Marino Law | Gold Coast Law Firm

Under new legislation, franchisors could be liable for franchisees’ breaches of the Fair Work Act

On 1 March 2017, the Federal Government introduced new legislation into the House of Representatives that will amend the Fair Work Act 2009 (Cth) (the “Act”) and implement the Government’s promise at the last Federal election to increase protections for vulnerable workers under the Act.

The proposed legislation is widely expected to receive bi-partisan support and be passed without significant amendment.

Pursuant to the proposed legislation, the Fair Work Amendment (Protecting Vulnerable Workers) Bill, a responsible franchisor entity, being an entity that has a significant degree of influence or control over a franchisee, will be directly liable for any contraventions of the Act by the franchisee, such as any underpayment of wages, in circumstances where the franchisor, or an officer of the franchisor, knew, or could reasonably be expected to know the contravention would occur, or was likely to occur and that they failed to take reasonable steps to prevent those contraventions.

If there are reasonable grounds for a franchisor to suspect that a franchisee is underpaying wages, such as a pattern of complaints or knowledge of inadequate record keeping, and it turns a blind eye, it will be liable pursuant to the proposed legislation.

Under the proposed legislation, penalties for serious contraventions will increase 10-fold (up to $108,000.00 for individuals and up to $540,000.00 for corporations). A serious contravention is a contravention of the Act that is deliberate and part of a systematic pattern of conduct such as employers deliberately failing to keep proper records in order to cover up underpayments of wages. Accordingly, the increased penalties will not apply to inadvertent and non-systematic oversights.

Given the extensive fines that could be imposed pursuant to the proposed legislation, all franchisors ought take proactive steps as soon as possible to address any non-compliance within their franchise networks. In particular, franchisors should ensure that appropriate due diligence systems are in place that will enable them to monitor the compliance of their franchisees and to take appropriate action where necessary.

Marino Law has extensive experience acting for franchisees and franchisors with respect to the negotiation and preparation of franchise agreements and associated documentation. Marino law also has extensive experience in dealing with disputes between franchisors and franchisees.

Should you require assistance in any of the above areas, please contact one of our highly experienced lawyers.



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