Amendments to Fair Work Act to Protect Vulnerable Workers

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Posted September 18, 2017

In response to investigations into the exploitation of underpaid workers of prominent Australian franchises, the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 was passed on 4 September 2017.

 

This will inevitably change the regulatory landscape of workplace law, particularly for franchisors. As the name suggests, it protects vulnerable workers by increasing fines for serious breaches of workplace laws as well as holds franchisors responsible if their franchisee contravenes the law.

 

What is the Effect on Franchisors?

Part of the responsibility of a franchisor is to ensure their franchisees are equipped with enough knowledge to adhere to workplace laws, specifically when hiring and managing employees. Under the new Bill, franchisors may be the ones liable if their franchisee breaches workplace laws, even if they are not directly involved in the incident. If the franchisor knew of the likelihood of a breach but did not take the reasonable steps to identify and eliminate the issue between franchisee and their employee, they may be held liable, resulting in legal actions and fines against the franchisor.

 

Penalties for breaches of pay slip and employee keeping requirements of the Fair Work Act have increased to $54,000 per contravention and up to $540,000 per breach for a ‘serious contravention’. A serious contravention if you knew the provision was breached and if there was a systematic pattern of conduct.

How Can Franchisors Ensure Compliance?

To avoid being held liable for the actions of franchisees, franchisors should ensure that they comply with the laws by taking reasonable steps:

• inform franchisees of the relevant awards and conditions that the franchisees must comply with when employing staff;
• have arrangements in place to periodically check franchisee compliance on wage conditions;
• have a complaints system where employees can contact the franchisor directly in the instance that they have issues with a franchisee not paying them correctly;
• implement steps to encourage franchisees to comply (and address issues with those who do not).

Equip Franchisees with Information

Giving franchisees the appropriate information to correctly run the franchise and comply with the law is vital. This can be done by providing them with information on legal issues such as:

• the requirements they must abide by when employing staff; and
• where to obtain information regarding awards and employee remuneration.

The Salon Policy and Procedures Manual and other HABA information brochures are a good place to start in providing clear steps on what the requirements are for employing, training and paying staff. It is wise to include:

• examples of letters of employment;
• examples of pay slip statements;
• recommendations of, or requirements for, an accounting software system that will automatically issue compliant pay slips;
• details regarding record keeping and time recording; and
• the most up-to-date award for the Hair & Beauty industry.

Consider your Franchise Agreement

It is not necessary to completely re-draft your franchise agreement because of changes to the new Bill. There should already be a “catch-all” provision in your template agreement that requires franchisees to comply with all relevant laws including workplace laws and the Fair Work Act. However, it is advised that franchisors include an explicit clause about compliance and reporting in relation to the Act and inform their franchisees of the changes that have occurred – for instance, you could simply share this blog post with them. Doing so ensures that the responsibilities of franchisees are made clear throughout the agreement.

 

As a member of HABA, both franchisors and franchisees can benefit from the access to a community of businesses in the hair and beauty industry. HABA supports franchisees in determining the relevant award for their staff, provide template letters of employment and offer assistance to the franchisees in any difficult or legal dealings with employees; and if necessary, the Fair Work Ombudsman (FWO). Franchisors and Franchisees should become members of HABA and each franchise does require a separate membership to take full advantage of the security and insurance offered by HABA to salon owners.

 

Key Takeaways

Although the Fair Work Amendment (Protecting Vulnerable Workers) Act may hold franchisors liable if their franchisees breach workplace laws, there are practical steps that franchisors can take to reduce the risk of non-compliance. There is no need for franchisors to panic, provided they inform and educate their franchisees with relevant information about compliance, regularly check up with franchisees, have a complaints system and encourage franchisees to adhere to the laws. If you have any questions about the new Fair Work Amendment contact HABA on 02 9221 9911.