News & Insights

Petrol station operator and franchisor Caltex Australia Limited has been criticised by the Fair Work Ombudsman for widespread non-compliance with workplace laws revealed by an audit of 25 of its franchisees.

The Fair Work Ombudsman revealed an astonishing 76 per cent non-compliance rate among the businesses that were audited with two franchisees now also being prosecuted by the Fair Work Ombudsman.

As a result of the widespread non-compliance issues Caltex has now established an assistance fund for franchisee employees who have not been paid their full entitlements by Caltex franchisees.

Caltex’s non-compliance issues are yet another reminder to franchisors to ensure their franchisees are complying with workplace laws.

The vulnerable workers legislation

The highly publicised Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth) was passed on 5 September 2017. Under the legislation, franchisors can be held liable for contraventions of the Fair Work Act 2009 (Cth) (the Act) by their franchisees where they knew, or reasonably ought to have known about the contraventions, but failed to take reasonable steps to prevent the contraventions occurring.

The legislation also introduces a new category of penalties for serious contravention which could result in penalties of up to $630,000 for corporate entities and $126,000 for individuals.

In issuing a penalty a Court will have regard to:

• the franchisor’s size and resources;
• the franchisor’s ability to influence the franchisee’s operations;
• action taken to ensure the franchisee had knowledge and understanding of workplace laws;
• arrangements in place for assessing compliance; and
• arrangements in place for receiving and addressing possible complaints about underpayments or contraventions of the Act.

The new legislation (which also applies to holding companies and their subsidiaries) has significantly raised the stakes for franchisors. Franchisors must now be vigilant in taking proactive steps to ensure their franchisees are meeting their obligations as employers.

How can Macpherson Kelley help?

Macpherson Kelley has pioneered a procedure which is already being used by franchisors and franchisees to meet their obligations under the legislation including:

• delivering training to franchisees (including on behalf of the franchisor);
• developing checklists and guides;
• drafting employment contract templates;
• drafting workplace policies (including complaints procedures);
• undertaking minimum wage audits for franchisee employees;
• implementing an advisory service for franchisees;
• setting up complaint making procedures for employees of a franchisee; and
• amending franchise agreements to include provisions relating to employee obligations

Please contact our Employment Safety and Migration team for more information on how we can assist your business with meeting its obligations under the new legislation.

This article was written by Barney Adams, Associate – Employment, Safety and Migration.