Business Franchise Australia and New Zealand 79The Bill seeks to:
- Introduce fines of up to $54,000 for every
instance of underpayment by a franchisee,
and similarly, increase the penalty for
serious breaches for a franchisee from
$10,800 to $108,000, and for a body
corporate franchisee, from $54,000 to
$540,000; - hold franchisors and holding companies
responsible for certain breaches by their
franchisees or subsidiaries, where they knew
or should have reasonably known but failed
to take reasonable steps to prevent them; - clarify the prohibition on employers
unreasonably requiring their employees
to make payments in relation to the
performance of work; - provide the Fair Work Ombudsman (FWO)
with evidence-gathering powers similar
to those available to corporate regulators
such as the Australian Securities and
Investment Commission and the Australian
Competition and Consumer Commission;
and - prohibit the hindering or obstructing
of the FWO and or an inspector in the
performance or his or her functions or
powers, or the giving of false or misleading
information or documents.
what will it mean for franchise
groups?
We believe the Bill will add significant
costs to those doing the right thing, deter
entrepreneurs from considering franchising as
an option, and erode the critical relationships
between franchisees and franchisors.
It’s not enough that a franchisor didn’t
know about a significant breach, it’s enough
simply that they should have known about
it, and that the franchisor should have taken
‘reasonable steps’ to prevent this kind of
behaviour.
Business Franchise Australia and New Zealand 79The ‘reasonable steps’ are, in fact,
unreasonably onerous on franchisors and
holding companies, both in terms of costs
and business confidence (eroding complex
business relationships between franchisees and
franchisors), with the extra costs inevitably
going to be passed down to franchisees.
Imposing an expectation of this kind is not
sustainable or affordable for many businesses- many retailers and fast food entities that
would be captured by the Bill in its current
form simply do not have the financial or
personnel resources for a finance or audit
division.
In some cases, retailers have informed us that
they would be required to reroute funding
from core services focused on keeping
businesses open or reduce staff levels to
provide an auditing and other ‘watchdog’
type services (i.e. taking reasonable steps to
prevent a contravention by a separate legal
entity within their franchise or company
framework).
These activities, in our view, will not grow
business, innovate or support market
competitiveness.
The NR A made formal submissions to the
Senate Inquiry stating our opposition to the
amendments as proposed under the Bill,
and held several emergency meetings with
the Department, however, with bipartisan
support, it’s likely the Bill will become
legislated later this year.
Some of the issues we have flagged include:- The current legislation is sufficient to
cover franchise entities and holding
companies (that are the subject of the Bill),
for the issues that came to light in these
investigations; - Terminology that is open to interpretation
needs to be amended; - The Bill imposes a primary liability on a
responsible franchisor or holding company
for a contravention by a franchisee or
subsidiary entity irrespective of whether
an order has been sought or made against
the franchisee or subsidiary, but in the vast
majority of cases the franchisor is removed
from the employment practices of its
franchisees; - A prosecution would not need to prove the
responsible franchisor (or holding company)
knew exactly who was being underpaid and
on what basis; - The reference to “auditing of companies
in the network” in the Explanatory
Memorandum indicates that this would be
a necessary reasonable step for franchisors
and holding companies to take to ensure
compliance with the FW Act
how will it work in practice?
The real concern coming out of the 7-Eleven
inquiry report is the lack of power the
FWO has when it comes to gathering direct“we believe the Bill will add significant costs to
those doing the right thing, deter entrepreneurs
from considering franchising as an option,
and erode the critical relationships between
franchisees and franchisors.”troy wild | deputy ceo & director of legal Services | NAtioNAl ret Ail
AssociAtioN | principal lawyer | NrA legAl