Franchises and Vulnerable Workers – Proposed Fair Work Amendments

On 1 March 2017 the Fair Work Amendment (Protecting Vulnerable Workers) Bill was introduced to the House of Representatives. If passed, the Bill will amend the Fair Work Act 2009.

**Background**

The media has recently shed light on the poor treatment of workers employed in some of Australia’s largest franchises.

One highly publicised example of this occurring is the issues that have arisen with certain 7-Eleven franchises. Investigations by Four Corners and Fairfax Media resulted in the discovery of underpayment of wages and the modification of payroll records by certain franchisees.

Reports have also emerged that some franchisees were paying the lawful rates to their workers but then coerced them into paying back a proportion of their wages in cash.

What will be the key changes if the Bill becomes law?

The Bill’s aim as a whole is to address the issue of the exploitation of vulnerable workers by employers and to strengthen the existing workplace laws overall. It proposes to do this by:

• introducing a higher scale of penalties for ‘serious contraventions’ of the law
• increasing penalties for record-keeping failures
• making franchisors and holding companies responsible for underpayments by their franchisees or subsidiaries where they knew or ought reasonably to have known of the contraventions and failed to take reasonable steps to prevent them. The new responsibilities will only apply where franchisors and holding companies have a significant degree of influence or control over their business networks.
• expressly prohibiting employers from unreasonably requiring their employees to make payments (eg. Demanding a proportion of their wages be paid back in cash).
• strengthening the evidence-gathering powers of the Fair Work Ombudsman to ensure that the exploitation of vulnerable workers can be effectively investigated.
• giving the Fair Work Ombudsman new avenues to pursue those who hinder or obstruct investigations, or provide false or misleading information.

There has been general support for increased protection for vulnerable workers however the targeting of franchisors has not been widely supported and subject to criticism.

We will continue to monitor and report on the progress of the Bill as it moves through the passage of Parliament. On 23 March 2017 the Senate referred the Bill to it’s Education and Employment Committee. Submissions can be made to the committee about the Bill until April 2017. Two particular issues that will be considered are

• whether the proposed amendments will strengthen protections “against forced labour and servitude as part of Australia’s modern slavery framework” and
• whether it is appropriate to hold franchisors and holding companies responsible for acts of franchisees and subsidiaries.

It will be very important for franchisors to obtain advice as to their potential liability. Regular audits and checks of franchisees compliance with Award and other employee obligations is recommended.