Bill to increase franchisor compliance risk

Senate debate continues today on the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 which looks to tighten the chain of responsibility between a franchisor and franchisee.

The Bill seeks to amend the Fair Work Act and introduce a higher scale of penalties for “serious contraventions” of prescribed workplace laws and increased penalties for record-keeping failures.

Franchisors will be held responsible where it is deemed that the business model has led to objectionable practices. Franchisors will be held responsible for underpayments by their franchisees where they knew or should have reasonably known of the contraventions and failed to act to prevent the practices. This will apply where a franchisor has a significant degree of influence or control over their business networks.

The proposed changes are of huge significance to franchisors. The amendments are intended to target larger corporations that see the current penalty of $54,000 as an acceptable cost of doing business, but there is no distinction in the Bill between a large and small employer, taking the risks for all franchises in relation to contraventions of workplace laws from bad to worse.

The franchise sector is being singled out and put on notice with franchisors required to take greater responsibility for the employment practices of their franchisees. We work with many franchises – the extra burden placed with this increase in liability emphasises the importance of reporting and compliance to every franchisor.

While the Bill proposes that a franchisor must show that it has taken reasonable steps to prevent contraventions by its franchisees, it does not outline the fine print as to what is considered reasonable. In short, ensuring compliance across the employment relations practices of its franchisees will become an even more substantial risk area and liability for franchisors.

Further, the Bill will give new unprecedented powers to obtain documentation and materials as part of any investigation where it seeks to ensure the protection of vulnerable workers.

The Bill responds to a number of high-profile cases involving well-known franchise businesses such as 7 Eleven exploitation of workers and what Senator Nick Xenophon said “looms as the biggest case of wage fraud in Australian corporate history.”

Harry Hilliar, Senior Employment Relations Adviser, Employsure

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