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Are your Contracts Properly Signed?

Contracts are a part of every day commercial life and it is vital that they be properly signed to reduce challenges about whether they are legally binding.

How do individuals sign?

An individual signing:

  • an agreement needs to sign under their own name
  • a deed needs to sign under their own name and have their signature witnessed by a third party adult who is not a party to the deed and that witness should print their name and address

It is also good practice for an individual’s signature on any contract to be witnessed by a third party as this will be helpful in case there is a subsequent dispute about the authenticity of the individual’s signature. If the document is especially important, the individual’s signature should be witnessed by a solicitor or a justice of the peace.

How do companies sign?

Section 127(1) of the Corporations Act provides that a company may execute an agreement by any of the following methods:
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Restrictions on Your Right to Terminate a Commercial Contract

An “ipso facto” clause is essentially a clause in a commercial contract which allows a party to enforce a right, or terminate or amend a contract, where the other party experiences an insolvency event such as having an administrator appointed.

Clauses of this nature are commonly found in commercial contracts including commercial leases.

Under the new laws (which apply to contracts entered into after 1 July 2018), there is an automatic stay on the enforcement of ipso facto clauses where:

  • a company enters into a scheme of arrangement (or announces it will enter into a scheme of arrangement) to avoid being wound up in insolvency
  • a managing controller or receiver is appointed over all or substantially all of the company’s assets
  • a company goes into administration

Consequently, a party cannot terminate a contract due solely to any of the above reasons and must continue to supply goods and services to the financially distressed company (provided the company continues to perform its obligations and is not otherwise in breach of contract).
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On the Horizon – Equal Pay for Female Employees

Labor has announced that if elected to government in 2019, it will move to enshrine equal pay within the Fair Work Act. 

Labor has signalled an intention to:

  • lower the bar for applications for equal pay orders (so as to expand the industries in which such orders may be made – eg, early childhood, aged care and disability services)
  • restructure the Fair Work Commission and appoint a second Commission President who will preside over a pay equity panel to decide on equal pay cases guided by a new equal remuneration principle

This announcement follows previous promises for a $400 million boost for woman’s superannuation and a ban on pay secrecy clauses.

With workplace/IR issues being a hot-button election topic and a Federal election tipped for May 2019, it is increasingly likely that further substantial changes may be made to Federal workplace laws in the second half of 2019.

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Casual Employees Conversion to Permanent Employment

On 1 October 2018, 85 modern awards were varied so as to insert provisions entitling casual employees to request conversion to permanent employment following 12 months of regular casual employment.

Under the new casual conversion provisions, a request to convert to either full-time or part-time employment:

  • must be made by the casual employee in writing
  • must be genuinely considered by the employer (which must consult with the employee about the request)
  • may only be refused by the employer on reasonable business grounds
  • must be responded to by the employer notifying the employee in writing of their decision within 28 days of the request

These provisions were inserted into those modern awards that did not already contain casual conversion clauses. Any modern award that already contained a casual conversion provision remains unchanged.

Watch this space …. In late December 2018, the Coalition announced that it plans to introduce legislation in early 2019 so as to incorporate casual conversion into the National Employment Standards. Such legislation, if passed, will provide all casual employees with the right to request conversion to permanent employment, including those who are not covered by a modern award or enterprise agreement containing a conversion clause.

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Relaxation of Strict Procedural Requirements for Enterprise Agreement Approval

In December 2018, the Federal Government passed legislation which provides the Fair Work Commission with the power to approve enterprise agreements despite the existence of minor procedural and technical errors.

Previously, the existence of minor procedural and technical errors in an enterprise agreement up for approval was subject to the specific wording of the Fair Work Act which required:

  • employers to strictly comply with extensive procedural requirements relating to the negotiation of, vote for, and application for approval of, enterprise agreements
  • the Fair Work Commission had to reject any application for approval where these procedural requirements had not been complied with

This resulted in the Fair Work Commission being forced to reject applications on unreasonable (and sometimes absurd) technical grounds, including where:

  • an employer had printed the Notice of Employee Representational Rights on company letterhead
  • where an employer had relied on the Commission’s own enterprise agreement date calculator which provided an incorrect result

With the recent changes, the Fair Work Commission will now be able to approve enterprise agreements containing minor technical errors or applications involving minor procedural errors, provided that the errors are not likely to disadvantage employees.
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Family and Domestic Violence Leave now part of the Fair Work Act

On 12 December 2018, the National Employment Standards (NES) were amended in order to entitle all national system employees to family and domestic violence leave.

In essence, family and domestic violence leave:

  • entitles all employees (including casuals) to 5 days of unpaid family and domestic violence leave within a 12 month period
  • may be taken upon an employee’s commencement of employment, and then upon each anniversary of employment (ie, it does not accrue progressively during a year of service like other forms of leave)
  • does not accumulate from year to year

Family and domestic violence leave may be taken whenever an employee is subject to “violent, threatening or other abusive behaviour by the employee’s close relative that seeks to coerce or control the employee or causes the employee harm or fear”.

Employees will be able to take this leave in order to deal with the impact of family and domestic violence eg, to make arrangements for their own safety, to attend court hearings or to access Police services.
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Privacy Act Reminder – Mandatory Data Breach Notifications and Penalties

Under changes to the Privacy Act which came into effect on 22 February 2018, relevant entities are required to take reasonable steps to notify affected individuals and the Commonwealth Privacy Commissioner if there has been:

  • unauthorised access to, disclosure of, or loss of, personal information held by the entity, and
  • a reasonable person would conclude that the access, disclosure or loss of the personal information is likely to result in serious harm to the individual

If the entity becomes aware, or has reasonable grounds to believe, that an eligible data breach has occurred, it must as soon as practicable take reasonable steps to notify affected individuals of:

  • the identity and contact details of the entity (and any other entities it reasonably believes may have received/be responsible for the data breach)
  • a description of the breach
  • the nature of the personal information concerned
  • recommended steps to be taken by the individual

and provide a copy of the notification to the Privacy Commissioner.
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Coming Soon – Director Identification Numbers … Directors Beware

The government has released draft legislation to create a Director Identification Number (DIN) system.

A DIN will be a unique number identifying an individual director, similar to how Australian Company Numbers identify companies (despite any company name changes).

The intention of the reforms is to combat illegal phoenix activity – that is, when a company is liquidated by its owners and its business and assets are transferred to a new trading company in a deliberate scheme to avoid paying creditors.

The same key person(s) (usually one or more directors) will often be involved in both companies, hence the government intends to track directorships to combat this illegal activity.

Further details will be available when the legislation is presented before Parliament. In the meantime, directors are encouraged to stay informed about their duties and obligations as a director in addition to ensuring they have suitable lawful protections in place such as insurance.