The Government has today introduced legislation which places significant additional responsibility on franchisors over the employment practices of their franchisees. These changes are set to send shockwaves through Australia’s $170 billion franchise industry.

The Fair Work Amendment (Protecting Vulnerable Workers) Bill will implement the Government’s election commitment to increase protections for vulnerable workers under the Fair Work Act 2009. The Government has indicated that these changes will be pursued with determination, and are expected to receive bi-partisan support. The proposed measures include:

  • new offence provisions that capture franchisors and parent companies who fail to take reasonable steps to prevent non-compliance within their franchise networks; and
  • a tenfold increase in the maximum penalty for serious contraventions of the Fair Work Act 2009, up to $540,000 for a corporation and $108,000 for an individual.

We understand that this will coincide with an increase of funding to FWO of $20 million and the creation of a new Migrant Workers Taskforce which will specifically target employers who exploit migrant workers.

The proposed legislation will effectively create a joint liability scheme, meaning that franchisors will be directly liable for the underpayment liabilities of its franchisees where it has failed to take reasonable steps to identify and eliminate non-compliance within their franchise networks. These arrangements will hold franchisors directly liable for non-compliance within the franchise network and is a dramatic shift in the operational framework of the industry. Given the far reaching implications of this draft legislation, all franchisors must take immediate proactive steps to address non-compliance within their network.