COVID-19 contract, lease and consumer law considerations for NDIS Providers

In collaboration with MPS Law, this is the second in a series of articles discussing employment considerations, commercial leases, contract disputes, business continuity and the NDIS Practice Standards.

This article will cover commercial leases, planning for the impact of a reduced workforce on service delivery, the Australian Consumer Law and factors to consider when changing or cancelling service bookings.

Planning for the impact of a reduced workforce

Even before the pandemic, the disability workforce was stretched and COVID-19 is likely to create additional resourcing challenges.

These challenges include the likely spike in absenteeism of staff required to self-isolate or attend to caring responsibilities. Coupled with reduced revenues, changes in how some supports are delivered may be unavoidable.  

Guidance from the National Disability Insurance Agency (NDIA) confirms that registered providers are expected to continue delivering support and where they cannot service all clients, to make arrangements with clients to prioritise essential supports.  

Ensuring continuity of support and effective risk management

Providers subject to the Core Module of the NDIS Practice Standards (Core Module) must ensure that “each participant has access to timely and appropriate support without interruption”. 

Faced with fewer resources, providers must examine their client base holistically and prioritise resources to those clients who are most at risk if there is a disruption in service delivery.   

Providers should assess whether clients’ needs (which may have changed) can be met adequately and safely with the current workforce and plan for scenarios where staff are not available or the operating environment is impacted (for example where entry to facilities is restricted such as in Victoria, New South Wales, and South Australia). 

The NDIS Practice Standards require that risks to the organisation, participants, financial and work health and safety risks and risks associated with the provision of supports are identified, analysed, prioritised and treated. For each participant, there should be a documented risk assessment that includes strategies for controlling known risks. Updating of risk assessments is crucial to planning for the impact of staff shortages. 

In consultation with clients as well as where appropriate any carers, family or nominees, providers should review clients’ care plans and assess what is essential.  

Relevant questions for providers include:

• Is it possible to mitigate the risk of exposure to COVID-19 by reducing or substituting less critical services? 

• Are there other modalities for service delivery (e.g. care planning can be carried out over the phone or using telehealth for physio, therapy or other clinical services)?

Remember to manage expectations by explaining that unanticipated disruptions are likely, changes in staffing means that the client may not be involved in selecting workers (including preferred genders) and remind clients (and others) of what they can do if they have any concerns, feedback or complaints.

Registered providers must notify the NDIS Quality and Safeguards Commission if there is an adverse change in financial capacity or a significant change in the number of workers delivering services or NDIS participants receiving services.

Changing or cancelling service bookings and terminating service agreements

Providers cancelling a service are required to contact the affected client and, where relevant, the Plan Manager and/or Support Coordinator. 

The service agreement will set out how much notice of a disruption or change to scheduled appointments is required (usually at least 24 hours). If supports cannot be delivered, alternative arrangements must be explained and agreed upon. 

Where the client is moving to a new provider, the transition must be planned, documented and communicated. 

Providers subject to the Core Module are expected to have processes for transitioning clients in place, so this is a good time to begin reviewing and communicating how those processes work.

Consumer rights in relation to changed services depend on whether the change is material (the substance of what was originally agreed has changed in a material way). If there is a material change, communicate those changes clearly to the client or other appropriate people using appropriate means. 

Keep records of what is communicated and if the client agrees to continue receiving services, the agreed changes that will occur. 

From 30 March 2020, providers can charge 100% of the applicable fee for short notice cancellations (no show or less than 10 business days’ notice) if alternative billable work for the relevant worker is not found and the business is required to pay the worker for their time.  

However, where a client cancels a booking and indicates they are doing so due to a material change, they should not be charged.  

Consumer guarantees

Be mindful that failure to deliver services using an acceptable level of skill or technical knowledge may breach the Australian Consumer Law. 

If the client elects to terminate due to a major breach of a consumer guarantee (a ‘major failure’), the service agreement ends when the client tells the provider of their intention to cancel the agreement.

If the client wants to end the agreement (for any other reason) the notice period for termination set out in the service agreement applies. Note that where a ‘major failure’ occurs, the client may also be entitled to claim compensation for consequential loss.  

Seek professional advice if you are unsure how rights and remedies under the Australian Consumer Law apply.

In addition to consumer rights, providers should be aware of their general contractual rights and obligations. The rights and obligations, including any rights of termination and the law on frustration, will depend on the facts. As a result, advice should be sought to check how the law applies to you.

Rent relief for commercial tenants

For disability providers across Australia that rent the premises they operate from, the mandatory Code of Conduct for commercial tenancies (the Code) may ease some of the financial pressure. 

The Code was agreed on by National Cabinet on 7 April 2020 and will come into effect in all States and Territories on a date to be defined by each jurisdiction

The Code applies to enterprises with a turnover of $50 million or less, where the tenant or landlord is eligible for the JobKeeper Program and contains overarching principles that include the requirement for landlords and tenants to negotiate in good faith. 

The ultimate objective of the Code is to proportionately share the financial risk and cash flow impact through negotiated, temporary arrangements that are tailored to the particular circumstances of each tenant.

Included in the Code are leasing principles which help with making arrangements between the tenant and landlord. 

Leasing principles

• No termination – Landlords must not terminate leases for non-payment of rent.

• Lease compliance – Tenants must continue to comply with their lease obligations. otherwise tenants will jeopardise the protections provided by the Code.

• Rent reductions – Landlords must offer tenants a reduction in rent in the form of waivers and deferrals of up to 100% of the amount ordinarily payable (proportionate to the reduction in the tenant’s trade). Rental waivers must constitute at least 50% of the total rent reduction (or less if both parties agree).

• Period for payment – Repayment of deferred rent is across the balance of the lease term or for a period of no less than 24 months, whichever is greater (unless otherwise agreed).

• Landlords to pass on benefits – The Landlord must pass on any reduction it received in statutory charges (e.g. land tax, council rates).

• No penalty – The Landlord must not charge fees or interest on rent or payments being deferred.

• No draw on security – Landlords must not draw on a tenant’s security (bond, bank guarantee or personal guarantee).

• Term extensions – Landlords should allow tenants to extend the lease for the period the subject of the rent deferral.

• Rent freeze – Landlords to freeze rent increases (other than turnover rent in retail leases) for the duration of the COVID-19 pandemic period and a reasonable recovery period after it passes.

Before negotiating with your landlord, tenants may want to consider the following:

• Review lease period – If the lease is due to expire within 12 months, are you able to negotiate an extension of the lease with a rent reduction?

• Gather records and data – Do you have sufficient financial data and have you analysed your losses (or revenue decline)? Do you have records that demonstrate eligibility for the JobKeeper program?

• Assess your premises – Has the landlord closed access to your building?  Is less floor space needed because staff are working from home? Has the landlord restricted access to amenities (toilets, showers etc.) in the building? 

• Identify the relief package – Will there be a rent free period or merely a rent reduction? Are there circumstances for unpaid rent to be recouped (i.e. a repayment plan)? Will other terms of the lease be changed (e.g. the period of the lease or rent review mechanism)? If insurance proceeds or government assistance is available, is the tenant required to use those funds to repay unpaid rent? How long will the arrangement apply for and when might the arrangement be reviewed?

• Communicate openly – Are you being clear and frank with your landlord and are you demonstrating sensitivity to their circumstances, consistent with the Code that encourages open honest and transparent dealings? 

If the parties cannot reach an agreement on leasing arrangements, the Code allows for the dispute to be referred to the leasing dispute resolution process (that ordinarily applies in each jurisdiction) for binding mediation. 

Legislation in each State and Territory will provide more detail on how this will work.

Your accountant can advise you on the records that are required to demonstrate a reduction in business turnover.

Records showing changes to service bookings (e.g. active, inactive or rejected bookings, number of cancellations given with more than 10 days’ notice) and the total value of payments requests pending or awaiting approval may also be relevant. 

Any information collected from the Myplace Provider Portal should be carefully anonymised.

What would you like to know about? Tell us in the comments below or send an email to [email protected].

Disclaimer

This commentary is general in nature and provided for informational purposes only. It is not intended to be comprehensive and does not constitute legal advice.  You should seek legal or other professional advice or consult with the appropriate government authority if you are unsure about how the issues raised in this commentary apply to the circumstances of your business.

Kai Sinor is a legal practitioner and former Assistant Director for Compliance at the NDIS Quality and Safeguards Commission. He specialises in regulatory matters and has worked across a variety of social justice and regulatory issues for the past decade. Kai is a Senior Lawyer at MPS Law, where he provides legal services to NDIS providers on compliance, corporate and commercial matters.