Strict New Fair Work Laws for Franchisors

Federal parliament has passed new workplace laws seeking to protect franchisees from franchisors and employees of holding companies.

With Federal Parliament passing new workplace laws, Cameron Hancock, Commercial Lawyer at BusinesDEPOT , says that the amendments are going to be a wake-up call for Franchisors. “Franchisors no longer can turn a blind eye to poorly behaving franchisees. The onus has shifted…the franchisor now holds the onus of proof to prove that they took reasonable steps to prevent franchisees contravening certain workplace laws.”

The Federal legislation, The Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (the Bill), was passed by Parliament on 5 September 2017 and will take effect on assent – in approximately six weeks’ time.

The laws will apply to franchisors that have a significant degree of influence or control over the franchisee and will impose serious financial penalties where franchisors commit, or fail to take reasonable steps to prevent, contraventions of workplace laws where they knew or ought to have known about them.

In such a case, franchisors (or holding companies) might be held responsible for underpayments by their franchises or subsidiaries.

A franchisor will not contravene the new rule if it has taken ‘reasonable steps to prevent the contravention by the franchisee’. Cameron Hancock recommends that all franchisors review their franchise agreements to ensure that they are updated to include employment law audit powers. Without such powers included in the franchise agreements, a franchisor will impact their ability to take reasonable steps to prevent contraventions.

The new law takes aim at ‘cashback’ arrangements from employee to employer, including franchisors and holding companies, to protect vulnerable workers (and presumably small operators) from an inequitable balance of power in negotiation at the beginning of an employment or franchise arrangement.

Increased financial penalties will be introduced with The Fair Work Act 2009 (Cth) (FW Act) for payslip breaches or for providing false payslips to workers or Fair Work Inspectors.

The scope of investigative powers has been reinforced to give Fair Work Inspectors greater ability to request information and has added some teeth to the consequences for hindrance and failing to produce information, as requested.

The Bill also introduces a new ‘serious offences’ capability for enforcement where employers knowingly contravene the FW Act or where there is evidence of a systemic failure to comply. The tribunal will now have the discretion to impose financial penalties up to 10 times their current level, bringing the new maximums to $630,000 for corporations and $126,000 for individuals, in these serious cases of breach. This amendment was introduced to address concerns that civil penalties under the FW Act are currently too low to effectively deter employers who exploit vulnerable workers.

The new arrangements have been welcomed by the Fair Work Ombudsman, Natalie James, who said: “We will always welcome new tools, resources or powers that will help the agency address serious cases of non-compliance and exploitation in the workplace, especially when it comes to protecting the most vulnerable members of our community.

“My agency will continue to be fair and balanced in its approach and will continue to operate in accordance with our compliance and enforcement policy.

“However, employers who know their obligations and systematically fail to meet their workplace obligations should be on notice that we will use all the powers at our disposal.”

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Sarah Bell

With a background in research and investigations, Sarah Bell married into the real estate industry in 2009 and has found a passion for both the business and its people.