FWC assesses new unfair contract terms regime for independent contractors for the first time

The new unfair contract terms regime, enabling certain independent contractors to challenge the terms of their service contracts, has been tested for the first time since its introduction in August 2024.

Recap – the new unfair contract term regime

Before looking into the case, let’s briefly recap the new regime.

Under the Fair Work Act 2009 (Cth) (FW Act), the Fair Work Commission (FWC) is now empowered to review contract terms between certain independent contractors and their principals relating to workplace relations matters, such as remuneration, working hours, and termination, and amend or set these terms aside if they are found to be ‘unfair’.

Factors that the FWC considers when these applications are made, include:
🔸The relative bargaining power between the parties
🔸Whether there was a significant imbalance in contractual rights and obligations of the parties
🔸Whether the term is reasonably necessary to protect a party’s legitimate interests
🔸Whether the term imposes a harsh, unjust, or unreasonable requirement on a party
🔸Whether remuneration is below what an employee would earn for similar work

The unfair contract regime only applies where the sum of the contractor’s annual rate of earnings is less than the contractor high-income threshold, which is set at $175,000 from 1 July 2024. Contractors who earn above this amount are not eligible to challenge the terms of their service contracts.

The Case – Jacqueline Mary Margaret Bowden v Kenneth Brendon Dungan

The Applicant in this case provided personal care services to the Respondent and applied to the FWC for an unfair contract term remedy under section 536ND of the FW Act. The Applicant’s concerns primarily related to the Respondent’s alleged breach of a contractual term and the Respondent’s alleged failure to make payment for services rendered. As such, in the Application, the Applicant sought $1,320 in unpaid fees. Critically, the Applicant did not assert that any terms of the services contract were unfair.

As such, the FWC dismissed the claim, finding that:
🔸 The unfair contract terms jurisdiction does not have jurisdiction to deal with contractual breaches or payment disputes— it only has jurisdiction to the extent of assessing whether a contract term is unfair.
🔸 Since the Applicant’s claim concerned an alleged breach of contract rather than challenging the fairness of a term, the FWC lacked jurisdiction.
🔸 The new regime allows the FWC to amend or set aside unfair terms, but it does not allow the FWC to enforce contractual rights. The proper avenue for such a claim was through the Court system.

This case demonstrate the limited scope of the new unfair contract regime.

Key Takeaways for Businesses:

🔸 FWC’s jurisdiction is limited – It reviews contract fairness, not breaches of contract or unpaid invoices.
🔸 Contracts should be clear and balanced – Terms on termination, hours, and pay should be reasonable and justified, and the agreement should not be too ‘one-sided’.
🔸 Proactive contract reviews are essential – Businesses should review their agreements to ensure compliance and avoid disputes.

With these new powers in place, organisations who engage contractors may experience an increase in applications by independent contractors challenging their contractual terms in the FWC.

If your organisation engages independent contractors, it is never too late to review your agreements to ensure you are set in a manner to ensure you minimise the risk of your contract being successfully challenged in the FWC. HR Legal can assist in reviewing existing contracts, identifying potential risks, and drafting new contractor agreements.

For expert guidance on navigating the new regime, contact the HR Legal team!

Case reference: Jacqueline Mary Margaret Bowden v Kenneth Brendon Dungan [2025] FWC 485 

Share:

This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.