In The News

Mon 12 Feb 2018

Franchising & Employee Rights – Be Aware and Prepared!


Business Planning & Strategies
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Fair Work seem to have been very busy over the last few months undertaking audits of various businesses operating across a wide range of industries, as well as commencing investigations and taking legal action where they believe employee rights are not being met. Therefore, if you are not already aware of your employment obligations you need to update yourself and your team as soon as possible.

This has become even more important for those operating within the franchising sector due to last year’s introduction of the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (“FWAA”) where franchisors’, licensors’ and their related entities potential liability not only for their team members, but their franchisees’, subsiduaries’ and/or licensees’ team members, has substantially increased.

While there was already liability exposure before the introduction of the FWAA, the FWAA makes this liability exposure very clear and arguably easier to attach. Furthermore, the brand de-value and backlash to the franchising industry when employee rights are ignored makes this an important matter for the whole sector (franchisors, franchisees, employees, suppliers and customers) who benefit from the continuation and growth of this industry.

In our October 2017 blog we raised the introduction of the FWAA and consequently suggest you have a look at this earlier blog where we discussed this legislation in more detail.

The focus here is to act not only as a reminder to get moving on ensuring you are aware of, meeting your obligations and taking preventative steps to avoid non-compliance, but to emphasise that the government and courts are taking employee rights seriously, and in some instances have imposed not only substantial penalties against the relevant employers, but also against directors, associated or connected entities, and even certain employees or external advisors.

For example, last year accessorial liability laws were used to obtain penalties against a professional services accounting firm for knowingly helping its client exploit one of its employees, and in another case a restaurant’s HR manager was personally fined $21,760 for her role in facilitating wide scale exploitation of overseas workers, even though she was an employee with no ownership rights in the restaurant and was herself on a visa. While these are not franchising specific cases, we would suggest they are relevant and should be kept in mind.

Given the above, just a few matters that can be considered include:

  • For franchisors and multi site franchisees:
    • Reviewing your current processes and systems:
      • Are they are up to date with the applicable laws and sufficient for your particular situation?;
      • Do they allow for continual review and updates as needed?; and
      • Do they each support the goal of having a positive, respectful and compliant culture?;
    • What you’re doing to help your franchisees or associated operations understand and meet their obligations?;
    • What tools you are providing to assist compliance– internal and external resources?;
  • For franchisors, you should also be reviewing your franchise agreement and manuals to see if any changes are necessary or would assist create a positive, respectful and compliant culture.

Furthermore, if you have not already visited the Fair Work Australia website (www.fairwork.gov.au) then you should get on this website now. The Fair Work Ombudsman has sought to provide various tools  (in various languages) to help workers as well as employers be aware and meet their obligations, and potentially also report to them when there is non-compliance. Finally, we would of course recommend the importance of this issue, if you have not already, then you should be speaking with your legal and accounting advisors specialised in franchising and this area to ensure you are on the right path.

Please note this brief update, does not purport to be comprehensive advice relevant to your circumstances. Consequently specific legal advice for each of your circumstances should be obtained first before taking or not taking any action in respect to this area.


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