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The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 took effect on 15 September 2017. This amendment was made to the Fair Work Act 2009 in response to investigations conducted into the exploitation of workers in prominent Australian franchises. This article will outline some of the legislative changes that this bill introduces.

What is the Effect of the Amendment on Franchisors?

This Amendment means the franchisors can be held responsible if their franchisee does not follow workplace laws. This liability may extend to the franchisor even when they were not directly involved in the workplace breach. Indeed, a franchisor may be responsible for a franchisee’s breach if the franchisor (or an officer of the franchisor):

  • knew, or could reasonably be expected to have known, that a relevant contravention would happen; or  
  • at the time the contravention happened, knew, or could reasonably be expected to have known, that a contravention of the same or similar kind was likely to happen; and  
  • have not taken reasonable steps to prevent the contravention entirely, or simply one of the same or similar character.

How Can Franchisors Ensure Compliance?

Franchisors should help their franchisees understand and meet their responsibilities under workplace laws. By doing so, franchisors can minimise their legal and reputational risks. Note that ‘reasonable steps’ undertaken by a franchisor may vary depending on several factors, including the size and resources of the franchisor. However, as an example, some reasonable steps that franchisors can take include: 

  • ensuring franchisees are informed about the relevant awards and conditions they must comply with when employing staff;
  • providing franchisees with support in complying with workplace laws;
  • having arrangements in place to periodically check franchisee compliance on wage conditions;
  • establishing a reporting channel where employees can contact the franchisor directly should they have issues with a franchisee not paying them correctly;
  • implementing steps to encourage franchisees to comply (and address issues with those who do not).

Equip Franchisees with Information

As noted above, an important aspect of taking reasonable steps is to ensure franchisees are equipped to comply with workplace laws. You can do this by providing franchisees with information concerning legal issues they will face when operating their franchise, such as:

  • requirements when employing staff; and
  • where to obtain information regarding awards and employee remuneration. 

The operations manual is a good place to provide direct and easily accessible information. For example, the operations manual should have clear steps regarding the legal requirements for employing, training and paying staff. In line with this, franchisors should provide the franchisees with tools to comply with such legal requirements, including, for example:

  • example/template letters of employment;
  • example/template payslip templates;
  • recommend/require accounting software to issue compliant payslips;
  • details regarding time-wording and record keeping; and
  • links to fair work and its relevant resources. 

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Become a Member of a Relevant Employer Organisation

As a franchisor, joining an industry organisation relevant to your franchise system is beneficial as it provides franchisors with access to a community of businesses within the same industry. Examples of employer organisations include the National Retailers Association and National Transport Association. For example, these organisations can assist in compliance by providing services that:

  • support franchisees in determining the relevant award;
  • providing template letters of employment; and
  • assisting franchisees in their detailing with employees and the Fair Work Ombudsman (FWO). 

Alternatively, franchisors can usually obtain similar support by developing a relationship with a law firm or HR advisory firm. Then, franchisees may receive benefits here, including a discounted fee. 

Check Franchisee Compliance 

As a franchisor, the head office should conduct regular audits on franchisee compliance with workplace laws. These audits should include checking whether:

  • they are issuing payslips properly;
  • position descriptions are accurate; 
  • they record hours worked by employees via the relevant software system. 

The frequency of such audits should depend upon the size of the network and resourcing of the head office. Indeed, as noted above, the Amendment does take into account the nature of the franchise. As such, smaller networks with a limited head office will likely receive more leniency in the number of audits completed versus larger networks with a large head office.

However, note that regular audits on franchisees to ensure compliance should be a priority of all franchisors regardless of size.

Establish a Reporting Channel  

Establishing a reporting channel provides employees with an avenue to direct their comments, questions and complaints about their workplace conditions. For example, creating such a channel reduces the risk of employees making complaints to the public or directing them to the FWO. This then allows you to address the issue internally, efficiently, effectively, and confidentially. It could also point out where a further investigation into the operation of a particular franchisee and its compliance is necessary

Consider Your Franchise Agreement

It is likely that your franchise agreement already contains a ‘catch-all’ provision that requires franchisees to comply with all relevant laws, including the Fair Work Act. However, it is recommended that your franchise agreement also contains an express clause that addresses its compliance obligations concerning the Amendment. Doing so will assist the franchisor in its dealings with the FWO by indicating that it has made the obligations of franchisees explicit.

Key Takeaways 

In short, franchisors can take practice steps to minimise the risk of non-compliance within their network, fulfilling their obligations under the Amendment. An important objective of this Amendment is to clarify to franchisors that they cannot remain complacent or oblivious to the actions of their franchisees in relation to workplace laws. Rather, franchisors need to take an active role within the franchise network to ensure compliance. 

If you have any further questions, our specialist franchise lawyers can assist you 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

What are my obligations under the Amendment?

As a franchisor, your main obligation under the Amendment is to ensure your franchisees follow workplace laws. This is because you are liable under the Amendment when your franchisees breach workplace laws.

I do not have the resources to conduct regular audits on my franchise network. What are my obligations?

In this case, the Amendment takes into account the size and the resources of your head office size and resources. Then, it will make a determination based on that. However, you should still remain diligent in conducting audits wherever you can.


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