On 27 October 2017, new workplace laws relating to franchisors and holding companies took effect.
These changes are part of the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017.
Under these new laws, franchisors and holding companies can be held responsible if their franchisees or subsidiaries don’t follow workplace laws (if they knew or should have known and could have prevented it).
The changes apply to franchisors that have a significant amount of influence or control over the business affairs of the franchisee. Holding companies have control over the affairs of their subsidiaries (by definition).
You could be held responsible if your franchisees or subsidiaries don’t follow workplace laws regarding:
- the National Employment Standards
- a modern award
- an enterprise agreement
- method and frequency of paying wages
- deductions from pay and ‘cashback schemes‘
- guarantees of annual earnings
- sham contracting
- record-keeping requirements
- pay slip requirements
- an equal remuneration wage order
- a workplace determination
- a national minimum wage order.
For breaches relating to underpayments, you could be held liable if:
- you have a significant degree of influence or control over the franchisees or the affairs of the subsidiaries;
- you knew (or could have reasonably known) that a franchisee or subsidiary wasn’t following workplace laws; and
- you failed to take reasonable steps to prevent the breaches.
Practical Tips to Minimise Risk
You can minimise your legal and reputational risks by helping your franchisees and subsidiaries to understand and meet their responsibilities. As a minimum, you should:
- ensure that your staff, franchisees, and subsidiaries are educated and trained so that they are aware of their responsibilities to comply with workplace laws;
- regularly review their systems to ensure compliance;
- take appropriate action when non-compliance is identified;
- ensure that allegations of underpayment of wages or other alleged breaches of workplace laws are promptly and properly investigated and resolved; and
- implement random audits to reinforce a compliance culture, with appropriate sanctions for non-compliance.
If faced with potential prosecutions under the new laws you will need to be able to demonstrate that you have taken a pro-active approach to complying with the workplace laws.