In response to investigations into the exploitation of underpaid workers of prominent Australian franchises, the Fair Work Amendment (Protecting Vulnerable Workers) Bill (the Bill) was introduced on 1 March 2017. The Bill recently passed both Houses of Parliament, and will inevitably change the regulatory landscape of workplace law, particularly for franchisors. As the name of the Bill suggests, it protects vulnerable workers by increasing fines for serious breaches of workplace laws as well as holding franchisors responsible if their franchisee contravenes the law.

What is the Effect of the Bill on Franchisors?

Part of the responsibility of a franchisor is to ensure their franchisees are well-equipped to adhere to workplace laws specifically when hiring and dealing with employees. Under the new Bill, franchisors may be liable if their franchisee breaches workplace laws, even if they are not directly involved in the breach. If the  franchisor knew the likelihood of the breach but did not take reasonable steps to identify and eliminate it, they may be held liable.

How Can Franchisors Ensure Compliance?

To avoid being held liable for the actions of franchisees, franchisors should ensure that they comply with the laws by taking reasonable steps as set out in the Bill:

  • inform franchisees of the relevant awards and conditions that the franchisees must comply with when employing staff;
  • have arrangements in place to periodically check franchisee compliance on wage conditions;
  • have a complaints system where employees can contact the franchisor directly should they have issues with a franchisee not paying them correctly;
  • implement steps to encourage franchisees to comply (and address issues with those who do not).

Equip Franchisees with Information

Equipping franchisees to appropriately run the franchise and comply with the law is vital. This can be done by providing them with information in regards to legal issues such as:

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

The Operations Manual and information brochures produced by the franchisor are a good place to provide clear steps regarding what the requirements are for employing, training and paying staff. It is wise to include:

  • examples of letters of employment;
  • examples of pay slip statements;
  • recommend or require an accounting software systems that issue compliant payslips;
  • details regarding record keeping and time recording;
  • the relevant award for the industry; and
  • links to Fair Work Australia and best practice guides .

Become a Member of a Relevant Employer Organisation

Joining a relevant industry organisation is also beneficial as it provides access to a community of businesses in the same industry. Relevant employer organisations such as Australian Retailers Association, the National Retailers Association and the National Road Transport Association provide services that:

  • support franchisees in determining the relevant award;
  • provide template letters of employment; and
  • assistance in the franchisee’s dealings with employees and if necessary the Fair Work Ombudsman (FWO).

Alternatively, developing a relationship with a law firm or HR advisory firm may provide similar benefits by allowing franchisees access to services for a discounted fee.

Check Franchisee Compliance

Ensure that as a franchisor, head office regularly checks and records franchisee compliance with laws. Checks should include whether:

  • letters of offer include appropriate position descriptions;
  • payslips are properly issued;
  • hours worked by employees are recorded via a software system.

The frequency of these checks should depend on the size of the network and resourcing of head office.

The Bill includes a provision where the “size and resources of the franchise” will be taken into account. Therefore, it implies that more leniency will be given to a smaller network with limited head office staff as opposed to a large network with a significant head office staff count. Regardless of the size and resources of a franchise network, compliance with the law should be a priority.

Establish a Complaints System

A complaints system provides employees with an outlet to direct comments, questions and complaints about workplace conditions. By making a complaints system available, whether it be through an employee hotline or other channel, franchisors can reduce the risk of complaints being made public, going directly to the FWO and triggering an investigation. Internal mechanisms such as the complaint system and going to HR managers allows any issue to be dealt with efficiently, effectively and confidentially.

Consider your Franchise Agreement

It is not necessary to completely re-draft your franchise agreement in light of the new Bill. There should already be a “catch all” provision in your template agreement that requires franchisees to comply with all relevant laws including workplace laws and the Fair Work Act. It is advisable to include an explicit clause about compliance and reporting in relation to the Bill. Doing so ensures that the responsibilities of franchisees are made explicit and this will assist in any dealings with the FWO.

Key Takeaways

Although the Fair Work Amendment (Protecting Vulnerable Workers) Bill may hold franchisors liable if their franchisees breach workplace laws, there are practical steps that franchisors can take to minimise risk of non-compliance. There is no need for franchisors to panic, provided they equip their franchisees with relevant information about compliance, regularly check up with franchisees, have a complaints system and encourage franchisees to adhere to the laws. If you have any questions about the new Fair Work Amendment, or as a franchisor need legal advice, contact LegalVision’s franchise lawyers on 1300 544 755.

Tim Mak
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