On 5 September 2017, the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (the Bill) was passed by both houses of Parliament. The Bill has recently received Royal Assent, making changes to the Fair Work Act 2009 (Act)
There are significant changes for franchisors, in the aim of protecting vulnerable workers. Some of the significant amendments include:
making franchisors and holding companies responsible for underpayments by their franchisees or subsidiaries in certain circumstances;
increased penalties for ‘serious contraventions’ of workplace laws;
increased penalties for breaches of record-keeping and pay slip obligations; and
stronger powers of the Fair Work Ombudsman to collect evidence in their investigations
Responsibility for Underpayments
One of the critical changes for franchisors is their increased responsibility for underpayments made by their franchisees or subsidiaries. The franchisor may be liable where the franchisor:
had a significant degree of influence or control over the franchisee’s affairs;
knew or ought to have known that the contravention would occur; and
failed to take reasonable steps to prevent the contraventions.
In determining whether the franchisor took reasonable steps to prevent the contravention, the Court may have regard to all relevant matters, including:
the size and resources of the franchise;
the ability to influence or control the contravening employer’s conduct concerning the contravention;
any action taken to ensure the contravening employer’s compliance with the appropriate laws and/or their understanding of such laws;
the arrangements for receiving and addressing possible complaints about alleged underpayments or other contraventions; and
whether the franchisor gave any encouragement or requirement to comply with the Act to the contravening employer.
There are also similar provisions for a franchisee’s contravention of the National Employment Standards and pay slip obligations.
Despite the increased obligations on franchisors, there are provisions allowing for the franchisor to pursue a claim against the contravening employer. For instance, where a franchisor has paid an amount for a contravening employer’s underpayment, the franchisor may commence proceedings against the contravening employer in the Federal Court, Federal Circuit Court or an eligible State or Territory Court.
Should you wish to discuss any of the changes to the Act or concerns regarding your franchise, contact a business lawyer. Feel free to call Alex Martin, on (03) 9481 2000.