Franchisors and Parent Companies Feeling Vulnerable to Super Fines

The Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017, is designed to protect vulnerable workers from exploitation by employers.  The Bill is expected to pass through the Senate without much trouble. It is the Coalition’s response to the systematic underpayment of workers by franchisees in the 7-Eleven franchise, as well as the widespread practice of paying employees at lawful rates, and then forcing them to pay back proportions of their wages in cash.

The Bill increases the penalties for contraventions of the Fair Work Act 2009 (the Act), introduces a new civil penalty liability for franchisors and extends the powers of the Fair Work Ombudsman.

Franchisors get ready – change is coming.

Super Fines

If the Bill is passed, ‘serious contraventions’ of the Act will attract new heavy hitting penalties – ten times the current civil penalties. A contravention will be ‘serious’ if the employer’s conduct is deliberate and part of a systematic pattern.

Franchisor and Parent Company Liability

The Bill also places additional pressure on franchisors. If the proposed changes are accepted, then the franchisor who has a significant degree of control over the franchisee’s affairs will contravene the Act if the franchisor (or their officer) knew or could reasonably be expected to have known that the franchisee:

  • would breach the Act; or
  • was likely to breach the Act.

The franchisor’s liability is limited if they have taken reasonable steps to prevent the contravention.

In addition, the Bill increases the powers of the Ombudsman, allowing it to compel individuals to attend interviews and override the privilege against self-exposure to penalty. This means that you may no longer decline to answer questions on the basis that you may incriminate yourself.

What do the changes mean for employers?

The Bill may undergo amendments, however, as it stands, the circumstances in which the franchisors can be found liable for a franchisee’s actions have been expanded.

Franchisors can limit their liability if they can show that they have taken reasonable steps to prevent serious breaches of the Act. Franchisors should review their processes and practices and ensure that their franchisees are complying with all National Employment Standards and keep a record of that review and compliance checks.

Get in touch

Stay ahead of the game by having Peter McNamara review your franchise agreements, processes and practices. Get in touch today to avoid a penalty tomorrow.

Want more?

Understand how you may become personally liable for contraventions of the Fair Work Act by reading our article.


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