Franchisors and holding companies should be aware that they can be held liable for breaches of employment law by their franchisees and subsidiaries when the Vulnerable Workers Bill, which has passed both Houses of Parliament, receives royal assent. Partner Veronica Siow and Lawyer Roseanna Bricknell report.
- In certain circumstances, franchisors and holding companies will contravene the Fair Work Act 2009 (Cth) (the Act) if a franchisee or subsidiary contravenes the Act.
- The Fair Work Ombudsman (FWO) will be empowered to coercively gather evidence from employers under investigation for suspected underpayment and exploitation.
- Serious contraventions of the Act can attract penalties of up to $630,000 ($126,000 for individuals).
- Employers who do not keep proper records will bear the burden of disproving any wage claims brought against them by the employees.
Franchisor and holding company liability
Under the new provisions, franchisors and their holding companies will contravene the Act if their franchisees contravene the Act and the franchisor:
- is 'responsible': that is, if it exerts a 'significant degree of influence or control' over the affairs of the franchisee. This has not been expressly confined to the employment affairs of the franchisee; and
- either 'knew or could reasonably be expected to have known' that the relevant contravention or a contravention of the same or similar character was likely to be committed by the franchisee.
Franchisors or holding companies will not contravene the Act if they have taken reasonable steps to prevent the relevant contravention by the franchisee. This defence will be determined on a case-by-case basis. However, reasonable steps might include:
- training franchisees;
- requiring franchisees to comply with the Act and auditing them to ensure that they do so;
- encouraging cooperation with the FWO; and
- establishing a whistleblower hotline for employees to report any non-compliance.
Franchisors may seek to recover from their franchisees any payments that they make to employees by virtue of their liability as a 'responsible' franchisor under the new provisions.
New powers for the FWO
The FWO's investigative and enforcement powers have been strengthened. The FWO can now apply to the Administrative Appeals Tribunal for notices to be issued:
- to compel the production of documents; and
- to compel persons to attend interviews during an investigation into an alleged contravention.
A new category of 'serious contraventions' involving deliberate and systematic underpayment of workers and falsification of pay records has been introduced. Serious contraventions can attract a penalty that is ten times higher than other non-serious contraventions ($126,000 for individuals and $630,000 for corporations, compared with $12,600 and $63,000 respectively for non-serious contraventions).1
Penalties may also be imposed for giving false or misleading information to, or hindering or obstructing, the FWO.
Reversal of the burden of proof for employers who fail to keep proper records
If a civil remedy application (such as a wage claim) is brought against an employer in respect of a particular matter and the employer was required by the Act to keep records or payslips in relation to that matter but did not do so, the burden of proof of the allegation will reverse. It will be up to the employer to prove that they are not liable for the claim, or the full value of the compensation and/or penalties will be payable.
Requests for payments from employees
Employers are now prohibited from directly or indirectly requesting unreasonable payments from their staff. This measure is designed to protect employees from being required by employers to pay back wages unreasonably (such as in the manner that has been reported in the media).
- Calculated by reference to the value of a penalty unit current as at 1 July 2017.