Australia's peak industrial law watchdog,
the Fair Work Ombudsman (FWO), in
which 7-Eleven, Caltex, Dominos, Pizza
Hut and a number of other well-known,
multi-national companies, were found to
have been underpaying their Australian-
based workers, the Commonwealth
Parliament has rolled out a number of
amendments to the Fair Work Act 2009
(FWA). Having come into effect on
September 15, 2017, these amendments
are unique in that, for the first time,
head franchisors, even those that are not
located within Australia, can now be held
strictly liable for underpayments (as well
law) made by local, Australian-based
franchisees. While the amendments are,
on one level, a reaction to the seeming
epidemic of underpayment of workers by
such companies, it can also be seen as
part of the current government's broader
push to hold overseas companies more
accountable for their Australian-based
operations.
key features of these amendments and
offer some practical risk mitigation
strategies for overseas-based companies
who have established, or are looking to
establish, franchises in Australia.
of the amendments is that the law now
targets franchisors that turn a blind eye
to the breaches of their franchisees, with
franchisors now strictly liable for their
franchisees' actions when exercising a
"significant degree of control" over them.
The Parliament has deliberately left the
definition of "significant degree of control"
relatively open. The deliberate vagueness
in the definition is not unique to these
amendments and is a common feature
throughout the FWA. The apparent policy
rationale for this approach is to encourage
employers (and now franchisors) to "over
comply" with their obligations to best
protect themselves from breaches of the
FWA. Sophisticated employers often used
skilled employment and industrial lawyers
to balance their legal obligations under
the FWA with the commercial reality
of that employer's business. With these
changes, franchisors, especially those with
headquarters outside Australia, are now
part of their retinue of Australian-based
service providers.
Another key feature of the amend-
ments is that franchisors (as well as fran-
chisees) are now exposed to significantly
higher penalties for contravening pay-
ment-related workplace laws, with fines
increasing ten-fold. In addition, employ-
ers are now prohibited from asking their
employees for "cash-back" an amend-
ment spurred by findings that young work-
ers were led to ATMs by employers and
forced to return some of their wage.
under these new laws, despite the FWO
charging ten companies under the FWA
since the amendments went into effect.
In the recent decision of Fair Work
Ombudsman v NSH North Pty Ltd t/
as New Shanghai Charlestown [2017]
FCA 1301, Justice Bromwich endorsed
the policy rationale and objective of
the amendment. He called Parliament's
efforts to increase penalties for such
cases as "entirely warranted." With
multi-national bodies such as 7-Eleven
charged with paying employees as little
as $5 an hour, the necessity of such
stringent laws becomes apparent.
However, not everyone is satisfied.
The scope of the new laws has been
criticized, particularly when considering
the breadth of the definition of the
"franchisor," the type of control
required by the franchisors, and the
level of knowledge they must have in
terms of wrongdoing by franchisees. As
more cases come before the court, the
parameters of liability for franchisors
under the amendments are very likely
at HHG Legal Group. He advises and represents
a broad spectrum of clients in both complex
and simple commercial litigation matters
including shareholder and partnership disputes,
consumer and competition legislation matters,
insolvency and related matters, as well as
employment law matters.
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16 Parliament Place
West Perth, Western Australia 6005
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