You may have heard that the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 was recently passed. Our friend Andrew Crean, Special Counsel at MILLS OAKLEY has put together this quick outline as to how the changes could affect your business.
One of the impacts of the legislation is that it changes the risk profile for franchisors with respect to workplace relations matters; specifically payment entitlements of employees.
In summary, a franchisor will now be liable for a franchisee’s breach of payment obligations (e.g. paying below the applicable award rate) under the Fair Work Act if:
- the franchisor has a significant degree of influence or control over the franchisee entity’s affairs;
- the breach occurs in the franchisee’s capacity as a franchisee entity; and
- the franchisor or one of its officers knew or could reasonably be expected to have known the breach would occur.
A defense to liability exists when a franchisor entity can show that, at the time of the breach, they had taken reasonable preventative measures.
The risk profile also extends to holding companies, who can be held liable for the breach’s of their franchisor subsidiary if the holding company or an officer of it knew or could reasonably be expected to have known that the contravention would occur.
In light of these changes, it is being recommended that franchisors:
- review their franchising arrangements, and in particular the degree of influence they have over their franchisees’ arrangements;
- consider their level of involvement in the affairs of their franchisees, and whether this means that they would be considered a ‘responsible franchisor entity’, for the purposes of the Act; and
- consider what reasonable steps are appropriate within the franchising network to ensure compliance with pay related obligations, which in turn may impact on existing franchise arrangements.
If you think this Act could affect your business, would like some clarification or just want to have a chat about how your business could be performing better get in touch with us today.