There is now an onus on parent companies to prevent their subsidiaries violating the Fair Work Act
Holding companies and franchisors will now face much greater accountability for failing to act when a subsidiary or franchisee is found to be violating the Fair Work Act (FWA).
The new law means there will be a higher scale of penalties (up to 10 times the current amount) for a new category of ‘serious contraventions’ of prescribed workplace laws.
These changes have been introduced to address exploitation of vulnerable workers - as illustrated in the 7-Eleven wage scandal - by also holding those higher up the supply chain responsible, according to Rigby Cooke Lawyers partner and workplace relations specialist Simone Caylock.
Indeed, in July it was announced that court imposed penalties against 7-Eleven operators have now topped $1 million in litigations by the Fair Work Ombudsman.
“A raft of new changes came into effect last month under the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, including a tenfold increase on maximum penalties (from $12,600 to $126,000 for individuals and from $63,000 to $630,000 for companies) for serious contraventions of the FWA (including deliberate breaches of record keeping obligations), prohibitions on “cash back schemes”, and expanded evidence-gathering powers for the Fair Work Ombudsman,” said Caylock.
“From 27 October 2017 however, the law placed a new onus on franchisors and parent companies to demonstrate they have taken reasonable steps to prevent a franchisee or subsidiary from contravening the FWA.
“Failure to prove so could potentially lead to a civil proceeding and those fines of up to $630,000 per breach.”
The new law provides that franchisors and holding companies can be held liable for breaches of certain workplace laws by their franchisees/subsidiaries if they “knew or could reasonably be expected to have known” that the contravention would occur, or that a contravention “of the same or a similar character was likely to occur”.
Caylock added that simply pleading ignorance will not hold up in court.
“If organisations are responsible for franchisees or have subsidiaries that engage staff, to be able to demonstrate they have taken reasonable steps, they must ensure they have systems in place, such as declarations, audit programs and risk assessments, to ensure those third parties comply with relevant workplace laws,” she said.
A franchisor or holding company can only be held liable in relation to contraventions that occur after 27 October 2017 but in determining if a holding company or franchisor had ‘knowledge’ the Court “may have regard to conduct that occurred, or circumstances existing, before” 27 October this year.
HRD recently reported that a 7-Eleven worker was dismissed by a franchisee in Brisbane who allegedly removed him from the roster after he refused his employer’s request to repay his leave entitlements.
The FWO alleged that Ponnada, on behalf of the company, made several requests for the worker to return the $731.06 that had been paid.
7-Eleven said they supported the FWO’s investigation into the Brisbane franchisee.