Since the 7-Eleven wage scandal, franchise systems have been on the frontline in debates concerning alleged non-compliance with workplace laws. A number of developments, proposals and pending decisions in this area – including from the Government, the Fair Work Ombudsman (FWO), unions and the Fair Work Commission (FWC) – all have the potential to have significant consequences for franchisors and franchisees. Six of the ‘hot topics’ for the industry in this area are set out below.

1. Proposed changes to the Fair Work legislation

Following the 2016 election, the Government has confirmed its commitment to:

  • amend the Fair Work Act 2009 (FW Act) to increase the penalties payable by employers who underpay their staff
  • establish a Migrant Workers Taskforce (the Terms of Reference for the Taskforce have now been released and can be accessed here)
  • increase the FWO’s investigative clout by granting it new examination powers and creating an express prohibition on providing false and misleading information
  • introduce a new provision in the FW Act that franchisors may be liable for contraventions of the FW Act by franchisees (in relation to a franchisee’s employees). This will occur in situations where the franchisor should reasonably have been aware of this conduct occurring.

2. FWC gives the Coles enterprise agreement the BOOT

The successful appeal of the FWC’s decision to approve the proposed enterprise agreement for Coles Supermarkets (Agreement), has put employers on notice that the FWC is likely to adopt a stricter approach when assessing a proposed agreement against the relevant award under the Better Off Overall Test (BOOT).

The FWC’s initial approval was challenged by an individual employee on the basis that the Agreement did not meet the BOOT in respect of each employee, and the reduction in penalty rates in comparison to the General Retail Industry Award 2010 (Retail Award) was not offset by other ‘contingent’ entitlements. The Full Bench accepted this argument and overturned the decision to approve the Agreement.

Following this decision, Coles has had to fall back on its 2011 enterprise agreement, which is itself under threat following an application by another employee for it to be terminated. If this is successful, the Retail Award will apply to Coles’ employees.

3. Change in SDA’s approach to bargaining?

Following the Coles decision, the Shop, Distributive & Allied Employees’ Association (SDA) has signalled a significant change in direction. In a recent letter to union leaders, Gerald Dwyer, the National Secretary of the SDA, said the SDA would review up to 100 of its enterprise agreements with a particular focus on weekend and late night penalties, and would consider applying to terminate expired agreements that are no longer more favourable than the relevant award. Employers should expect a more robust approach from the SDA during future bargaining.

4. FWC working overtime on penalty rates decision

There have also been significant developments for employees employed under Awards. In particular, as part of the FWC’s four yearly review of modern awards (in addition to changes to the annual leave provisions), it is considering an application by employer groups to reduce both Sunday and public holiday penalty rates in a number of Awards (the ‘penalty rates’ case). The FWC’s final determination is expected to be handed down in November of this year. This decision will also have implications for the BOOT.

5. The FWO: the enforcement awakens

The FWO has adopted both a ‘carrot’ and ‘stick’ approach to compliance issues for employers in franchise systems. In response to concerns expressed by some employers that they may all be ‘painted with the same brush’ following the 7-Eleven scandal, the FWO has introduced a ‘compliance partnership’ model which allows it to work collaboratively with businesses to ensure compliance with workplace laws. However, to date, only a small number of franchise systems have taken up the opportunity.

The FWO has also continued to be active in prosecuting franchisees for contraventions of the FW Act, with an increased focus on including individual directors and managers as ‘accessories’ in these proceedings, on the basis that they were ‘knowingly involved’ in the contraventions.

6. Employees – informed and empowered

Whether or not it has been prompted by the actions of the individual employee who challenged Coles’ Agreement, employees – including stereotypically ‘vulnerable workers’ (i.e. who are young, non-unionised and/or from a migrant background) – are becoming increasingly informed and empowered about their workplace rights. A cursory search on social media sites such as Facebook shows that there are many groups and forums where employees share information about employment practices in various franchise systems. This awareness, combined with the increasing media attention on these issues following the 7-Eleven case, means that franchisors and/or franchisees who try to ‘keep quiet’ about workplace contraventions are less likely than ever to avoid claims by employees.