New FWC legislation may affect franchisors
22 May 2017
From service counters to the corporate boardroom, The Fair Work Commission is on the verge of introducing new legislation that will hold franchisors accountable for workplace breaches that occur anywhere in their franchisee network. Do you know your risk profile?
In August last year, the head office of 7 Eleven felt the anger of the national workplace relations tribunal. An investigation had exposed the systemic underpayments of 182 employees – many of whom were migrant workers and deemed ‘vulnerable’.
Swift punitive measures saw the parent company slapped with large fines and pulled into a national inquiry. Addressing the Franchise Council of Australia, Natalie James, Fair Work Ombudsman, was pointed in her message: “Put simply, legally and morally a franchisor cannot hide behind or outsource its responsibility to ensure lawful remuneration to a franchisee.”
Now, a private bill is before Federal Parliament that will, if passed, result in amendments to the Fair Work Act 2009, introducing a new environment of accountability for franchisors and franchisees alike.
How will this pan out for stakeholders? For executive management charged with corporate governance and operational strategy, your risk profile would extend to every location where your franchisees reside.
And for the majority of franchisees, who are small business owners faced with complex responsibilities and long days in the saddle; your potential oversights or slips ups could trigger a workplace breach.
The penalties for con-compliance are set to rise, with the Bill proposing to increase the maximum penalty from $10,800 to $108,000 per contravention for individuals, and from $54,000 to $540,000 per contravention for corporations. Deliberate and systemic contraventions will also be heavily fined.
Luis Izzo, Director of Workplace Relations at Australian Business Lawyers & Advisors, named ‘Workplace Relations and Employment Team of the year’ in the Lawyers Weekly Australian Law Awards, 2016, explains that this legislation now shines a spotlight on all corners of the franchise industry, and franchisors should prepare.
“What franchisors need to be aware of is that it doesn’t matter if you specifically don’t know something is wrong in relation to a franchisee. If it’s possible something might be amiss, and if you should ‘reasonably’ have known about the issue, your entire franchise business could be at risk. It begs the question - how well are you currently monitoring the operations of your franchisees?”
However, with both parties liable and at significant risk under these new laws, it’s more important than ever that franchisors and franchisees collaborate and work together to prioritise workplace compliance.
Franchisors might consider revising franchisee contracts and mandating that franchisees engage employment relations advisors, at their own cost, to ensure workplace compliance. However, approaches may vary per franchisee and it can be tricky to implement a consistent approach, not to mention the high cost of independent consultants.
Given the shared risk, a franchise may also opt to share the cost of expert workplace compliance and risk management between franchisor and franchisee.
Another alternative is an insurance and workplace advice membership such as Workplace Assured, where member businesses receive expert reviews of workplace practices under the Fair Work Act, unlimited advice from a 24/7 Workplace Advice Line and workplace insurance cover.
Importantly, subscribers also have access to legal expertise via Australian Business Lawyers & Advisors, which functions as the engine room of Workplace Assured, providing the all-important bedrock of expertise, risk-management and strategic advice for your business.
Franchisors have enough to worry about without losing sleep over potential employee claims for incorrect pay. It could pay to consider the potential impacts of the new Bill on your business and take action now to safeguard your franchise from risk.