Following a number of recent high profile cases involving franchisees breaching their obligations as employers, the Government introduced the Fair Work (Protecting Vulnerable Workers) Bill 2017.
The Bill proposes amendments to the Fair Work Act 2009 (Cth) to:
A franchisor will be a “responsible franchisor entity” when it has a significant degree of influence or control over the franchisee entity’s affairs.
A Court will assess a number of factors in deciding whether an entity has taken reasonable steps to prevent a contravention, including:
Franchisors who are required to pay amounts to comply with Court orders as a result of the contravention by their franchisees can seek recovery of those amounts from their franchisees.
While the Bill has yet to pass, it has the potential to fundamentally change the franchising relationship. The usual separation of a franchisee as the owner of its own business, responsible for the conduct of that business, will be challenged. Given the lack of immediate clarity as to what it means, for the purpose of the Bill, for a franchisor entity to have a significant degree of influence or control over the franchisee entity’s affairs, and the potential for a franchisor to be in contravention despite not having actual knowledge of the contravention, this has the potential to place significant burdens on franchisors to monitor the conduct of franchisees. In its current form, the Bill also does not provide clarity as to when the defence will be available in any given circumstance. Given the accessorial liability provisions already found in the Fair Work Act, this development is significant, with the potential for a marked shift in a franchisor’s liability for the conduct of franchisees who, until now, have been responsible for their own operations.
Gadens can assist clients involved in franchising (whether franchisors or franchisees) to understand both their franchising and employment obligations in the context of these proposed amendments.