Franchise law

Legislation Changes
For Franchisors

One of our services at Franchise Right is to ensure our clients are kept up to date with the latest legislations and laws relating to franchising within Australia.

On September 20, 2017 the New Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 was introduced. This Act is now in force and increases the exposure and legal responsibilities of employers and franchisors within their franchise system.

In 2016, a number of Australian-based franchises endured reputational and financial damage as they dealt with allegations of underpaying employees. In some cases, franchisors avoided legal liability as they claimed they were unaware of the actions of the franchisees within their franchise system. As a result, the Act will provide adequate protection for franchise employees and will require franchisors to review their current systems and address non-compliance issues.

The Facts

  • Penalties are steep: the maximum penalty for a person who knowingly contravenes an Award or the Fair Work Act as part of a systematic pattern of conduct is up to $540,000 for a corporation and $108,000 for an individual.
  • New penalties: for providing Fair Work Inspectors with false or misleading information or records, and new prohibitions for hindering or obstructing investigations into underpayment and exploitation of vulnerable workers.
  • New reverse onus of proof: requiring employers in claims for unpaid wages where the employer has not produced wage slips or employment records.

 From 27 October 2017:

  • Franchisors and holding companies will be held responsible for workplace violations if the franchisor or holding company had a significant degree of influence or control over the franchisee.
  • Franchisors and holding companies will be liable if they or an officer knew or could reasonably be expected to have known that contraventions would occur or were likely to occur and they had not taken reasonable steps to prevent the contravention.

 Consequences

  • Where the franchisor or holding company is held not to have taken reasonable steps to prevent the contraventions, liability will be imposed for the unpaid wages of the aggrieved employees and civil penalties of $63,000 for a corporation and $12,600 for an individual per contravention.
  • Where the contravention is considered “serious” because it was deliberate and part of a systematic pattern of conduct relating to several employees, the civil penalty is increased to $540,000 for corporations and $108,000 for individuals per breach.
  • The franchisor or holding company may recover the unpaid wages paid by it to the aggrieved employees from the franchisee but not the penalties imposed.

What Should You Do?

Contact us at Franchise Right! The severity of these consequences is steep which is why we implore our clients and their franchisees to ensure they follow all the necessary industry regulations. Our role is to support and guide franchisors – we work with you to establish processes and systems which will see you avoiding any legal pitfalls.

We can assist franchisors with:

  • reviewing and updating current compliance programs
  • introducing or updating suitable training, compliance and audit processes
  • updating and developing operations manuals

If you have any hesitation or queries, please contact us today.

We give credit to and thanks for this article, published by Franchise Law, Melbourne   – a blog that provides franchise legal commentary, practical information and updates for franchisors and franchisees in Australia by Melbourne franchise lawyer Chris Verebes.