Joint Employer Predictions Come True – Proposed Changes to Legislation
It’s great to hear that our crystal ball is working well. Back in January, we wrote an article on the potential that Franchisors and Franchisees could be seen as Joint Employers [you can read that article here]. That prediction seems to be coming true, as the wheels are turning in Australia on proposed legislation changes. It will only be a matter of time before we see the same legislation changes here in New Zealand.
Here is what is happening currently…
Senate Committee Making Progress
As of an April 6th deadline, the senate committee responsible for reviewing the Australian Protecting Vulnerable Workers Bill had received a number of public submissions in support of changing current legislation.
The proposed legislation would make Franchisors liable for any outstanding wages in their networks. This even means outstanding wages for workers who are employed and paid by their Franchisees. The ruling comes in the wake of the recent 7-11 debacle, where the privately-owned company has been forced to repay almost $88 million to underpaid workers.
This bill is a controversial one. While the intention of ensuring all workers get fair wages and fair treatment in their employment is well-meaning, organisations such as the Franchise Council of Australia and The World Franchise Council oppose the liability on franchisors. The danger of an entire network being brought down by the actions of a couple of franchisees is worrying.
The Risks of the Bill
The major risk to Franchisors if the bill is passed in its current form is, that they could be liable for their Franchisee’s failure to pay their own staff correctly.
The change in legislation would see the Franchisor judged on if they ‘could reasonably have been expected to have known’ about the infractions of their Franchisees.
A Franchisor would not have to have direct knowledge of a Franchisee’s wrongdoing to be held liable. And it is not just underpayment of employees that is covered by the Protecting Vulnerable Workers Bill. It extends to a large number of workplace law compliance areas.
As well as increased civil penalties, a Franchisor can be ordered to directly compensate employees that have been underpaid by their Franchisee.
A Target on Franchisors
Franchisors are being targeted in these legislation changes as, franchises are commonly known to have ‘vulnerable workers’. These proposed changes are in direct response to the practice of Franchisees deliberately underpaying employees and Franchisors claiming no knowledge of such a business model.
The proposed changes in legislation will see a significant increase in the responsibility of Franchisors. They will be directly responsible for all of the independent businesses operating in their network. This leaves many Franchisors questioning the difference between company owned stores versus franchised stores - a question that we will have to wait and see as the legislation evolves.
What Can Franchisors Do?
This new legislation will allow Franchisors to remove liability if they have taken reasonable steps to prevent their Franchisees from acting with incorrect practices.
However, this is not a safety net. There are no set rules around what the ‘reasonable steps’ should be. It will all depend on the individual circumstance of the franchise. Consideration will be made to the size of the network and the available resources for regulating the Franchisees within, as well as the Franchisor’s influence, and their arrangements for assessing compliance with the Act.
NZ Franchisors - Time To Get Prepared
While these proposed changes relate to Australian Law, it will not be long before New Zealand Employment Law falls in line. Now is the time to make arrangements that will protect your franchise network. Put systems in place to assess that your Franchisees are abiding by correct employment practices. Then you will be ready for this when these changes come to New Zealand.
At in2HR, we have been busy preparing franchise systems for these changes. We can help you safeguard your franchise by implementing:
- A robust on-boarding program for your Franchisees so that they understand their employer obligations.
- Ensuring that your Franchisees have the HR support mechanisms to implement best people practices into their business and your franchise.
- Provide visibility to you as a Franchisor into your franchisees business through conducting regular HR audits. This will give you peace of mind that your Franchisees are complying with employment legislation and that your brand is protected.
If you are an established franchise or a new franchise in NZ, get in touch with us at in2HR to see how we can help you develop robust systems that will keep you out of hot water.