Bakers Delight Holdings have landed in the hot oven over alleged staff underpayments in three of its Tasmanian stores. The franchise could face severe penalties if it is found that they have breached their franchisor obligations. In addition, the Fair Work Ombudsman (FWO) could deem Bakers Delight liable for around $642,000 of the outstanding underpayments. This article will provide a breakdown of the case and the penalties Bakers Delight could face for their alleged franchisee underpayments.
Has Legal Action Commenced?
The Fair Work Ombudsman (FWO) has commenced legal action in court according to the Franchisor Liability Provisions of the Fair Work Act (FWA). They allege the baking giant’s franchisee underpaid workers by about $1.25 million between July 2017 and October 2020 in 3 Hobart stores.
Further, the FWO has alleged that Bakers Delight became aware the franchisee was underpaying its staff through an audit. However, they failed to take preventative action to prevent repeat breaches. This failure, the FWO alleges, means the franchisor failed to take reasonable steps to prevent future breaches.
What Are the Franchisor Liability Provisions?
The Franchisor Liability Provisions state that a franchisor may be responsible for breaches their franchisees commit per specific provisions under the FWA. These provisions include:
- employees entitlements;
- national minimum wages, equal remuneration orders and guarantee of annual earnings;
- methods and frequency of payments;
- pay slips and record keeping; and
- sham contracting.
To avoid such liability, franchisors must take reasonable steps to prevent a breach of those provisions.
Continue reading this article below the formHow Can I Ensure Compliance as a Franchisor?
Franchisors must take reasonable steps to ensure compliance with workplace laws by franchisees. These steps include:
- creating a culture of compliance within the franchisee chains;
- conducting randomised audits and not becoming complacent in your commercial relationship with the franchisees;
- supporting and continually training managerial staff regarding complying with workplace laws;
- establishing a line of open communication where employees impacted by any breach under the workplace laws can make a report; and
- ensuring any non-compliance issue that comes to light is remedied by the relevant franchisee swiftly and completely to rectify it and avoid it from reoccurring.
Further, identifying breaches and encouraging the franchisee to remedy them may not be enough to meet the ‘reasonable steps’ test. Instead, franchisors should implement measures to identify breaches and remedy them. Further, they should proactively ensure the relevant franchisee does not repeat the conduct.
What Are the Consequences for Failing to Comply?
Failure to ensure compliance with the workplace laws as a franchisor may result in proceedings brought against you. The penalties for non-compliance are severe, and you may receive fines per contravention.
Scenario Example
Consider you are a franchisor and discover some franchisee breaches. Some of your franchisees across Australia need to pay their young workers correctly. You issue a general notice to all your franchisees across Australia that they must pay their staff per the requirements under the law. Further, they must back-pay workers any money owed from previous underpayments.
However, you do not follow up or conduct checks to ensure your franchisees have complied with the notice. This failure may fall under the Franchisor Liability Provisions. Therefore, you may face penalties for failing to meet your obligations as a franchisor or be deemed legally liable to remedy the underpayment or breach.
As a franchisor, you must not engage in misleading and deceptive conduct. We explain what it is and how to avoid it.
Key Takeaways
As a franchisor, you should have processes in place to ensure franchisee compliance with the FWA. Remember that there are severe penalties attached to non-compliance, and as a franchisor, you should proactively rectify any non-compliance in your franchising network.
If you need assistance understanding your obligations as a franchisor, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
The Franchisor Liability Provisions state that a Franchisor may be held responsible for breaches committed by its Franchisees of specific provisions under the FWA. To avoid such liability, franchisors must take reasonable steps to prevent a breach of those provisions.
Failure to ensure compliance with the workplace laws as a franchisor may result in proceedings brought against you. The penalties for non-compliance are severe, and you may receive fines per contravention.
We appreciate your feedback – your submission has been successfully received.
