New Laws To Tackle Franchise Worker Exploitation

Published October 16, 2017 (last updated July 21, 2020) Author: Employsure

Major changes to the franchise sector will take effect this Friday 27 October following the FWO’s commitment to tackle vulnerable worker exploitation. It comes as nearly half (49%) of the Fair Work Ombudsman cases this year involved a visa holder and over $1.4 million in underpayments were recovered for young workers.

Senior Workplace Relations Adviser from Employsure Andrew Spiteri says “The Fair Work Ombudsman has been particularly active in recent years in clamping down on franchise non-compliance with Award conditions.”

From 27 October 2017, franchisors bear increased liability where a franchisee breaches the Fair Work Act.

For example, if a franchisee underpays an employee or breaches National Employment Standards, depending on the relationship, a franchisor may also be liable for a breach of the Act. Franchisors may be liable if:

  • The franchisor has a significant level of influence or control over the franchisee entity’s affairs, and
  • The franchisor knew or could reasonably be expected to have known the franchisee’s contravention would occur, and
  • The franchisor did not take reasonable steps to prevent a contravention of the same or similar nature

Andrew says: “Franchisors are exposed to legal liability and penalties where they reasonably could have known of the non-compliance. Practically speaking, it means a franchisor has increased responsibility to demonstrate they have taken ‘reasonable steps’ to prevent a breach by their franchisees.”

A franchisor’s breach of the Act could result in franchisors being liable for penalties of up to $63,000 per breach, or $630,000 per breach if the breach is serious and systematic.

These new provisions in the Vulnerable Worker’s Bill are aimed at franchisor and franchisee and holding company or subsidiary arrangements which could operate on a business model based on underpaying workers. Andrew says: “it’s fair to assume that not all franchisors are intentionally non-compliant. Some have either been blind to the problem or not taken sufficient action to ensure their network comply once it was brought to their attention.”

But franchisees aren’t off the hook either: “with the entire franchise sector under the spotlight, the Fair Work Ombudsman won’t overlook the legal obligations of a franchisee. The increased penalties magnify the impact on franchisees and validate that they are still liable for their workplace practices.”

Further, Andrew explains the wider implications: “beyond the franchise sector, this Bill emphasises the importance that all employers irrespective of size or industry, are responsible for their obligations under the Fair Work Act and for the impact of the economic decisions that they make.”

Media Enquires.

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