A FAIR AMOUNT OF WORK

Inside Franchise Business - - Contents - By Suzanne Jarz­abkowska, group CEO and part­ner, and So­phie Letherbar­row, man­ag­ing part­ner, DC Strat­egy Lawyers

The Fair Work Act and fran­chisees.

With all its com­pli­ca­tions the Fair Work Act can af­fect the fran­chise sec­tor, so you need to make your­self aware of what is in­volved and

find out how you can avoid be­ing put at risk for con­tra­ven­tions.

For var­i­ous rea­sons, the 7-Eleven con­tro­versy will live in peo­ple’s minds for quite some time. The me­dia high­lighted the is­sues well for the fran­chise sec­tor: fran­chisees un­der­pay­ing em­ploy­ees, many of them on stu­dent and other visas, and images of young peo­ple at ATMs with­draw­ing cash to re­turn a por­tion of their wages to em­ploy­ers who threat­ened to have their visas re­voked.

This in­ci­dent tar­nished not only 7-Eleven’s rep­u­ta­tion, but brought the en­tire fran­chise sec­tor un­der in­creased scru­tiny with the Fair Work and the mi­gra­tion of­fices. And there has been a grow­ing stream of smaller play­ers caught and fined for in­fringe­ments, both for in­no­cent mis­takes and for egre­gious breaches.

This is a com­plex is­sue, par­tic­u­larly for fran­chise net­works where busi­ness is gov­erned by state-based awards that are up­dated an­nu­ally. In many cases, fran­chisees in the quick-ser­vice res­tau­rant (QSR) and re­tail space rely on ca­sual and part-time work­ers, of­ten stu­dents. Un­der the Fair Work Act they may be re­garded as part-time some­times and ca­sual at other times.

Adding to the con­fu­sion, if they are on over­seas stu­dent visa, they may be al­lowed to work only 20 to 40 hours a fort­night, cre­at­ing ex­tra com­pli­ance re­quire­ments un­der the Mi­gra­tion Act.

Many fran­chisors and fran­chisees also de­pend on work­ing-hol­i­day em­ploy­ees (417 visa) and skilled for­eign work­ers spon­sored un­der a Tem­po­rary Skill Short­age (TSS) visa (for­merly known as 457). While em­ploy­ers must meet in­dus­try-stan­dard salaries, the min­i­mum wage - tem­po­rary skilled-mi­gra­tion in­come thresh­old (TSMIT) - un­der the TSS visa class is cur­rently $53,900. This is also sub­ject to both Fair Work and mi­gra­tion com­pli­ance. About one in 8 of all work­place dis­putes has been found to be visa re­lated.

As if this isn’t com­pli­cated enough, the Fair Work Com­mis­sion re­duced Sun­day penal­ties across the hospi­tal­ity, fast-food, res­tau­rant, re­tail and phar­macy sec­tors in Fe­bru­ary with vari­a­tions of 125, 150, 175 and 200 per cent de­pend­ing on the in­dus­try sec­tor and worker status, whether they are part-time, full-time or ca­sual. There is also the ap­pli­ca­tion of dif­fer­ent pub­lic-hol­i­day penalty rates.

While most em­ploy­ers wel­come these changes, tran­si­tion to the fully re­duced rates will be phased in over four years, apart from the pub­lic hol­i­day awards that ap­ply from July.

Fran­chisors need to keep up with what is re­quired of them and their fran­chisees.

WHAT YOU NEED TO KNOW

Of par­tic­u­lar con­cern to em­ploy­ers, fran­chisees and fran­chisors is the is­sue of ac­ces­so­rial li­a­bil­ity un­der the Fair Work Act, which stip­u­lates that any­one who con­tra­venes the Act is held re­spon­si­ble for that con­tra­ven­tion.

A per­son is in­volved in a con­tra­ven­tion if they:

• have aided, abet­ted, coun­selled or

pro­cured the con­tra­ven­tion

• have in­duced the con­tra­ven­tion, whether by threats or prom­ises or oth­er­wise

• have been in any way, by act or omis­sion, di­rectly or in­di­rectly, know­ingly con­cerned in or party to the con­tra­ven­tion

• have con­spired with oth­ers to ef­fect the con­tra­ven­tion.

So fran­chisors, mas­ter fran­chisees, fran­chisees, in­di­vid­ual com­pany di­rec­tors, in-house HR and ac­count man­agers and out­sourced providers of ac­count­ing, HR and wage-pay­ment ser­vices can all be found to “in­volved” or ac­ces­so­rily li­able for the in­fringe­ment. This means both back-pay­ing em­ploy­ees, and for each of the par­ties found to be in­volved, fines of up to $10,800 per con­tra­ven­tion for an in­di­vid­ual and up to $54,000 in the case of a com­pany.

PRO­POSED CHANGES

The Fair Work Amend­ment (Pro­tect­ing Vul­ner­a­ble Work­ers) Bill 2017 will in­crease the Fair Work Of­fice bud­get by a pro­posed $20 mil­lion so it can pur­sue its ef­forts.

Here are the pro­posed changes... • Fran­chisors will be held equally re­spon­si­ble for con­tra­ven­tions of the FWA by their fran­chisees if it can be es­tab­lished they knew or should have known of the fran­chisee’s breach or did not take rea­son­able steps to con­tain it. While they may place re­spon­si­bil­ity on to the fran­chisee for the back pay­ment of wages in the case of an un­der­pay­ment breach, the fran­chisor will still be li­able to the pay the penalty im­posed.

• A po­ten­tial ten­fold in­crease to the in­di­vid­ual penal­ties to $108,000 and for companies to $540,000 where it can be es­tab­lished the breach was in­ten­tional or “part of a sys­tem­atic pat­tern of con­duct re­lat­ing to one or more per­sons”.

• The es­tab­lish­ment and fund­ing of a mi­grant worker task force to help with polic­ing com­pli­ance with both the Mi­gra­tion and Fair Work Acts.

• Given that most pros­e­cu­tions by far in­volve an ac­ces­sory, there will be an in­crease in the Fair Work Of­fice’s search pow­ers to com­pel em­ploy­ers and other in­volved par­ties to pro­vide ev­i­dence and co-op­er­ate with the investigations.

• There will also be new pro­vi­sions to deal with de­lib­er­ate con­tra­ven­tions such as the 7-Eleven sit­u­a­tion where em­ploy­ers re­quired em­ploy­ees to re­turn part of their wage, or for pro­vid­ing false pay­roll doc­u­men­ta­tion.

Given that these amend­ments ap­pear

to have bi­par­ti­san sup­port in both houses of par­lia­ment, they will al­most cer­tainly be­come law this year.

WHAT YOU CAN DO?

Con­sider if the fran­chise busi­ness unit sup­ports labour costs that meet the awards for your sec­tor. Ask the fran­chisor for fi­nan­cial data such as profit-and-loss state­ments from their ex­ist­ing net­work that show ba­sic costs and rev­enue. Work out whether the labour costs are rea­son­able to sup­port award wages. Un­sur­pris­ingly, many busi­nesses un­der­pay­ing em­ploy­ees do so be­cause they would not be prof­itable if they met the award.

Ex­pect the fran­chisor to de­mand your profit-and-loss state­ments with wages out­lined clearly. This will al­low the fran­chisor to re­quest clar­ity for any month where wages as a per­cent­age of turnover fall be­low an ac­cept­able thresh­old. It is not only the fran­chisor’s right to have this in­for­ma­tion, in or­der to pro­tect them­selves from ac­ces­so­rial li­a­bil­ity un­der the Fair Work Act, it has now be­come their re­spon­si­bil­ity.

Ex­pect your fran­chise agree­ment to con­tain clauses re­quir­ing that fran­chisees must com­ply with all state and fed­eral work­place laws as a con­di­tion of the agree­ment. Find out if there is head-of­fice sup­port for fran­chisees to gain ad­vice about where to source work­place re­la­tions ad­vice such as awards, dis­missal and other em­ploy­ment is­sues.

Find out if the fran­chisor ed­u­cates new fran­chisees about their ex­ter­nal statu­tory obli­ga­tions to the Fair Work Act, the Mi­gra­tion Act (and oth­ers as rel­e­vant to your sec­tor), the penal­ties for in­fringe­ment and their obli­ga­tions un­der the fran­chise agree­ment. Does the fran­chisor pro­vide a train­ing mod­ule in the on-board­ing phase that trains and tests fran­chisee un­der­stand­ing and en­sures a pass­ing grade? Fran­chisors can en­sure fran­chisees do the same with their man­agers, so ask for ac­cess to the train­ing mod­ule for your own em­ploy­ees.

Check if the Fair Work Act, the Mi­gra­tion Act, in­dus­try awards (and other statu­tory work­place re­quire­ments) are ad­dressed in the fran­chise’s op­er­a­tions, pro­ce­dures and train­ing man­u­als.

Your fran­chisor might have in­tro­duced tech­nol­ogy tools across the net­work such as ros­ter­ing sys­tems with soft­ware that can be pro­grammed to de­ter­mine the ap­pro­pri­ate wages, part-time or ca­sual des­ig­na­tion, age, penal­ties, num­ber of hours worked and so on in a payslip ad­vice for­mat that meets the Fair Work and award re­quire­ments. Or they might pro­vide a re­li­able out­sourced provider with the ap­pro­pri­ate tech­nol­ogy and un­der­stand­ing of the le­gal re­quire­ments to han­dle wages. Ask other fran­chisees what they do to en­sure they com­ply.

It is im­por­tant that your fran­chisor pro­vide clear ex­pec­ta­tions dur­ing the re­cruit­ment phase in re­la­tion to le­gal and op­er­a­tional com­pli­ance, and out­lines specif­i­cally the Fair Work and Mi­gra­tion Acts and rel­e­vant awards and re­quire­ments.

Find out from other fran­chisees if the fran­chisor gives reg­u­lar up­dates, train­ing and sup­port on work­place com­mit­ments. Does the fran­chisor pro­mote a cul­ture of ac­count­abil­ity and com­pli­ance that en­cour­ages and sup­ports fran­chisees with prob­lems or con­cerns about meet­ing their obli­ga­tions?

Know­ing your re­spon­si­bil­i­ties as a fu­ture em­ployer, un­der­stand­ing the laws that gov­ern your in­dus­try and go­ing the ex­tra mile in the due-dili­gence process be­fore you com­mit to buy­ing your fran­chise are your best in­vest­ment in your fu­ture.

The Fran­chis­ing Code ad­vises you to take le­gal and fi­nan­cial ad­vice. Do it. You wouldn’t buy a house with­out a pest and build­ing re­port, so ask your spe­cial­ist fran­chise lawyer about em­ploy­ment is­sues such as Fair Work Act com­pli­ance when you have your fran­chise agree­ment re­viewed.

While most em­ploy­ers wel­come these changes, tran­si­tion to the fully re­duced rates will be phased in over

four years, apart from the pub­lic hol­i­day awards that ap­ply from July.

Suzanne Jarz­abkowska heads up the multi-dis­ci­plinary con­sult­ing, le­gal, re­cruit­ment, brand and mar­ket­ing team at DC Strat­egy; while So­phie Letherbar­row has had more than 20 years’ ex­pe­ri­ence in com­mer­cial and busi­ness law.

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