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Key changes for franchisors under the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017

Peter Stewart

There are a number of changes that you should be aware of under the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, including:

  1. Making a franchisor (who is able to exert a significant degree of influence or control over a franchisee) liable for a variety of different contraventions of the Act by franchisees within their network, in circumstances where they knew, or reasonably ought to have known, about the contraventions but failed to take reasonable steps to prevent them from occurring;
  2. Making a holding company responsible for a variety of contraventions of the Act by its subsidiary where the holding company fails to take reasonable steps to prevent those contraventions occurring;
  3. Making officers of a franchisor or holding company potentially liable as an accessory to a contravention of these new provisions by a franchisor or holding company;
  4. Allowing a person who has suffered loss from a contravention by the franchisee to seek a compensation order against a franchisor or holding company (for example, to enable an employee working in a franchised business to recover unpaid amounts that its employer failed to pay);
  5. Giving a franchisor or holding company a statutory right to recover an amount paid under such a compensation order from the franchisee or subsidiary;
  6. New higher penalties for a category of serious contraventions of the Act where penalties 10 times higher than normal will apply. A contravention is classed as serious if someone has knowingly contravened the provision and their conduct was part of a systemic pattern of conduct relating to one or more persons;
  7. New penalties for providing Fair Work inspectors with false or misleading information or records and new prohibitions for hindering or obstructing them;
  8. New prohibitions against an employer or prospective employer requiring an employee or prospective employee to unreasonably spend or pay an amount (to prevent cashback arrangements);
  9. Doubling the maximum penalties for 'strict liability' contraventions relating to employee records and payslips;
  10. Trebling the maximum penalties for giving false or misleading employee records or payslips;
  11. Giving greater investigation and enforcement powers to the Fair Work Ombudsman (FWO) including the power to seek from the Administrative Appeals Tribunal presidential member a FWO Notice requiring a person to give information, produce documents or to attend before the FWO and answer questions;
  12. Prohibiting a person from intentionally hindering or obstructing the FWO or an inspector in their functions;
  13. Imposing a presumption in respect of certain civil remedy provisions where records aren’t provided by an employer. The presumption places the burden on the employer to disprove an allegation made by an employee in relation to contraventions of specific civil remedy provisions where the employer was required to make and keep a record, make a record available for inspection or give a payslip but failing to do so. Importantly however, that presumption won’t apply if the employer has a reasonable excuse as to why it failed in these undertakings; and,
  14. Importantly, the reach of these amendments is wider than what is traditionally considered to be a franchise under the Franchising Code of Conduct. The Fair Work Act uses the definition of 'franchise' set out in the Corporations Act which means that the reforms may also apply to other types of agreements that grant a licence to use intellectual property for profit. Unlike the Code, the recipient's business only has to be substantially or materially associated with that intellectual property and there is no requirement for the recipient to be required to follow a system or marketing plan controlled or suggested by the licensor.

For more information on the changes and how they will impact your business, please contact our Franchising team