Question: Am I Responsible For My Franchisee’s Employment Law Breaches?
Answer:Under the Fair Work Act 2009 (Cth) (the Act), employees are entitled to rights at work. For instance, minimum wage, notice of termination and redundancy pay. Franchisees must comply with the Act when hiring workers.
What is Accessorial Liability?
Franchisees enter into written employment contracts with their employees. Franchisors are not a party to this agreement. However, in some cases, the franchisor may also be responsible if the franchisee doesn’t comply with their obligations under the Act. This concept is referred to as accessorial liability.
So, if a franchisee is caught underpaying workers, and the franchisor knew and/or participated in the process for making and setting wages, they may share responsibility for the breach. This is because the franchisor was ‘involved in’ the breach.
As a franchisor, you can be potentially liable both as a company and in your personal capacity (e.g. where you are the owner or director of the franchise).
How Can You Reduce Your Liability?
There are a number of practical steps you can take to reduce the risk of breaching Australia’s workplace laws, including:
- conducting training for your franchisees about their obligations as an employer;
- completing regular audits of your franchisees (for instance, interviewing employees and requesting copies of employee records); and
- incorporating express terms into the franchise agreement that require franchisees to enter into an employment agreement with their works. Franchisors should also provide their franchisees with a pro forma employment agreement template.
Updates
The Federal Government introduced the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 to crack down on non-compliance with the Act. Franchisors should understand how, if passed, the Bill will affect their liability.
