How you can minimise your risks of being an accessory to payroll non-compliance as a franchisor.

Accessorial Liability for Franchisors – Will You Be Next?

The FWO’s successful prosecution of the Yogurberry franchise has raised many questions on how franchisors can protect themselves from “accessorial liability” – being an accessory for payroll contraventions of the Fair Work Act.

Background 

The FWO “lifting the bar” on both franchisors and managers in meeting their responsibilities to ensure franchisee payroll compliance, highlighted the importance of taking ‘reasonable steps’ to protect the franchisor from becoming an accessory to a franchisee’s payroll non-compliance.

In Yogurberry’s accessorial liability case, they were prosecuted under section 550 of the Fair Work Act 2009 (Cth) (the Act), which states  “A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.” Importantly, “involvement” can include being, “in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention”.

Reasonable Steps to Take

As a franchisor, you can minimise your risks of being an accessory to payroll non-compliance, by taking ‘reasonable steps’. Based on specific obligations imposed by the FWO in “proactive compliance deeds” they have entered into with a number of franchisors, these steps might include:

  • Ensuring your franchise agreement requires franchisees to comply with workplace laws, breach of which will result in termination of the franchise [note – you will need to speak to a specialist franchising lawyer about this].
  • Providing HR systems – this could include promoting a centralised payroll system to simplify the payroll process for franchisees, as well as providing visibility to the franchisor on whether employees are being paid correctly. With information comes responsibility, but the court of public opinion won’t accept a franchisor explanation of “we didn’t know”.
  • Employee Helplines – for franchisee employees to be able to raise payroll and underpayment issues directly with the franchisor.
  • Training for franchisees – Providing all franchisees with training on workplace laws, including their obligations and the consequences for breaching those workplace laws.
  • Monitoring compliance – Checking-in with your franchisees via regular audits and ensuring they are complying with workplace laws and then addressing any issues identified – before it becomes a media problem.
  • Providing franchisees with access to specialist employee relations advice, including from external professional sources.

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