Franchising

Changes to Fair Work Legislation

 

New law has just passed Parliament amending the Fair Work Act. The changes were introduced following the highly publicised wage scandal involving 7-Eleven, which saw a systemic underpayment of workers by a large number of its franchisees.

The Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (the Bill) will:

  • increase penalties for ‘serious contraventions’ of the Act
  • hold franchisors and holding companies liable for underpayments by their franchisees or subsidiaries where they knew or ought reasonably to have known of the contraventions
  • prohibit employers from unreasonably requiring their employees to make payments
  • increase the Fair Work Ombudsman’s evidence-gathering powers

How will the changes affect Franchisors?

The changes relating to franchisors only apply to franchisors with a significant degree of influence or control over the franchisee’s affairs. A franchisor won’t have breached the Act where they took reasonable steps to prevent the contravention.

In deciding whether a franchisor took reasonable steps to prevent the breaches, a court may have regard to:

  1. the size and resources of the franchisor
  2. the extent to which the franchisor had the ability to influence or control the contravening franchisee’s conduct in relation to the contravention or contravention of the same or a similar character;
  3. any action the franchisor took directed towards ensuring that the contravening franchisee had a reasonable knowledge and understanding of the requirements under law;
  4. the franchisor’s arrangements (if any) for assessing the contravening franchisee’s compliance with workplace laws;
  5. the franchisor’s arrangements (if any) for receiving and addressing possible complaints about alleged underpayments or other alleged contraventions of this Act within the franchise; or
  6. the extent to which the franchisor’s arrangements (whether legal or otherwise) with the contravening franchisee encourage or require the contravening franchisee to comply with workplace laws.

Tips for Franchisors

It’s a good idea for franchisors to review their workplace training and policies to avoid getting caught out by the Act. Some tips franchisors can implement now include:

  • reviewing the franchise agreement to ensure it deals with workplace compliance
  • providing proper training to franchisees which covers workplace compliance
  • recommending all franchisees obtain independent legal advice in relation to their employment policies and practices
  • conducting an audit of franchisees’ existing employment policies and practices
  • if a breach is suspected, immediately taking steps to prevent or rectify the breaches

For further information on the changes, or to arrange an audit of existing franchisees’ employment practices, please contact us now.

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