The Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 passed on 5 September 2017. Despite efforts by the Franchise Council of Australia and others in the franchising industry, the amendments targeted at making franchisors liable for Fair Work Act contraventions by their franchisees were passed largely in their original form.
Under the amendments a franchisor will be a “responsible franchisor entity” if it has a “significant degree of influence or control over the franchisee entity’s affairs”. If that franchisee contravenes provisions of the Fair Work Act (principally those relating to proper payment of employees), the responsible franchisor entity will also be liable if it (or its officer) knew or could reasonably be expected to have known that:
- the contravention by the franchisee entity would occur; or
- a contravention by the franchisee entity of the same or a similar character was likely to occur,
unless, as at the time of the contravention, the franchisor had taken reasonable steps to prevent a contravention of the same or a similar character.
The amendments include a non-exhaustive list of factors a court may take into account in determining whether reasonable steps have been taken. Notably this includes the following:
- The size and resources of the franchisor.
- The extent to which the franchisor has the ability to influence or control the contravening employer’s conduct.
- Action taken to ensure the employer had reasonable knowledge and understanding of the requirements (eg employment policies and training for franchisees).
- Arrangements for assessing compliance (eg reporting and monitoring).
- The extent to which the arrangements with the employer encourage or require compliance.
It is clear from the wording of the amendments that a one size fits all approach is inappropriate. The circumstances of each franchisor and case will need to be examined to determine whether the franchisor should have anticipated a breach and if so, what it should have done to limit the risk of the breach occurring.
These new provisions will apply to conduct occurring from 6 weeks after the amendments receive royal assent.
The final form of the amendments adds no further clarity on their application to foreign franchisors, an issue raised in our earlier update which can be accessed here: https://www.khq.com.au/legal-blog/proposed-australian-workplace-law-changes-affecting-franchisors/. The explanatory memorandum to the bill states that foreign franchisors who have only entered into a master franchisor arrangement with an Australian company and have no operations in Australia will not be caught by the laws.