Are you taking "reasonable steps" in the right direction in your franchise network to ensure workplace compliance?

25 June 2018

Last week the Fair Work Ombudsman released its “Guide to promoting workplace compliance in your franchise network” (the Guide).

The new resource was launched as part of the Fair Work Ombudsman Natalie James’s speech to the Franchise Advisory Centre’s Franchise Management forum, which was held on 13 June 2018 in Brisbane. During her speech Ms James emphasized that “a franchisor sets the tone for its network“. Ms James also emphasized that the Guide “will be useful for franchisors of shapes and sizes” as it sets out “useful strategies that head franchisors can implement to promote compliance with workplace laws” within its network.

Ms James announced that the Guide had been prepared by the Fair Work Ombudsman in conjunction with members of the franchising community and FranshiseED and is a tool franchisors can use in response to legislative changes that came in to effect last year pursuant to the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth). These laws subsequently amended the Fair Work Act 2009 (Cth) by introducing new provisions making franchisors and holding companies responsible in some circumstances if their franchisees or subsidiaries do not comply with certain workplace laws. The drafting of these laws were targeted on those franchise brands that found themselves in the spotlight of the media and under the Ombudsman’s microscope for significant non-compliant workplace practices such as underpayment of wages and cash back arrangements and sham contracting.

In her speech Ms James encouraged franchisors to invest in workplace compliance saying that brands that have invested in compliance have found this to be a small price to pay in comparison with negative brand coverage, market cap deterioration and a whole host of legal and accounting problems with franchisees down the track. Ms James went on to say, and essentially put franchisors on notice that:

“Franchisors can choose to work with us [the Fair Work Ombudsman] to be a part of the solution, or choose to roll the dice. We hope that together with knowledge of their network and the dynamics of the market, this new guidance will support franchisors to assess their risks and make choices in the interests of their business and brand going forward.”

The 20 page Guide arguably sets out how franchisors can be part of the “solution” by providing practical advice to assist franchisors to promote sustained workplace compliance in their networks, which in turn will help franchisors meet their legislative obligations. The Guide is divided into for parts, each setting out steps, in the Fair Work Ombudsman’s opinion will assist franchisors in minimizing any potential legal and reputational risks it may be exposed to as a result of actions and conduct of franchisees in its network.

Many franchisors have already taken proactive steps to ensure proper education and training of franchisees about their obligations under workplace laws, as well as implementing systems and processes to monitor compliance.

In our view, the Guide reaffirms what we consider to be franchising best practice strategies. These include recruiting the right business owner who has similar brand values and beliefs to that of the franchise and providing franchisees with initial and ongoing training that covers workplace issues and compliance requirements as a means of promoting workplace compliance in your franchise network. The Guide includes some practical and common sense steps franchisors can take to promote workplace compliance in their networks, such as:

  • Undertaking network self audits to ensure franchisees are complying with their workplace and award obligations;
  • Delivery of workplace compliance training with franchisees upon commencement and periodically; and
  • Implementation of a hotline enabling employees to raise issues of non-compliance by their franchisee-employer.

HWL Ebsworth franchising and workplace relations practice groups have assisted various franchise networks with the development and implementation of some or all of the above steps, as well as other compliance initiatives.

Whilst Ms James encourages franchisors to contact the Fair Work Ombudsman and enter into a compliance partnership with the Fair Work Ombudsman as a sign of public commitment and compliance, we strongly recommend that franchisors seek proper legal advice before doing so. Demonstrating a franchise network’s public commitment to compliance can be achieved and celebrated in a number of ways.

If you would like to discuss steps your franchise can take to help your network comply with its workplace obligations take the time now to contact us.

This article was written by Sean O’Donnell, Partner and Vanessa James-McPhee, Senior Associate.

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