The top 10 legal risks for small businesses in 2014


The top 10 legal risks for small businesses in 2014

Each year brings a new round of changes to the regulations governing the sphere in which small businesses operate. The sheer number of issues can leave you overwhelmed and unsure of where to start. In fact it may feel at times that keeping up to date with it all is a full time job in itself. Well we’re here to help. We’ve compiled a list of the biggest challenges small businesses are likely to face in 2014. Combining both the newly implemented laws and those recurring issues that continue to catch people out year after year.

1. New Anti Bullying Laws

Changes to the Fair Work Act came into effect on 1st January 2014. A worker who has been bullied in the workplace can now apply directly to the Commission for an order to stop the bullying. Under the Fair Work Amendment Act bullying occurs when an individual or group repeatedly behaves unreasonably towards a worker and the behaviour creates a risk to health and safety.

There is no time limit to making an anti-bullying application, however the worker must still be employed by the business where the bullying occurred.

The Commission has the power to intervene but cannot award financial remedies which means you won’t be hit with a compensation claim. It’s essentially a form of external dispute resolution but as always prevention is better than the cure and the best approach is to ensure all workers in your business feel comfortable bringing to your attention instances of bullying and knowing they will be dealt with fairly and effectively.

2. Changes to the Privacy Act

Changes to the Privacy Act relating to the handling of personal information by businesses came into play on the 12th March 2014.

The new laws tighten protections on the way organisations collect, handle, use or disclose an individual’s personal information.

The collection and disclosure of information without permission and the failure to obtain consent before sharing personal information will attract penalties and your business may be forced to formally apologise.

If in doubt over whether these changes impact you, check out this privacy checklist by OAIC.

3. Changes to Competition Laws

In the 2013 election, the Liberal Government flagged changes to the Competition Laws. On March 27th this year, draft terms of reference for the review were released.

The areas highlighted by the ACCC included:

Greater focus on representations made over “savings”- discounts off what?

Emerging issues in the online consumer marketplace: particularly the upfront disclosure of additional fees and charges, including credit card surcharges.

The Australian Consumer Law Consumer Guarantee Regime, particularly regarding consumer rights when buying products and the sale of extended warranties.

4. Not having a Shareholders Agreement

So you and a close mate, family member or partner had an awesome idea and have decided to set up a business together. What could possibly go wrong you ask? You’d be surprised what issues come up when people start working together.

The best way to avoid those disputes that could potentially prove to be crippling to your business is by having a shareholders agreement. This document clearly outlines the structure, ownership matrix and expectations placed on the partners, ensuring that should anything go wrong down the track, there is little doubt as to how things will be dealt with.

5. Exit Strategies: More Important than you think

Having the pragmatic conversation regarding an exit strategy with your partner isn’t the easiest topic to broach. It’s a bit like discussing a pre nup. Of course we’d all like to think things will last forever but the simple fact is they don’t and a formal agreement before the fact, without emotions involved, will save you and your business a great deal of time and money in the long run.

It’s inevitable that one partner will eventually leave the partnership for one reason or another. So to avoid costly legal battles ensure you have something in writing that clearly states how a departure will be dealt with and what will happen to the business upon this occurring.

6. Failing to Define Partnership Roles

If there’s a common theme you’re starting to pick up on here, it’s entirely intentional. Get everything in writing. Make sure you document important terms and conditions and any agreements between partners, contractors and suppliers.

The same goes for the direct relationship between the partners and the business. It is essential you clearly define your roles and responsibilities from the outset. This will ensure expectations are met and one person isn’t left carrying the can so to speak.

7. Misunderstanding Contractual Terms & Obligations

It’s a well known fact that you should read anything carefully before signing it. But how well do you really understand what you’ve signed up for? Especially with the number of documents and agreements you have arriving on your desk (or in your inbox) on any given work day.

If possible keep a record of all the contracts you’ve entered into ready to hand. An excel spreadsheet listing each agreement and your respective obligations would be particularly helpful. As much of hassle it may be to compile this document it will pay off tenfold in the long run, especially when contracts are up for re-negotiation.

8. Investor Relations

A carefully fostered owner-investor relationship is a beautiful thing. When done properly its win-win for all involved. You have the ideas and the skills, they the money and want to back your up and coming startup.

Make sure you don’t get enmeshed in a deal unfavourable to your own interests. Spend time preparing clear terms and conditions and a shareholders agreement outlining precisely who owns what.

When you start out, an investor can appear incredibly generous, but don’t forget, they’re a prudent business person at the core. They’ll be covering their back so make sure you do the same. Make sure whatever you agree on is fair and equitable to all involved and that you, as the brainchild, can’t be forced out down the track.

9. Taming the Tweet

In this age of online EVERYTHING it’s no surprise that more and more business is being done online. This translates into unprecedented access to the consumer 24/7, but it also means your business is subject to trial by social media on a daily basis.

It’s essential you are aware of this. Be prepared. Understand the social media beast and use it to your advantage. After all, it provides you with unparalleled access to those you previously had to fork out substantial resources in advertising to reach. That’s not to say you won’t need to advertise, just that when you’re starting out, social media is a financially savvy way to deliver your message.

If you have people in your employ, ensure you provide them with policies relating to their social media use to protect your business.

10. You’re the Boss: Know your Obligations as an Employer

If you’re employing people for the first time you need to ensure you understand your legal obligations as an employer. These duties are designed to protect employees and maximise productivity. I’m sure that having been an employee in the past, you know that treating your staff well, translates into a greater chance of business success.

Your legal obligations stem from a variety of sources including federal and state legislation, industrial awards and agreements as well as employment contracts, both written and verbal.

Your main obligations will include but aren’t limited to:

  • paying the correct award wages (Modern Awards List)
  • ensuring a safe work environment
  • forwarding PAYE tax installments to the Australian Taxation Office
  • making the required superannuation contributions
  • reimbursing workers for any work-related expenses

It’s important you have codes of practice in place such as those that deal with discrimination, harassment and bullying. Also, are you aware of leave entitlements including the paid parental leave scheme?

This list is designed to highlight some of the main legal issues small businesses face on a daily basis. Don’t be overwhelmed by it. Knowledge is power and ensuring you’re up to speed with the latest changes means you’ll save yourself from nasty legal battles in the future.


Kate Horman

at T

Comments (2)
Fleur Leong

Fleur Leong, Director at

Thanks Kate. I'd better get my act together and address some of these in my business.

Kate Horman

Kate Horman at T

Pleasure Fleur! Just remember, knowledge is power, so don't be overwhelmed by this. Being aware of what you face is the first step to success. If you have any questions at all, I'm here to help.