Employers and franchisors take note – are you compliant?

The exploitation of vulnerable workers dominated headlines for much of 2016. As a result of the widespread issues identified, the Turnbull Government promised to strengthen laws to protect those most vulnerable to workplace exploitation.

In fulfilling this promise, the Government has introduced the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Cth) (Bill). The Bill proposes a raft of changes to the Fair Work Act 2009 (Cth) (Act) to among other things, increase penalties for certain breaches of the Act, strengthen the powers of the Fair Work Ombudsman (FWO) and to hold franchisors accountable for the actions of their franchisees.

Increase to penalties

Under the Bill penalties will increase by 10 times to 600 penalty units ($108,000) for individuals and 3,000 penalty units ($540,000) for companies for ‘serious contraventions’ of the Act.

A contravention will be ‘serious’ when it is deliberate (or intentional) and forms part of a systematic pattern of conduct relating to one or more other persons, such as a recurring pattern of methodical conduct or a series of coordinated acts over time.¹

The increased penalties will apply to those who contravene:

• the National Employment Standards
• a modern award
• an enterprise agreement
• a workplace determination
• a national minimum wage order
• an equal remuneration wage order
• provisions relating to payment of remuneration (including unreasonable requirements to spend an amount) and employer obligations in relation to guarantee of annual earnings and
• employee records and payslip obligations.

In addition, the maximum penalties for ‘strict liability’ contraventions of payslip and employee record obligations will double to 60 penalty units ($10,800) for individuals and 300 penalty units ($54,000) for companies.

Liability of franchisors

‘Responsible franchise entities’ (including franchisors and subfranchisors)² who exercise a significant degree of influence or control over a franchisee entity’s affairs will be liable for certain contraventions of the Act if:

• they knew, or could reasonably be expected to have known of the contraventions and
• could reasonably have taken action to prevent such contraventions from occurring.

Examples of reasonable steps which may be taken to avoid breaches of the Act include:

• requiring compliance with workplace laws in franchise agreements
• providing franchisees or subsidiaries with a copy of the FWO’s Fair Work Handbook
• encouraging franchisees or subsidiaries to cooperate with any audits by the FWO
• establishing a contact or phone number for employees to report any underpayment to the business and
• auditing companies in their network.

FWO Powers

To aid enforcement and investigation of non-compliance with the Act, the Bill also strengthens the evidence-gathering powers of the FWO by providing it with more extensive formal evidence gathering and examination powers.

Recommendations

Employers should review their current workplace practices for compliance with the Act, in particular those provisions which attract significant penalties for ‘serious contraventions’.

Franchisors should also ensure their franchise agreements, processes and systems require and facilitate compliance with workplace laws by their franchisees – not only to protect themselves from significant penalties under the Act, but to protect the brand’s reputation at large.

¹Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 section 557A(2).
²Liability will also extend to certain holding companies under the Bill section 558B(2)