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HOW FAR IS FAIR?

by Sally Knight,
last updated 02/05/2017

in this article:

Australian legislation may impact global franchise model

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The Fair Work Commission in Australia has been busy in recent weeks, ruling to cut penalty rates (double time and time and a half) for some industries operating on Sundays and now proposing new legislation that would make franchisors liable for outstanding wages owed to workers who are employed and paid by their franchisees. 7-Eleven, which agreed to change its business model following the discovery that underpayment and wage fraud were common practice within the majority of outlets operated by franchisees, has so far determined more than 2000 claims worth in excess of A$83 million (an average of over A$39,000 per claimant).

The Franchise Council of Australia (FCA) supports the penalty rate cut, but not the full reforms proposed in the Australian Government’s Protecting Vulnerable Workers Bill. Jason Gehrke of the Franchise Advisory Centre says that, 'The bill has been criticised for overstepping the mark and posing such a threat to franchising that franchisors may cease to offer franchises rather than risk creating unmanageable liabilities. International franchisors are also likely to avoid entering the Australian market under the new laws, with fears among overseas observers that the laws set a dangerous precedent for other governments to follow that could undermine franchising as a business model.'

There is a resource page on the Franchise Council of Australia's website outlining the effects of the bill for the Australian franchise sector. The FCA has major concerns with the legislation, in particular as it singles out franchising, applies a one-size-fits-all approach and requires franchisors to shadow check or duplicate every employment compliance procedure of their franchisees (independent businesses in their own right). The FCA advocates further amendments to the bill to achieve the policy intent of protecting vulnerable workers without crippling franchise networks under costly and unwieldy legislative responsibilities.

The FCA is also seeking input from franchisors to ensure that the franchise sector's interests are strongly and clearly communicated to the Government – any New Zealand franchisors who are operating in or considering entry to the Australian market may be interested in the opportunity to state their opinions.

In the words of Stephen Giles, who serves on the Board of Directors of the FCA alongside Jason Gehrke, "Workplace law compliance is a global challenge. Australia should not rush to be the  first country to try and find a legislative solution, as this ignores the fact that there are complex new issues in the workplace that are a function of broader social issues.  The real driver behind the problematic behaviour is not franchising - [it is rather] issues such as immigration, lack of genuine cultural diversity in the workplace and challenges to our legal framework posed by new entrants who bring with them different cultural and social norms and values."

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