The Senate’s Education and Employment Legislation Committee has recommended that the Senate pass the government’s Protecting Vulnerable Workers Bill without substantial amendment.

In our recent update, we discussed the government’s proposed Fair Work Amendment (Protecting Vulnerable Workers) Bill and what this means for the liability of franchisors concerning the employment practices of their franchisees. Unsurprisingly, specific legislation which will make franchisors liable for breaches of the Fair Work Act committed by franchisees within their franchise networks have those in the franchise sector worried.

The Committee supports the governments proposed legislation, albeit subject to some relatively minor amendments. One expressed concern is the possible exploitation of workers within the context of labour hire arrangements and supply chains. In this context, the Committee has recommended that the government’s Migrant Worker Taskforce consider whether further reform is necessary. Similarly, the ALP has expressed its support for the Bill, while indicating a desire to broaden its scope and application.

Once passed, the Protecting Vulnerable Workers Bill would amend the Fair Work Act to protect vulnerable workers by:

  • making franchisors and holding companies responsible for underpayments by their franchisees or subsidiaries where they knew or ought to have reasonably known of the contraventions and failed to take reasonable steps to prevent them;
  • introducing a higher scale of penalties for ‘serious contraventions’ of payment-related workplace laws;
  • increasing penalties for record-keeping failures;
  • expressly prohibiting employers from unreasonably requiring their employees to make payments (e.g. demanding a proportion of their wages be paid back in cash); and
  • strengthening the evidence-gathering powers of the Fair Work Ombudsman to ensure that the exploitation of vulnerable workers can be effectively investigated.

The Committee has taken the unusual step of encouraging the Fair Work Ombudsman to take an appropriately targeted, but measured approach towards enforcing the legislation, once this is passed. In this sense, the Protecting Vulnerable Workers Bill effectively provides the Fair Work Ombudsman with the mandate it requires to undertake a deep review of employment practices in the franchise sector.

A large-scale compliance audit campaign specifically targeting the franchise sector is all but inevitable. With this in mind, and the potential to be held liable for the underpayments and other workplace breaches committed by individual franchisees, franchisors are encouraged to ACT NOW and take proactive steps so as to identify and address compliance issues within their network.