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Franchisor Compliance Under the Microscope

franchisor liability under the microscope

Franchisors and holding companies will now have added onus to ensure compliance within their businesses, as the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 is officially in effect from October 27.

These new laws detail that franchisors and holding companies can be held at fault if their franchisees (or subsidiaries) do not follow workplace laws. The changes are a means to discourage franchisors from ignoring potential breaches of workplace laws within their franchisees’ businesses.

The Act comes after a flurry of high-profile cases of vulnerable worker exploitation by franchisees in well-known franchise systems, such as 7 Eleven. The Fair Work Ombudsman examined the issue in several reports and inquiries, which revealed that methodical underpayment of migrant workers, as well as cash back schemes, were rife in franchised businesses.

Who is Affected?

All employers, employees, and businesses must comply with the changes made to the Fair Work Act. However, these changes are particularly significant for:

  • Vulnerable employees
  • Holding companies and franchisors
  • Companies or employers that try to intervene in Fair Work investigations.

The Changes

The changes outlined in the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 are quite detailed. We outline them below:

  • Serious contravention penalties
    There will now be increased penalties for those “serious contraventions” of workplace laws. A serious contravention is outlined as a “deliberate and systematic” non-compliance with the Fair Work Act.
  • Record-keeping and payslip penalties
    There will also be increased penalties for each break of pay slip and record keeping requirements. If the incorrect payment or record-keeping was found to be intentional, fines have increased to up to $126,000 per contravention per individual, and up to $630,000 per contravention per company. Employers will need to be able to provide a “reasonable excuse” for their incorrect record-keeping
  • Cash Back Scheme Penalties
    It has been made clear that employers cannot request cash back from employees after paying their wage. Prohibiting ‘cashback schemes’ means that employers are not allowed to ask prospective staff to pay money to receive a job; employers cannot deposit the retail award rate into the employees account but then request cash back; or apply unfair pressure on employees to pay their own wage.
  • Increased ability for Fair Work to investigate
    The Fair Work Ombudsman has stronger ability to gather evidence to take to court. New penalties now exist for providing false or misleading information, or hindering Fair Work’s investigation.

 

Franchisor Liability

One of the key changes introduced is franchisor liability. This means that franchisors will be held accountable if one or more of their franchisees contravenes the Fair Work Act. If the Franchisor exerts a reasonable amount of control over the franchise, knew, or could reasonably have known, that the contraventions were occurring, then they will be held accountable under the changes. Fines of up to $630,000 will then apply, plus the paying back of any incorrect wages.

In the case that a franchisee is found to have contravened the Act, the franchisor can use the ‘reasonable steps’ defence. This defence essentially details that the franchisor took the means necessary to ensure each franchisee followed Australian employment laws. The court will consider:

  • The extent that the franchisor could control or influence the offending franchisee’s behaviour.
  • The actions taken by the franchisor to make sure that the franchisee possesses working knowledge of compliance requirements.
  • The extent to which provisions between franchisor and franchisee encourage workplace law compliance.

Implement Systems Now

It’s never been so important to ensure that your business is operating transparently. Franchisors need to improve monitoring and auditing processes as soon as possible to ensure that they aren’t at risk. One of the easiest ways to ensure compliance throughout your franchise is to employ a workforce management software. End-to-end HR and payroll systems operate with complete modern award compliance, and keep neat records of all payslips and hours worked. It’s the simplest way to ensure compliance in every workplace procedure.

Roubler offers interpretation and compliance with all modern awards, backed by a completed integrated and managed payroll platform. Roubler stays up to date with all regulatory changes – such as this Bill, and the new Single Touch Payroll Reporting – so that you can have the peace of mind that your business is always compliant. To find out how Roubler can help your business comply with these changes, get in contact today.

 

Image Credit: YOMA

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