• Are you a franchisor?
  • Or a franchisee?
  • Does your company have subsidiaries?

If you answered “yes” you are in the sights of new laws which commenced on Friday 15 September. Even if you answered “no”, you should keep reading, as the higher penalties relating to payslip and record keeping offences can still apply to you.

Fair Work Amendment (Protecting Vulnerable Workers) Act 2017

Franchisors and holding companies are now responsible if their franchisees or subsidiaries underpay their staff if they knew or ought to have reasonably known that this was happening and failed to take reasonable steps to prevent it. These “head office” provisions will take effect from 27 October, according to the Fair Work Ombudsman Natalie James. It’s not just franchisors and franchisees – all employers must pay their workers correctly and must keep records of all the payments they make. Big fines are now in play if you fail to do so: up to $126,000 for individuals and up to $630,000 for corporations. So check you comply with the pay and employee entitlements under your Award, or enterprise agreement if you have one.

If you are unable to provide pay slips or employment records, you will automatically be guilty of breaching the record keeping requirements unless you have a “reasonable excuse”.

Accountants, HR consultants, or anyone who is a third-party to a serious contravention of the Fair Work Act are also in the frame. Serious contraventions will usually involve regular and systematic underpayments where it is difficult to argue that it was inadvertent.

It’s not enough to say you didn’t know

For franchisors and parent/holding companies, the new laws expressly make you liable for underpayments if you ought to have reasonably known your subsidiary or franchisee was not paying correctly. While this responsibility is supposed to only apply if you have a “significant degree of influence or control” over your business network, it’s clear the Fair Work Ombudsman will be arguing that franchisors have this influence and control by the very nature of their business model.

What else do you have to be wary of?

You are expressly prohibited under the new legislation from unreasonably requiring your employees to make payments to you (for example by demanding employees pay back some of their wages in cash, so that wages appear to be correct “on the books”). The Ombudsman will also be able to make you produce documents and answer questions about suspected underpayments and exploitation of vulnerable workers, although it will have to get the permission of a tribunal before it does so.

You must not obstruct a Fair Work inspector who is investigating you, nor must you give them false or misleading information or documents.

Written By Alison Williams on 18th Sept 2017