Australia's first joint employer prosecution against franchisor

According to a media statement, Australia's Fair Work Ombudsman (FWO) has commenced proceedings against Sydney-based coffee brand 85 Degrees for alleged non-compliance by eight of its franchised outlets which underpaid nine workers a total of $32,321. 

The FWO alleges that the franchisor should have reasonably known that its franchisees would underpay their workers following a previous action in 2015 resulting in an enforceable undertaking being given by the company to the FWO in 2015, and the franchisor’s knowledge of its franchisees’ financial circumstance, and their franchisees’ limited English capabilities and understanding of workplace laws. 

A total of 20 workers were impacted by underpayment or record-keeping and payslip violations. Just last year, the company was penalised $475,200 for exploiting young Taiwanese students under a purported internship arrangement, and is potentially facing penalties of up to $63,000 for each of the current violations. 

Changes to the Fair Work Act introduced in September 2017 designed to protect vulnerable workers introduced a form of joint employer liability for franchisors for wage underpayments by their franchisees unless they take reasonable steps to ensure workers are paid correctly. The FWO action against 85 Degrees is the first prosecution to be mounted since these laws were introduced. The brand does not appear to be currently listed on the Australian Government’s Franchise Disclosure Register, which is a mandatory requirement for franchisors.

We welcome links from other websites to this article. Please note that this article is copyright © Eden Exchange NZ Holdings Limited, Franchise New Zealand magazine and Franchise New Zealand On Line. While it may be downloaded for personal use, no part may be reproduced on any other website, in electronic or printed form or in any other form whatsoever.