Franchisor Responsibilities
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Are you a franchisor? Do you know your responsibilities under the Fair Work Act?
Under the Fair Work Act 2009 (FWA) franchisors can be held responsible for their franchisees’ conduct. These provisions apply to ‘responsible franchisor entities’.
What is a ‘responsible franchisor entity’?
To be a ‘responsible franchisor entity’, the following three things are required.
There must be a franchise: An arrangement where the owner of a brand or trademark (franchisor) allows a person to earn money by using the brand or trademark, or the reputation of the brand, in running a business (franchisee).
The franchisee's business must be substantially or materially associated with intellectual property relating to the franchise: The use of the franchise branding, such as a trademark, logo, or marketing, must be a major feature of the business operated by the franchisee.
The franchisor has a significant degree of influence or control over the franchisee's affairs: Determining whether influence or control is significant will depend on the franchise model and the parties and will include:
the rights of the franchisor to direct, manage, regulate, determine or command the franchisee entity about financial, operational and/or corporate matters,
how the relationship works in practice, such as how much the franchisor influences or contributes to management or operational decisions of the franchisee business or affects the franchisee's ability to generate revenue or profits.
What can a ‘responsible franchisor entity’ be held responsible for?
A ‘responsible franchisor entity’ can be held responsible if a franchisee contravenes the following provisions of the FWA.
Entitlements under the National Employment Standards; awards and agreements; and national minimum wage orders, equal remuneration orders and guarantees of annual earnings.
Rules for methods and frequency of payment.
Pay slips and record-keeping.
Sham contracting.
How can franchisors prevent workplace contraventions?
If the responsible franchisor has taken reasonable steps to prevent a contravention of the same or similar character as the contravention that happened, they won’t be held legally responsible.
Franchisors should review the arrangements they have in place that support compliance with workplace laws by their franchisees who employ people to work in the business and ensure they have processes in place to promote and monitor workplace compliance in their networks.