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  • Writer's pictureRaymond Duffy

Franchisors must proactively monitor franchisee compliance with workplace laws!

CW Retail Services Pty Ltd is the franchisor of a franchise network of retail pharmacy businesses. It trades under the brand, "Chemist Warehouse" with several hundred stores Australia wide.

Each of the Chemist Warehouse outlets operates under a franchise arrangement.

Following an audit by the Fair Work Ombudsman in 2015, a significant number of employees of franchised outlets across the Chemist Warehouse franchise network were found to have been underpaid in relation to compulsory on-line training undertaken by employees of the franchised outlets.

Over $3.5 million was eventually back paid by Chemist Warehouse and liable franchisees to employees.

The Fair Work Ombudsman and Chemist Warehouse also entered into a "Proactive Compliance Deed" designed in part to ensure future compliance by Chemist Warehouse and its franchisees with the Fair Work Act 2009 (Cth).

Underpayment of employees within the franchise industry as a whole had been a growing issue for some time. In September 2017 the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 became law.

The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 introduced a range of measures, including an increase in the maximum penalties for employers who deliberately flout the minimum wage and other entitlements under the Fair Work Act 2009. Some of these changes were:

  • increased penalties for ‘serious contraventions’ of workplace laws

  • employers cannot ask for ‘cashback’ (or payments) from employees

  • increased penalties for breaches of record-keeping and pay slip obligations

  • stronger powers given to the Fair Work Ombudsman in relation to its investigations

  • new penalties for giving false or misleading information to the Fair Work Ombudsman, or hindering or obstructing their investigations.

Importantly, the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 provided that to the extent a Franchisor has a significant degree of influence or control over their franchisee's affairs - Franchisors (or their officers) can potentially be held responsible if their franchisees do not follow workplace laws.

So, it is no longer tolerated for Franchisors to turn a blind eye to contraventions of workplace laws by franchisees. It will be important for Franchisors to incorporate internal organisational processes to show they have taken all reasonable steps to prevent franchisees from contravening workplace laws.

If you are a Franchisor and need help with:

  • best practices to ensure you comply with your lawful obligations; and

  • how to demonstrate you are being proactive in minimising franchisee non-compliance,

in regards to workplace laws, contact Greyson Legal | Franchise Lawyers.

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