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What are the 10 biggest legal risks for start-ups in 2014?

Monday, 6 January 2014 | By Lachlan McKnight

This year will bring new challenges and risks for start-ups. The new federal government is bound to bring in new laws and changes to existing laws. Other risks are from long-standing problems which seem to trip up business owners again and again.


Here’s our top 10 countdown of the biggest legal risks your business will face in 2014:


10. Changes to the Privacy Act


Changes to the Privacy Act commence in March 2014. The new laws tighten protections on the way organisations handle, collect, use or disclose an individual’s personal information.


If you collect unnecessary information, disclose this information without permission, or fail to obtain consent before sharing personal information, then penalties may apply. For example, the Privacy Commissioner may force you into apologising or even paying compensation.


9. ‘Mutual trust and confidence’ clauses in employment contracts


The Commonwealth Bank has been granted leave to appeal to the High Court of Australia after the full court of the Federal Court found one of the CBA’s former employees was owed an ‘implied duty of mutual trust and confidence’ in their employment contract.


This aspect of employment law is rarely used in Australia, though it is common in the UK. If the High Court upholds the Federal Court’s decision this will likely increase the obligations on employers in a very broad sense. ‘Mutual trust and confidence’ places obligations on both parties in an employment contract to not undermine the relationship and therefore its scope is potentially limitless. Watch this space.


8. Workplace injuries


While the number of workplace injuries has basically stabilised, the costs associated with them continues to spiral.


An ageing workforce means an increasing risk of the number and severity of workplace injuries. Keep a close eye on your safety and risk management systems as workers’ compensation schemes are under pressure and premiums likely to rise in many states.


Remember also under workplace, health and safety laws, you are required to show ‘due diligence’ by being proactive to prevent injuries from occurring.


7. Disability discrimination


Often workers who return to work injured or otherwise have long-standing injuries make successful claims to the Human Rights Commission.


Complaints about being victimised because of a physical injury are the most common type of complaint to the commission. Avoiding discrimination claims is about understanding your obligations under discrimination law and ensuring those workers are not subject to differential treatment


6. Not having a shareholders’ agreement


You’re setting up a new business with close friends or family, what could possibly go wrong? Disputes between business owners, particularly in small and family businesses, are common.


The best way to avoid disputes and litigation is by having a shareholders’ agreement, but there will be thousands of new businesses which start without a shareholders’ agreement.


5. Sexual harassment


It might have disappeared from the headlines – don’t be fooled, the number of sexual harassment claims is growing and cases commonly involve large amounts of damages.


Your business can avoid liability for sexual harassment claims by educating your employees about what sexual harassment is and letting them know it will not be tolerated under any circumstances. A standard sexual harassment policy might save you thousands of dollars in the long run.


4. Changes to competition laws


We don’t know precisely what the government has in mind, but big changes are flagged. However, we hope that any changes present an opportunity for business, not a risk of doing business. In any event, keep an eye on developments in these laws.


3. Social media


More and more business is being, and will continue to be, done online, and more and more businesses will be subject to trial by social media. Be prepared for this and make sure all employees are given policies which relate to their social media use in order to protect your business.


2. Commercial lease disputes


Yes, that old chestnut. Commercial leases continue to wreak havoc for unknowing business tenants all around the nation. You should speak to a lawyer before you enter into or negotiate a commercial lease to ensure it doesn’t cost you thousands in the long run.


Commercial leases often have tricky clauses which leave tenants liable to pay for things, which in all fairness they shouldn’t have to. Options-to-renew, make good, legal fees, assignment and relocation continue to cause problems and disputes – and this will no doubt continue into the new year.


1. New anti-bullying laws


As of January 1, 2014, workers who believe they are being bullied can apply to the Fair Work Commission to have the situation resolved. Most bullying allegations are made against managers and the person who has been accused of the bullying will have to attend a Fair Work Commission hearing. Under the Fair Work Amendment Act bullying occurs when (1) a group or individual repeatedly behaves in an unreasonable manner towards a worker or group of workers AND (2) the behaviour creates a workplace health and safety risk.


The commission has the power to intervene in the dispute, but it cannot issue financial remedies in the first instance. So you are not going to have to pay compensation or damages, unless you defy commission orders. However, the time, expense and impact on morale/productivity of having to go to an external tribunal is obviously something you want to avoid.


Therefore, the new legislation really offers an external dispute resolution procedure for aggrieved workers. The best preventive action is for your business to ensure workers can come to you with bullying complaints and that you handle these fairly, sensitively and impartially.


If you’d like to speak with a lawyer in relation to any of the above issues just get in touch with the LegalVision team!