Franchisors and holding companies can now be hit with penalties of up to $630,000 as new laws aimed at stamping out underpayment of workers come into force.
As previously reported by My Business, changes to the Fair Work Act have shifted employment oversight responsibilities to franchisors, with hefty penalties aimed to avoid a repeat of the high-profile 7-Eleven wages scandal.
However, it is not just franchise businesses that are affected by the new rules, with holding companies also in the firing line.
“A raft of new changes came into effect last month under the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, including a tenfold increase on maximum penalties (from $12,600 to $126,000 for individuals and from $63,000 to $630,000 for companies) for serious contraventions of the FWA (including deliberate breaches of record-keeping obligations), prohibitions on “cash back schemes”, and expanded evidence-gathering powers for the Fair Work Ombudsman,” explained Simone Caylock, partner and workplace relations specialist at Rigby Cooke Lawyers.
“From 27 October 2017 however, the law placed a new onus on franchisors and parent companies to demonstrate they have taken reasonable steps to prevent a franchisee or subsidiary from contravening the FWA.
“Failure to prove so could potentially lead to a civil proceeding and those fines of up to $630,000 per breach.”
According to Ms Caylock, all franchisors and holding companies can now be held liable for certain workplace law breaches by their franchisees and subsidiaries, where they either knew or could reasonably have foreseen such breaches were occurring.
“Simply pleading ignorance will not hold up in court,” she said.
“If organisations are responsible for franchisees or have subsidiaries that engage staff, to be able to demonstrate they have taken reasonable steps, they must ensure they have systems in place, such as declarations, audit programs and risk assessments, to ensure those third parties comply with relevant workplace laws.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.