Ben Coogan

Critical Franchising Update – Preparing for burden of ‘vulnerable workers’ legislation: proposed solutions for your business

Ben Coogan

20 April 2017

Franchising

This week Thomson Geer hosted, and I chaired, a critical franchising update seminar on the topic “preparing for the burden of ‘vulnerable workers’ legislation: proposed solutions for your business“.

It is quite a topical issue due to the numerous official reports into the “7 Eleven scandal” and the introduction of the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Cth). Although it is only at Bill stage and not yet enshrined in legislation, we expect that it will pass through the Senate without too much resistance or amendment. The next step is that the Senate Report is due on 9 May 2017 which is not far away.

Of course, there is intensive lobbying going on at the moment, particularly by the Franchise Council of Australia (FCA), numerous franchisors and locally in Queensland through a submission by the Queensland Law Society on 20 April 2017.

There have also been articles written by those in the franchising industry that identify that the Bill will bring franchising chaos with such statements as “tough, potentially game changing laws that may see the end of franchising in Australia as we know it” and “the amendments are a terrible outcome for the franchising sector in general, and the small operators in particular“. See link here http://www.brisbanetimes.com.au/business/workplace-relations/7eleven-sparked-reforms-will-bring-franchising-chaos-20170417-gvm2qj.html

Melodramatic? Perhaps. However, those statements carry with them a solid dose of reality given the current content of the Bill which, amongst other concerns, adopts a broader definition of franchisor than that set out in the Franchising Code of Conduct. Was that an unintentional mistake? I doubt it.

Further, it is clear that the Bill intends to establish a connection between the franchisor and franchisee through the use of the words “significant degree of influence or control” which is quite a broad term and one that is ambiguous.

The Bill has clear and obvious relevance to the franchising industry. However, given that the Bill amends the Fair Work Act it was a topic that was dealt with by our Employment Partner in Brisbane, Andrew Cardell-Ree.

Our seminar focused on explaining the key aspects of the Bill including due diligence and franchisor responsibility. Andrew also explained the pre-existing accessorial liability under the Fair Work Act.

What is apparent to us is that it will be difficult for a franchisor to comply with the proposed legislation and that in practice the franchisor may or may not be able to escape the chain of responsibility by distancing itself from a franchisee or sub-franchisee. This is because the Court is unlikely to accept that a franchisor can make out the defence to the chain of responsibility if it finds that, despite the franchisor’s best efforts to eschew it:

  • The franchisor had significant influence or control; and
  • The franchisor did not exercise the influence or control so as to take reasonable steps to prevent contraventions, before they occurred.

If that is the case, then the franchisor may be exposed to a significantly higher penalty for a “serious contravention“.

Perhaps more importantly for franchisors, we were able to identify, through our co-speaker in Stephanie Lewis of Certica, practical steps to manage and demonstrate compliance through establishing a compliant system, monitoring franchisee’s compliance and practice and the options for managing compliance.

If franchisors require assistance in determining what the proposed legislation means for them and how they can comply with it in a practical sense, bearing in mind the solutions that are available, please do not hesitate to contact Andrew Cardell-Ree or myself.