The Federal Government has introduced a Bill that will make franchisors liable for breaches of employment law by franchisees. Partner Simon Dewberry, and Managing Associate Andrew Stirling report.
- In certain circumstances, franchisors and their holding companies will contravene the Fair Work Act 2009 (Cth) if a franchisee contravenes the Act.
- Franchisors are caught if they have a significant degree of influence or control over the franchisee's affairs generally, including financial, operational and corporate affairs. It will be difficult for any sophisticated franchisor to avoid exposure under this test.
- If the franchisor has responsibility, it can avoid liability by proving it took reasonable steps to prevent the type of contravention that has occurred (for example, non-compliance with an award).
Under the proposed amendments, franchisors and their holding companies can contravene the Fair Work Act if their franchisees contravene the Act and either:
- the franchisor or one of its officers knew or could reasonably be expected to have known that the contravention by the franchisee would occur; or
- at the time of the contravention by the franchisee, the franchisor or one of its officers could reasonably be expected to have known that a contravention by the franchisee of the same or similar character was likely to occur.
Franchisors or holding companies will not contravene the Fair Work Act if they have taken reasonable steps to prevent a contravention by the franchisee of the same or similar character. Reasonable steps might include training franchisees, auditing their compliance with the Fair Work Act and establishing a whistleblower line for employees to report any non-compliance.
These provisions will take effect just six weeks from commencement of the Bill. We expect the Bill will receive support from Parliament.