Short-changed…Coffee Club franchisee penalised for underpaying employee - what does this mean for the franchisor?
Assisted by Ambrose Teo
The Fair Work Ombudsman (FWO) recently penalised a franchisee more than $180,000 for the underpayment of an employee. In this article we look at the potential impact that a franchisee’s conduct may have on a franchisor.
Summary of the facts
- The franchisee ran a Coffee Club Franchise in Brisbane;
- The employee was a foreign national working in Australia under a 457 visa;
- The employee went long periods of time without being paid his wages;
- The franchisee requested the employee to withdraw $18,000 and pay the franchisee by threatening to jeopardise his visa. The employee complied;
- In November 2015, the employee’s employment was terminated without notice and subsequently, the employee lodged a request for assistance to the FWO;
- After an investigation, it was found that the employee was short-changed $23,546 between September, 2013 and November, 2015; and,
- The franchisee was penalised over $180,000.
What are the possible implications?
At a superficial level, the conduct of a franchisee can have significant negative impacts on the public image and reputation of a franchise business. Unfortunately, for some franchisors, they may be caught in the cross-fire and receive public scrutiny for a franchisee’s acts or conduct. However, franchisors may soon also become liable for underpayments by franchisees or subsidiaries, when they knew, or ought to have known, of the contravention, and failed to take reasonable steps to prevent it under the proposed Bill. Franchisors may soon be captured under the proposed legislation and must begin to devise a compliance strategy to avoid potential penalties.
This present case is just another example of the desperate need for measures that would make significant headway in combating the exploitation of workers. For more information please see New laws for franchisors: encouraging Fair Work Act and award compliance and Franchisors, it’s not worth waiting…act now to meet your workplace obligations.
If you need assistance with managing due diligence with respect to Fair Work Act compliance in a franchise network or require assistance with franchising in general, contact:
Racha Abboud, Senior Associate
Phone: +61 2 9895 9283
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