sandwiches.

The festival’s downfall wasn’t just due to logistical nightmares; it was fuelled by the misleading promotion orchestrated by social media influencers. 

High-profile models and actresses were paid to post idyllic photos and videos on their private Instagram accounts, creating a mirage of the ultimate party destination. Little did their fans know, these influencers had no intention of actually attending the event. 

The aftermath left both disappointed festivalgoers and a legal conundrum in its wake. The disastrous Fyre Festival spawned lawsuits against the event’s organizers, who included Ja Rule and Billy McFarland, the latter of whom is now serving a six-year prison sentence for fraud.

As the FYRE Festival unfolded, legal questions arose, especially regarding the responsibility of influencers for promoting misleading content. 

In Australia, consumer protection laws, like the ACL, make it clear that deceptive advertising practices won’t be tolerated. While there’s no specific legislation targeting social media, the general laws on false and misleading claims in the ACL apply to businesses and influencers alike.

3. The Fine Print Finesse: Contracts Are the New Black

Contracts are your legal safety net in the unpredictable world of social media. 

An Influencer Agreement is a legal document which sets out the agreement between the Influencer and the Brand in relation to the rights and obligations of each party. Things like the length of the contract, confidentiality, permitted use of content, agreed fees and payment terms, exclusivity and restraints and the circumstances in which the agreement can be terminated should all be mapped out clearly in the contract. 

Make it clear who’s the boss, who’s getting paid, how to handle disputes, how to exit the arrangement if necessary and who’s in charge of the creative chaos.

4. The Age-Old Challenge: Mastering the Influencer Game when Marketing to Children

Stricter rules apply to advertising to children as of 1 December 2023, when the new Children’s Advertising Code came into force.

Advertising to Children must not contravene prevailing community standards, including by promoting products or services unsuitable or hazardous to children or encouraging unsafe practices. Advertising to Children that encourages bullying or promotes unhealthy ideal body image may also breach this rule.

AANA CEO Josh Faulks has said the new Code recognises the distinct vulnerability of children and provides a robust framework for the advertising industry:

“The Code is no longer limited to advertising for children’s products and will provide critical protections around any advertising directed at children,” Faulks said.

“It places a clear ban on directing advertising of hazardous products to children such as vapes, kava or highly caffeinated drinks. It also prohibits the encouragement of unsafe practices, including bullying or promoting unhealthy body image, and the use of sexual appeal or imagery when communicating to children.”

The new Code pays special attention to the rise of ‘kidfluencers’ and influencer advertising directed at children.

“The rules go beyond Australian Consumer Law recognising the subtle, embedded nature of influencer advertising directed at children which research says lowers children’s ability to recognise it as advertising. It must now be immediately clear to a child that they are interacting with advertising content,” Faulks said.

The new Children’s Advertising Code complements AANA’s Food & Beverage Advertising Code which already bans advertising of occasional food and beverages to children. This applies to all advertising, across all media channels at all times of the day.

Complaints about advertising that raise issues under the Children’s Advertising Code are handled by Ad Standards and are determined by the independent Ad Standards Community Panel, whose members are representative of the Australian community.

Keep it legal, keep it real, be sensitive and remember, kids are the toughest critics.

5. Endorsement Etiquette: Honesty is Punk Rock

Fake reviews are so 2010. Let your influencers be the punk poets of authenticity. Real talk, real opinions, and maybe a little rebellion in the mix – that’s the influencer code.

A 2022 ACCC analysis of more than 130 online businesses found 37% were manipulating reviews to have fake positive reviews published or negative reviews scrubbed. The ACCC found the sectors with the highest proportions of potential fake or misleading reviews were household appliances and electronics, beauty products, and home improvement and household products.

Misleading endorsements are a breach of the ACL and a no no.

6. The Data Dilemma: 

In this crazy world of tweets, snaps, and double-taps, we’re all navigating a sea of personal information. Remember, you’re not just posting pics – you’re the captain of your data ship! ⚓️ 

So influencers have certain responsibilities! 🕵️‍♂️ To stay on the good side of the Privacy Act 1988 (Cth), here’s the lowdown:

  • uncheckedHave a clear Privacy Policy: Lay it all out – how you scoop up, use, and share personal data. Your followers need to know what’s up, so keep it real.
  • uncheckedLock it down with ninja-level security: Fortify that data fortress with strong encryption, secure data storage, No unauthorized peeping, no sneaky business. Use Fort Knox-level storage, unbreakable encryption, and multi-factor authentication.
  • uncheckedSound the alarm on data breaches: If the ship’s got leaks, don’t keep it quiet! Tell your customers ASAP and take all reasonable steps to mitigate any harm.
  • uncheckedStay in the privacy policy loop: The Privacy Act is like a constantly updating playlist – you’ve gotta stay tuned. Be in the know about the latest reforms and keep your privacy game strong.

The evolving landscape of consumer protection laws and influencer regulations suggests that influencers must tread carefully in the #instaworthy realm. 

So, next time you see your favorite influencer promoting paradise on Earth, remember: the law is watching, and the party might just be a legal minefield. Stay savvy, stay legal, and keep scrolling!

🤘😎

If you’d like help setting up your legal foundations as a product-based business, or influencer, here at Law Quarter, we advise clients on all areas of business, marketing and consumer law, and our lawyers work with clients involved in beauty, healthcare and wellness throughout Australia. 

We also run a sister business, Compliance Quarter, so we’re set to help you build a big glowing business empire with the strongest of foundations 🙂

You can also reach out to me directly at jacqui@lawquarter.com.au or call me on 0411 659 671.

Glow Up Your Business: A Guide to Building a Radiant Legal Foundation for Your Beauty or Skincare Venture in Australia

Glow Up Your Business: A Guide to Building a Radiant Legal Foundation for Your Beauty or Skincare Venture in Australia

Commercial Law, Private Law

So, you’ve decided to dive into the glamorous world of beauty and skincare. 

And it’s all fun and games when you’re dreaming up that perfect perfume scent or creating the perfect booty cream, but there’s a whole lot of legal stuff you need to know before you can build a thriving brand.

Well, buckle up, because we’re about to embark on a journey to set up a legal foundation that’s as flawless as your favorite foundation 🙂

Firstly, before diving in, most personal care, skin care, beauty, make-up and cosmetic products may be described as ‘cosmetics’. 

A cosmetic is defined in our legislation as a substance or preparation intended for placement in contact with any part of the human body, including the mucous membranes of the oral cavity and the teeth, with a view to:

  • altering the odours of the body
  • changing its appearance
  • cleansing it
  • maintaining it in good condition
  • perfuming it
  • protecting it

Cosmetics include soap, shampoo and conditioner, moisturiser, ‘bath bombs’, hair dye, perfume, lipstick, mascara, nail polish, deodorant and many other products.

What laws and regulations govern the beauty and skincare industry?

The regulation of cosmetics in Australia is administered by three government regulators – the Therapeutic Goods Administration (TGA), the Australian Government, Department of Health under the Australian Industrial Chemicals Introduction Scheme (AICIS) and the Australian Competition and Consumer Commission (ACCC).

The Therapeutic Goods Administration (TGA) is responsible for regulating chemicals in personal care, skin care, make-up and cosmetic products that are medicines or marketed as having therapeutic effects

This includes most skin-whitening lotions, primary sunscreens, disinfectants, complementary medicines and blood products.

The second regulatory body is the Australian Industrial Chemicals Introduction Scheme (AICIS).  AICIS is a regulatory scheme that regulates chemicals that are imported or manufactured (introduced) for industrialuse and it’s part of the Australian Government, Department of Health.

It’s basically responsible for regulating the chemical ingredients in personal care, skin care, make-up and other cosmetic products that are not medicines or marketed as having ‘therapeutic effects’ and are considered to have an ‘industrial’ use.

The final body, the ACCC, regulates cosmetic product labelling or product safety in accordance with the Consumer Goods (Cosmetics) Information Standard 2020. The ACL also provides for penalties for false or misleading claims and representations about products.

So remember: one of the most important first steps is figuring out whether your products are cosmetics or therapeutic goods. 

Here’s a (non-exhaustive) list of laws and regulations you should pop on your radar if you’re operating a skincare business:

  • Therapeutic Goods Act 1989 (Cth)
  • Therapeutic Goods (Excluded Goods) Determination 2018 (Cth)
  • Australian Consumer Law (Competition and Consumer Act 2010 (Cth))
  • Consumer Goods (Cosmetics) Information Standard 2020
  • National Measurement Act 1960 (Cth)
  • National Trade Measurement Regulations 1989 (Cth)
  • Industrial Chemicals Act 2019 (Cth)
  • Fair Work Act 2009 (Cth) 
  • Good Manufacturing Practice (GMP)
  • Agricultural and Veterinary Chemicals Act 1994
  • Privacy Act 1998 (Cth)
  • Spam Act 2003 (Cth)
  • The Poisons Standard (also known as the Standard for the Uniform Scheduling of Medicines and Poisons (SUSMP)
  • The Mandatory Standard for Labelling Cosmetics (regulated by the ACCC)
  • General Data Protection Regulation (GDPR)

OK, so that’s the general framework for the beauty industry – now let’s get down to the nitty gritty of laying your flawless legal foundation:

1. Slay the Business Structure Game

First things first, let’s talk business structures. 

It’s like choosing the perfect shade of lipstick – you want something that suits you and makes you feel fabulous. In Australia, you can opt for a sole trader setup, a partnership, a company, or a trust. Each has its own perks and quirks, so get some solid legal advice and choose the one that aligns with your business goals and ensures you’re strutting down the right legal runway.

2. Registrations and Compliance: Because You’re Worth It

Now that you’ve picked your business structure, it’s time to register your baby. 

Start by getting yourself an Australian Business Number (ABN) with ASIC. 

Think of it as your business’s VIP pass to the exclusive party that is the Australian business scene. 

Next step: compliance

It’s not always the most glamorous field but the beauty world has its own set of rules, and it’s crucial to play by them. Complying with regulations is not only responsible but also adds a layer of trust to your brand – consumers love transparency.

You don’t need to register cosmetic products like you do in the EU, for example, but you will need to think about what other licences, registrations or permits you need, depending on what area of the beauty and skincare industry you’re operating in. 

Here are some of the registrations you need to consider in different categories:

Therapeutic Goods

If you’re in the game of selling therapeutic goods, make sure to register with the TGA – consider it your product’s exclusive red carpet moment ⭐

Importers

If you plan to sell any cosmetics in Australia that you bought from overseas, you must register your business with AICIS before you import (introduce) into Australia. Imagine your business as a jet setting beauty guru, and the entry stamp on your passport to the ultimate beauty destination comes from the AICIS. There is no threshold value or limit so you must register regardless of how much you sell.

Manufacturers (including home-based and small businesses)

If you intend to make cosmetics for sale in Australia where one or more ingredients were purchased from overseas, then you must also register your business with AICIS. Again, there’s no threshold value or limit so you must register regardless of the quantity and how much you sell.

If you purchase all ingredients locally and you blend these together to make your cosmetics, then you don’t need to register with AICIS. But if your process of mixing ingredients results in a chemical reaction, then they consider this to be manufacturing and you must register.

Take soap making, for example. If you’re a chemical maestro, whipping up soaps through the process of ‘saponification’, then you’re not just a soap maker: you’re a chemical magician! This means registering with AICIS is essential.

Local Council – Your Business’s Neighborhood Watch

If your business is setting up shop at home, your local council is like the neighborhood watch – keeping an eye out for all things business-related. Check out your local council’s website for the lowdown on any registrations or permits needed. It’s like getting the thumbs up from your local squad.

Insect Repellent – Keep Bugs at Bay, the Legit Way

Planning to whip up an insect repellent potion? Smart move – bugs are so last season 🙂 Make it official by registering your bug-be-gone creation with the Australian Pesticides and Veterinary Medicines Authority (APVMA).

3. Taming the Tax Beast

Taxes – the necessary evil that keeps the beauty industry glowing. Familiarize yourself with the Australian Taxation Office (ATO) and their guidelines (and find yourself a great accountant). It’s like contouring – a bit tricky at first, but once you get the hang of it, you’ll be sculpting your financial success with finesse.

4. Protecting Your Magic Formula: Intellectual Property

Your beauty and skincare creations are your magic potions, so guard them with all your might. 

Just like a signature fragrance, you want your brand to be unmistakably yours. 

One of the most important ways that you can protect your cosmetic brand and keep copycats at bay is by registering a trade mark

You can register your business name, logo (or a combo of both) and cosmetics brand, and you can also trade mark the distinctive packaging of your products and their distinctive scent. 

A registered trade mark will provide you with the exclusive right to use, licence and sell your mark, which means no one can use or misappropriate your trade mark without your permission. 

You might also want to apply for a patent to protect your product formulas. A patent is a type of intellectual property that gives its owner a legally enforceable right to exclude others from making, using or selling their innovative device or process. 

With a patent, you’re not just creating products; you’re crafting a legacy. It’s a legally enforceable declaration that says, “This genius is mine, and no one else’s!” Whether it’s a groundbreaking skincare formula or a haircare concoction that’s pure magic, a patent makes it yours – and yours alone.

5. Employment: Hiring and Contracts

As your empire grows, you might need to bring in some glam squad members. 

When hiring, ensure you’ve got the legalities covered with proper employment contracts (you can check out our post on contract playbooks and employment considerations here). 

It’s like having a beauty agreement that keeps everyone on the same page – no messy breakups, just a flourishing business relationship.

6. Insurance: A Beauty Business’s Best Friend

Accidents happen, my beauty friends. That’s why insurance is your BFF in the beauty biz. 

Whether it’s public liability, product liability, or professional indemnity insurance, make sure you’re covered. It’s like having a nice big beauty umbrella, protecting you from unexpected downpours.

7. Staying Ethical and Sustainable: A Trend That Never Fades

In the era of conscious consumerism, consider weaving ethical and sustainable practices into your business model. It’s not just good for the planet; it’s excellent for your brand image. Showcase your commitment to beauty that cares, and watch your customer base flourish.

There you have it – a laid-back guide to navigating the legal and regulatory scene in the beauty and skincare business.

If you’d like help setting up your legal foundations or drafting your contracts, here at Law Quarter, we advise clients throughout the cosmetics supply chain, including product and packaging manufacturers, importers, exporters, wholesalers, distributors and retailers and our lawyers work with clients involved in beauty, healthcare and wellness throughout Australia. 

We also run a sister business, Compliance Quarter, so we’re set to help you build a big glowing beauty empire with the strongest of foundations 🙂

You can also reach out to me directly at jacqui@lawquarter.com.au or call me on 0411 659 671.

Now, go forth and conquer the beauty world – stay fabulous 💄✨

How do I protect my assets and wealth?

How do I protect my assets and wealth?

Business Sale, Private Law

The start of a new year is a time for reflection and planning for all of us. You might be setting some big, dreamy, personal goals that will outlast the hangover of New Year’s Day. 

But if you’re a business owner, you’re likely also in goal setting mode too and putting your ‘blue ocean strategy’ thinking hat on to create long term success. This is why asset protection should be a top priority for you in 2023. It’s a perfect time to think about what will happen to you and your business if things don’t quite go as planned.

What is asset protection?

If you’re a business owner, your assets may be at risk to creditors, which include lenders, suppliers, the trustee in bankruptcy, the ATO, and any other people or organizations you owe money to. You also need to consider any statutory obligations that come with your role as a director and/or employer.

Asset protection is the process of legally safeguarding your assets from creditors, lawsuits, and other types of claims. For example, what will happen to your assets if an unexpected event occurs, such as a litigation or a personal accident? What happens if your business falls into tough times and the creditors come calling? 

Strategies for asset protection

There are several ways to protect your wealth and assets. Some common strategies include:

  1. Creating a trust: A trust can be used to protect assets such as property, investments, and cash from creditors and litigants.
  2. Setting up a company: By transferring assets to a company, you can limit your personal liability and make it more difficult for creditors to access those assets.
  3. Superannuation funds: Superannuation funds can provide protection against creditors as long as they are set up correctly.
  4. Offshore structures: Some individuals may consider using offshore structures, such as foreign companies or trusts, to provide an additional layer of asset protection.
  5. Insurance: Obtaining insurance for assets can provide protection against risks such as theft, fire, and other types of damage.
  6. Estate planning: This is the process of organising and preparing for the distribution of your assets after you pass away. It involves creating a plan that takes into account your financial situation, your goals, and the needs of your loved ones (including creating a will, potentially setting up trusts, naming beneficiaries, having a lawyer draft up powers of attorney (giving a person, or trustee organisation the legal authority to act for you to manage your assets and make financial and legal decisions on your behalf) and appointing an enduring guardian to make decisions about your health and lifestyle in the event you cannot make these decisions for yourself.

Protecting the Family Home

One of the primary concerns of most people is protecting the family home. The family home is often one of the most significant assets a person can own but as it is generally held in an individual’s name, it can 
be at risk.

There are several ways a business owner can ‘ring-fence’ the family home from his or her business activities. However, there are some risks and misconceptions about protecting the family home. 

Establishing a business in a company or trust structure gives the owner the protection of the corporate veil and generally creditors only have access to the company’s or trust’s assets. But if a company or trust can’t pay its debts, there is a risk that creditors will be able access the personal assets of the director or trustee to pay some or all of the debts.

One strategy is to give majority ownership of the home to a person who is not at risk from any bankruptcy or litigation procedures, for example, your spouse. This might lead to some stamp duty exemptions and doesn’t usually result in any capital gains tax (CGT) liabilities.

However, under the presumption of resulting trust, a party can be treated as a beneficial owner of property under the law of equity, despite the fact they are not the legal owner of the property.  The presumption generally arises where a person contributes purchase money to a property but is not registered on title as an owner, or where a person transfers a property or part of a property to another for no payment.

If a resulting trust can be established, the creditors of the at-risk party may be able to lay claim to an interest in the family home – even if the home is solely in the name of the other partner – unless evidence shows the transfer was intended as a gift (referred to as the ‘presumption of advancement’). There are a number of other factors to consider under the Bankruptcy Law as to whether or not a presumption of advancement would arise, and it ultimately comes down to the intention of the parties.

Currently, the “presumption” of advancement applies only in cases of gifts or contributions made by a husband to a wife, or by a parent to a child, however the High Court in Bosanac v Commissioner of Taxation [2022] HCA 34 indicated that it is open to expanding the categories to align with current values.

An alternative strategy to signing over the home to the unexposed spouse is to borrow against the property and to allow a related charge to be made over the primary residence, meaning there is very little equity left for creditors to pursue. These are not the only options for business owners, however, so it’s best to obtain advice on the most appropriate strategy for you.

Next Steps

Prior to making any changes to your business structure and other asset protection decisions, it is important to review the potential costs or tax implications that may arise from such alterations in order to effectively protect your assets.

You should consider seeking advice from a legal and financial professional before implementing any of these strategies to make sure that you are complying with all applicable laws and regulations.

For advice on business structure and asset protection, contact us at info@lawquarter.com.au or call us on 

What is the difference between an Australian Financial Services Licence and an Australian Credit Licence?

What is the difference between an Australian Financial Services Licence and an Australian Credit Licence?

Business Sale, Regulatory Updates

What is an AFSL?

An Australian Financial Services Licence (AFSL) is a licence issued by the Australian Securities and Investments Commission (ASIC) that allows a company or organisation to provide financial services to clients. 

This can include a wide range of services such as:

  • Providing financial advice to clients, including advice on investment products, superannuation, and insurance.
  • Dealing in a financial product, such as buying and selling shares or derivatives on behalf of clients.
  • Making a market for a financial product, such as trading shares or derivatives on behalf of clients.
  • Operating registered schemes, such as managed funds or superannuation funds.
  • Providing traditional trustee company services, such as acting as a trustee for trusts, estates and other securities.

To obtain an AFSL, a company must meet certain requirements and comply with certain regulations, such as having sufficient capital and insurance, and maintaining proper records and reporting. As an AFSL holder, you have a general obligation to provide efficient, honest and fair financial services. You must comply with the conditions of your AFS licence and the Corporations Act 2001.

What is an ACL?

An Australian Credit Licence (ACL) is a licence issued by ASIC that allows a company or organization to engage in credit activities, such as:

  • Providing credit assistance, such as helping clients apply for a loan or mortgage.
  • Brokering credit, such as arranging loans or mortgages on behalf of clients.
  • Providing credit advice, such as giving advice on the best type of loan or mortgage for a client’s needs.

Credit activities include providing credit assistance, brokering credit, and providing credit advice. For example, a mortgage broker would need an ACL, but the bank providing the mortgage would need an AFSL.

To obtain an ACL, a company must also meet certain requirements such as training and compliance and be able to demonstrate its ability to conduct the credit activity and how it will engage in good credit practice.

You have general conduct obligations that include:

  • acting efficiently honestly and fairly
  • being competent to engage in credit activities, and ensuring your representatives are competent and
  • being able to ensure your clients are not disadvantaged by an conflicts of interest that you or your representatives may have in relation to your credit activities
  • ensuring you and your representatives comply with the credit legislation
  • having appropriate dispute resolution systems (including both internal systems and being a member of an external dispute resolution scheme) 
  • having appropriate compensation arrangements in place (which for some will include holding professional indemnity insurance) 
  • having adequate resources (including financial, technological and human resources) and risk management systems
  • having appropriate arrangements and systems to ensure compliance.

The applicable legislation is the National Consumer Credit Protection Act 2009 and the National Credit Code. The credit legislation also contains more specific obligations and requirements, including:

  • the responsible lending requirements (ascertaining and verify a consumer’s financial situation and assessing whether the credit contract is not unsuitable) 
  • requirements in the National Credit Code dealing with precontractual disclosure and conduct in relation to the terms of credit contracts and consumer leases
  • maintaining trust accounts (if you hold money on behalf of another person while providing a credit service).

The above list, however, is not an exhaustive list of your obligations. 

In summary, AFSL allows the holder to provide financial services, including credit services, while ACL allows the holder to engage in credit activities only.

An Authorised Representative (AR) of an AFSL is a person or entity that is authorised by an AFSL holder to provide financial services on their behalf. The AR must be appointed by the AFSL holder in writing and must meet certain requirements, such as having the necessary qualifications and experience to provide the financial services offered. The AR must also comply with the conditions of the AFSL and with all applicable laws and regulations. They essentially act as an agent of the licensee, providing financial services under the licensee’s AFSL and conducting responsibilities on behalf of that licensee.

If you’re receiving either credit or financial advice, you need to ensure that the company or person is authorised and properly licensed to provide the advice. 

We’ve represented clients who have encountered problems when they’ve been dealing with an unauthorised or unqualified professional and have lost a significant amount of money as a result.

Check the Registers

You can check if a company or organisation holds an Australian Financial Services Licence (AFSL) by searching the Financial Advisers Register on the Australian Securities and Investments Commission (ASIC) website.

To check if a company or organization holds an AFSL, follow these steps:

  1. Go to the ASIC website: https://www.asic.gov.au/
  2. Click on “View All Registers” on the top right menu
  3. Under “Financial Advisers”, click on “Financial Advisers Register”
  4. Search for the company or organisation using the name or Australian Company Number (ACN)
  5. The search results will provide information about the company or organisation, including whether it holds an AFSL and the scope of the licence.

It’s important to note that the Financial Advisers Register only includes information about companies and organisations that hold an AFSL for providing financial advice and related services, not for credit services.

If you want to check if someone holds an Australian Credit Licence (ACL), you can look it up on the National Credit Licence Register, which is also available on the ASIC website. You can search by the name of the company or individual, or the credit licence number. The register will show you the type of credit activities the licensee is authorised to conduct, the expiry date of the licence, and other related information.

Contact Us Now

If you’ve received poor professional advice from an adviser, or you’re looking to obtain an AFSL or ACL in order to provide advice to clients and consumers, please contact us at info@lawquarter.com.au or call us on (02) 8318 5962

How do I enforce a judgment debt in NSW?

How do I enforce a judgment debt in NSW?

Litigation

So a company or person owed you money and you’ve now managed to secure a judgment in a court of NSW ordering them to repay the debt (a judgment debt). What now?

When a person (the ‘judgment creditor’) obtains a court judgment ordering a person (the ‘judgment debtor’) to return goods or pay money, the judgment debtor will not always comply with the judgment. They may not have the money or resources to pay the debt or they may simply be avoiding payment.

In this situation, the judgment creditor has 12 years from the date of the judgment to enforce the judgment. This is known as an ‘enforcement’ action. Enforcing a judgment debt in New South Wales (NSW) involves a process of collecting the money that is owed to you by the judgment debtor.

Here are the general steps to enforce a judgment debt in NSW:

  1. Obtain a copy of the judgment: This can be obtained from the court that issued the judgment or from the Sheriffs’ Office. The ‘Office of the Sheriff of NSW’ is a government authority responsible for court security, administering the NSW jury system and specific law enforcement such as serving warrants and enforcing various court orders (such as a writ).
  2. Identify the judgment debtor’s assets: This can include property, bank accounts, vehicles, or wages. You will need to find out where the judgment debtor’s assets are located and how they can be accessed. You can do this through a court via an examination notice (a form the debtor must fill out responding to questions about their income, assets and liabilities) if the judgment debtor’s assets are not easy to ascertain. 
  3. Issue a Writ for Levy of Property: Once issued, this type of writ authorises the Sheriff to seize and sell at auction personal property belonging to the debtor to pay the debt. You will need to provide the Sheriffs’ Office with a copy of the writ of execution, the judgment, and a fee for their services. The writ is valid for 12 months. If there is not enough personal property to satisfy the judgment debt that is owed to you and the debt is over $20,000, you can apply for an order seeking the sale of real property (land).
  4. Issue a Writ for the Delivery of Goods: This can be used if the court ordered the judgment debtor to return certain goods to you and they haven’t been returned. It authorises the Sheriff to seize the goods and return them to you (the judgment creditor) or recover their value by seizing other property and selling it. This type of writ is also valid for 12 months.
  5. Garnishee Order: If the judgment debtor has income, such as wages or salary, you can obtain a garnishee order. A garnishee order directs the judgment debtor’s employer or other organisation that holds money for the judgment debtor to pay some or all of the money owing to you, directly to you from their bank account, salary or wages.
  6. Charging Order: In the case of a judgment debt of the District or Supreme Court of NSW, you may wish to obtain a charging order. A charging order creates security over a specific asset(s) owned by the judgment debtor to the value of the judgment debt and restrains the judgment debtor from dealing with the asset.
  7. Debtor Examination: If the judgment debtor fails to comply with an examination notice you may apply to the Court for an examination order. An examination order summons the judgment debtor to Court to provide details of their financial affairs. To obtain an examination order you must apply to the appropriate Court and then personally serve it on the judgment debtor. The judgment debtor will then be required to attend an examination hearing where they will complete a statement of financial position attaching all relevant documentation.
  8. Bankruptcy Proceedings: Where the judgment debt is greater than the statutory minimum and the judgment debtor is an individual, you may wish to serve a bankruptcy notice. The current statutory minimum for a bankruptcy notice is $10,000.00. A bankruptcy notice must be personally served on the judgment debtor. Once served with a bankruptcy notice the judgment debtor has 21 days to make payment, or otherwise enter into a suitable repayment arrangement. If the judgment debtor fails to comply with the bankruptcy notice then they have committed an “act of bankruptcy”, and you are able to present a creditor’s petition seeking a sequestration order which effectively makes them bankrupt. A trustee in bankruptcy is then appointed to investigate the debtor’s financial affairs for the benefit of creditors.

Checklist

Requirement Status
Obtain a copy of the judgment
Identify the judgment debtors assets
Issue a Writ for Levy of Property
Issue a Writ for the Delivery of Goods
Garnishee Order
Charging Order
Debtor Examination
Bankruptcy Proceedings

The process of enforcing a judgment debt can be complex and time-consuming, and it may be necessary to seek the advice of a lawyer or a debt collection agency. 

Additionally, there may be limitations on the amount and types of assets that can be seized, and there are certain exemptions that apply, such as a principal place of residence and other assets with exemptions by law.

For help recovering a judgment debt, reach out to us at info@lawquarter.com.au or call us on (02) 8318 5962 for assistance and advice from one of our experienced litigation and commercial lawyers.

What is the DIN Regime?

What is the DIN Regime?

Commercial Law

The Director Identification Number (DIN) regime in Australia is a system established under the Corporations Act 2001, which requires directors of companies incorporated under the Act to apply for and hold a DIN. 

This includes directors of a company, registered Australian body, registered foreign company or Aboriginal and Torres Strait Islander corporation.

Are you a director of one of the following?

Are you a director of: Status
Registered Company
Registered Australian body
Registered foreign company
Aboriginal and Torres Strait Islander corporation

The DIN is a unique eight-digit number assigned by the Australian Securities and Investments Commission (ASIC) that is used to identify directors of companies. 

The DIN is linked to the personal details of the director, such as their name and date of birth, and is used to maintain accurate and up-to-date records of the director’s activities and responsibilities within the company. 

The regime was introduced with the Corporations Amendment (Director Identification Numbers) Act 2018, which added a new Part 2D.6 to the Corporations Act 2001. The Director Identification Number Rules 2018 made it mandatory for all directors (existing and new) of companies incorporated under the Corporations Act 2001 to apply for a DIN, effective from 28th May 2018.

The regime aims to improve the accuracy and completeness of information held by ASIC about directors of companies and enhance regulatory compliance. 

As illegal phoenixing (which occurs when a new company, for little or no value, continues the business of an existing company that has been liquidated or otherwise abandoned to avoid paying outstanding debts) has become a significant problem in Australia, the regime is also intended to reduce identity fraud and make sure directors do not engage in unlawful conduct.

A person cannot act as a director of a company without holding a DIN, and it’s now a criminal offence if an individual acts as a director while disqualified or while not holding a DIN. 

Companies are required to check the validity of the DIN of their directors and ensure they hold a valid DIN before they take office. 

If you are a director of an Australian company and you missed the DIN deadline of 30 November 2022, you should apply for a DIN immediately. 

If you need any further advice on corporate governance and legislative requirements for companies and directors, please reach out to us at info@lawquarter.com.au

My Supplier Cannot Meet Their Obligations. What Are My Contractual Rights?

My Supplier Cannot Meet Their Obligations. What Are My Contractual Rights?

Business Sale, Commercial Law

As a business owner or manager, it is important to understand your contractual rights against a supplier when things do not go as planned. A supplier is a company or individual that provides goods or services to another company.

There are several ways in which a supplier may fail to meet their obligations under a contract, including:

  1. Failure to deliver goods or services: A supplier may fail to deliver the goods or services that have been ordered by the buyer, either in whole or in part. This can lead to delays and additional costs for the buyer.
  2. Poor quality goods or services: A supplier may deliver goods or services that are not of the required quality or that do not meet the specifications set out in the contract. This can result in dissatisfied customers and lost sales for the buyer.
  3. Late delivery: A supplier may deliver the goods or services after the agreed upon delivery date, causing delays and potentially resulting in lost profits for the buyer.
  4. Breach of contract: A supplier may breach the terms of the contract in various ways, such as by failing to provide the required goods or services or by failing to meet certain performance standards.
  5. Disputes over payment: A supplier may dispute the amount that the buyer has agreed to pay for the goods or services, or may claim that the buyer has not paid the full amount owed.
  6. Intellectual property disputes: A supplier may use the buyer’s intellectual property without permission, leading to a dispute over ownership or licensing fees.

In these cases, the buyer (the company receiving the goods or services) may have certain rights under the contract to seek remedies.

One common remedy is the right to cancel or terminate the contract and seek a refund or damages. This may be appropriate if the supplier has breached a fundamental term of the contract, such as by failing to deliver the goods.

Another remedy is the right to require the supplier to perform their obligations under the contract. This may be appropriate if the supplier has only partially performed their obligations, or if they have performed them poorly.

It is important to carefully review the terms of the contract to determine what rights and remedies are available in the event of a breach. These rights may include the right to terminate the contract, the right to require the supplier to perform their obligations, and the right to seek damages.

To minimize the risk of disputes with suppliers, it is important to carefully review the terms of the contract before signing it, and to ensure that the contract clearly sets out the rights and obligations of both parties. This can help to avoid misunderstandings and ensure that both parties are held accountable for their obligations under the contract.

In summary, understanding your contractual rights against a supplier is important to protect your business and ensure that you receive the goods or services that you have paid for. Carefully reviewing the terms of the contract, seeking legal assistance if necessary, and taking action to enforce your rights can help to minimize the risk of disputes and ensure that your business is protected.

How do Force Majeure clauses work in supply agreements?

The purpose of a force majeure clause is to protect a party from being held in breach of contract if they are unable to perform their obligations due to circumstances beyond their control such as natural disasters, war, pandemics, or other events that could not have been reasonably anticipated or avoided. 

The clause will typically specify the types of events that will trigger the clause and the duration of the excuse from performance. It may also allow either party to terminate the contract if the specified event continues for an extended period of time and prevents either party from performing their obligations under the contract.

If a force majeure event occurs, the supplier may be excused from performing their obligations under the agreement for a specified period of time. This may include their obligation to deliver goods or services to the buyer. The supplier must typically give notice to the buyer as soon as possible after the force majeure event occurs, specifying the nature of the event and the extent to which it has affected their ability to perform their obligations under the agreement.

The force majeure clause may also specify how long the excuse from performance will last. This may be a fixed period of time, or it may continue until the force majeure event has ended or its effects have been mitigated. In some cases, the clause may allow either party to terminate the agreement if the force majeure event continues for an extended period of time and prevents either party from performing their obligations under the agreement.

A key example from the past few years is the global pandemic which caused a range of postal, shipping and delivery issues by suppliers, which resulted from government orders and lockdowns outside of their reasonable control.

It is important to note that a force majeure clause will only excuse a party from performing their obligations if the specified event has caused a true inability to perform. The supplier must show that the force majeure event has caused a genuine inability to perform, and not just an inconvenience or a financial burden. In addition, a force majeure clause will not excuse a party from performing their obligations if they have already breached the contract before the specified event occurred.

If you have a supply agreement that includes a force majeure clause and you believe that it may apply to your situation, it is a good idea to seek legal advice to understand your options and the best course of action to take.

Insurance and Risk

Insurance and risk are important considerations in supply contracts, as they can help to protect the parties involved in the event of unexpected losses or liabilities.

Here are a few ways that insurance and risk can be addressed in a supply contract:

  1. Indemnity clause: An indemnity clause in a supply contract may require one party (the indemnifying party) to compensate the other party (the indemnified party) for any losses or liabilities that the indemnified party incurs as a result of the indemnifying party’s actions or inactions. For example, if the supplier’s goods cause damage to the buyer’s property, the supplier may be required to indemnify the buyer for the damages.
  2. Insurance: A supply contract may require one or both parties to maintain certain types of insurance coverage, such as liability insurance or property insurance. This can help to protect the parties against potential losses or liabilities that may arise in the course of the contract.
  3. Limitation of liability: A supply contract may include a clause that limits the liability of one or both parties for certain types of losses or damages. For example, the supplier may be limited in their liability for damages caused by their goods to the amount of the purchase price of the goods.
  4. Risk of loss: The supply contract may specify which party is responsible for bearing the risk of loss for the goods being supplied. For example, the risk of loss may pass to the buyer once the goods have been delivered to them.

Can I make a claim under the Australian Consumer Law? 

The Australian Consumer Law is set out in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL) and provides a set of consumer guarantees that apply whenever goods are supplied to “consumers” as defined under the ACL.

And yes, it is possible to make a claim under the ACL against a supplier. The ACL sets out the rights and obligations of consumers and businesses, and provides remedies for consumers in the event that their rights are breached. 

If you are a consumer (an individual or a small business with an annual turnover of less than $10 million) and you have purchased goods or services from a supplier that are defective, not of acceptable quality, or not fit for their intended purpose, you may be able to make a claim under the ACL. You can make a claim against a supplier if they have breached their obligations under the ACL, such as by:

  • Supplying goods that are not of acceptable quality
  • Supplying goods that are not fit for their intended purpose
  • Supplying goods that do not match their description or sample
  • Supplying goods that are unsafe
  • Engaging in deceptive or misleading conduct

Section 259 sets out the rights of a consumer to require a supplier to remedy a failure to meet a statutory guarantee in relation to the supply of goods. Under s 274 of the ACL, 

The supplier may also be able to bring an indemnity claim against the manufacturer for defective goods. A supplier has 3 years within which to make that indemnity claim against the manufacturer under section 274(4) of the ACL. 

There are a range of claims available under the ACL and the time limits for bringing such claims vary depending on the type of claim and the jurisdiction in which the claim is brought, so it is best to seek legal advice when disputes arise.

If you are able to successfully make a claim under the ACL, you may be entitled to remedies such as a refund, replacement, repair, or compensation for damages.

Key Takeaways

  1. Make sure you have a written contract: A written contract can help to protect your interests and provide a clear record of the terms that have been agreed upon. It is important to carefully review the terms of the contract before signing it, and to ensure that it clearly sets out the rights and obligations of both parties.
  2. Know your rights: It is important to understand what rights you have under the contract in the event that the supplier fails to meet their obligations. These rights may include the right to cancel the contract, the right to require the supplier to perform their obligations, and the right to seek damages.
  3. Understand the terms of the contract: The terms of the contract will determine what rights you have and how you can enforce them. It is important to carefully review the terms of the contract to ensure that you understand your rights and obligations.
  4. Consider seeking legal assistance: If you are unable to resolve a dispute with a supplier, it may be necessary to seek legal assistance. A lawyer can help you understand your options and negotiate a resolution with the supplier.
  5. Take action to enforce your rights: If a supplier breaches the contract, it is important to take action to enforce your rights. This may involve cancelling the contract, requiring the supplier to perform their obligations, or seeking damages.

If you have a dispute with a supplier and you believe that your rights have been breached, it is a good idea to seek legal advice to understand your options and the best course of action to take.Contact us at Law Quarter for help with your supplier agreements and advice regarding disputes with suppliers. You can email us at info@lawquarter.com.au or you call (02)

What Employers Need To Know about Unfair Dismissal Claims

What Employers Need To Know about Unfair Dismissal Claims

Private Law

In 2020, unfair dismissal claims shot up by almost 70% during the coronavirus crisis with the Fair Work Commission dealing with an “unprecedented” caseload.

Recently, the NSW District Court awarded a former Aussie Toyota employee and Dad a damages award of $276,000 on the basis that the company could not prove he had engaged in serious misconduct and had unlawfully terminated him only one day before he was to due to receive a massive redundancy package.

So what if you need to dismiss an employee and want to minimise the risk of those consequences? 

In a challenging economic climate, it can be overwhelming as an employer to consider terminating an employee when you may face the complexities of an unfair dismissal application.

Here’s the lowdown for employers on unfair dismissal claims:

Who can make an unfair dismissal claim?

In order to bring an unfair dismissal claim in Australia, a dismissed employee must have been employed for a minimum period of time, which period depends on whether the employer is considered to be a small business employer.

A small business employer is defined by the Fair Work Act 2009 (Cth) as an employer that employs fewer than 15 employees at that time.  

The Fair Work Act says that when calculating the number of employees at the time of an employee’s dismissal, all employees are to be counted including employees of associated entities (as defined under section 50AAA of the Corporations Act 2001 (Cth)), the employee being dismissed, and any other employee(s) being dismissed at the same time.

You don’t count casual employees unless at the time of the relevant employee’s dismissal, the casual employee(s) are working on a regular and systematic basis.

If the employer is a small business employer, the employee needs to have been working for the employer for at least 12 months before they are eligible to make a claim under the legislation.

If you’re not a small business employer, the employee needs to have worked for your business for a minimum period of 6 months before becoming eligible to bring an unfair dismissal claim. 

If there’s been a change of business ownership, service with the first employer may count as service with the second employer when calculating the minimum employment period.

The employee must also be either covered by a Modern Award or an enterprise agreement, or if not, have an income less than the high-income threshold (see s 382 and 332 of the Fair Work Act).  

The high income threshold is currently $153,600 however this figure is adjusted annually on 1 July. For a dismissal which took effect on or before 30 June 2020, the high income threshold was $148,700.

If an employee does not meet the above eligibility requirements, they cannot bring a claim for unfair dismissal under the Fair Work Act however they may have a potential claim under the ‘general protections’ (otherwise known as ‘adverse action’) provisions of the Fair Work Act

What other type of claim can an employee bring?

Employees may also have other options available than just an unfair dismissal claim, some of which may entitle them to a lot more compensation because, unlike unfair dismissal claims (where you can only claim up to 6 months of your wages as compensation), the compensation available in relation to other common law claims may be ‘uncapped’ or subject to a higher jurisdictional amount. These include:  

  • Breach of Contract Claim;
  • Adverse Action Claim (General Protections Claim);
  • Discrimination Claim; or
  • Unlawful Termination or Wrongful Dismissal Claim.

What constitutes an unfair dismissal?

Under s 385 of the Fair Work Act 2009 (Cth) (FWA), a person has been unfairly dismissed if the Fair Work Commission is satisfied that the dismissal was harsh, unjust or unreasonable. The Commission must also be satisfied that the dismissal was not a case of genuine redundancy. If the employee worked for a small business employer and they failed to comply with the Small Business Fair Dismissal Code, this can also be grounds for dismissal under the Act.

Criteria for unfair dismissal

In considering whether it is satisfied that a dismissal was harsh, unjust or unreasonable, the Fair Work Commission must take into account the following (s 387 of the Fair Work Act):

  • whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees)
  • whether the person was notified of that reason
  • whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person
  • any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal
  • if the dismissal related to unsatisfactory performance by the person—whether the person had been warned about that unsatisfactory performance before the dismissal
  • the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal
  • the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal, and
  • any other matters that the Commission considers relevant.

What should an employer do if it receives a Fair Work Commission claim?

An employee has 21 days to file an unfair dismissal claim before the Commission, from the date the dismissal took effect. Once you receive a claim form, before filing a response to the claim, the first thing you should do as an employer is seek legal advice. 

You may be able to lodge an objection to the matter being dealt with by the Fair Work Commission, such as the claim being lodged outside of the requisite 21-day time frame. You could argue that the employee is not eligible to make a claim for unfair dismissal, or that the claim is vexatious, frivolous or has no prospects of success.

An employer is otherwise required to file a response after which time the matter proceeds to a conciliation conference with a Fair Work Commission conciliator. This gives both parties a chance to state their case and try and resolve the dispute. 

Fair Work Commission stats show that approximately 80% cases are resolved before ever getting in front of a Commissioner, being either “resolved informally by agreement of the parties” or because the applicant dropped the claim.

If a claim is not resolved on or before the Commission conciliation conference, upon request, the Fair Work Commission has the authority to conduct a hearing and make a determination in the matter after hearing the evidence of both parties.

If a resolution cannot be achieved, the employee will receive a certificate from the Fair Work Commission stating that the parties have attempted conciliation and the employee will then have access to the Fair Work Commission, the Federal Court of Australia or Federal Circuit Court of Australia to seek a determination in the matter.

Once the matter has proceeded to a hearing in the Fair Work Commission, Federal Court of Australia or Federal Circuit Court of Australia, the parties will be provided with a written decision which contains reasons for the decision

Next Steps

At Law Quarter, we’re experienced in providing employers with pre-dismissal guidance and advising and representing employers in relation to unfair dismissal claims and employment-related claims. We’d love to help. Contact our team on 02 8324 1333 for a free consult today.

The articles on this website comprise legal general information and not legal advice. It is general information presented and must not be relied upon without specific legal advice being sought in each individual case. In the event that you wish to obtain legal advice on the contents of this general information, you may do so by contacting our office to discuss.

Jacqui Jubb

Law Quarter

Email: jacqui@lawquarter.com.au

PS Need more advice as an employer in managing employees in the new flexible working climate? Check out our COVID-19: Working from Home Guide here