Once the Bill passes, franchisors will no longer have carte-blanche to ignore their obligations under the Act, as they will also be held responsible and liable for contraventions by their franchisees over which they have significant influence or control. The same applies to the holding companies of subsidiaries.
A new civil penalty liability will be imposed to a responsible franchisor whose franchisee contravenes the Act if the franchisor or one of its officers knew, or could reasonably be expected to know, that a franchisee would commit, or was likely to commit, a contravention.
The amendment aims to make franchisors more proactive in preventing contraventions of the Fair Work Act so they can no longer ‘turn a blind eye’ over their franchisees’ affairs.
To balance and limit a franchisor’s exposure to this new liability, the bill adds that the franchisor will not be held liable if, at the time of or prior to the franchisee’s contravention, the franchisor took reasonable steps to prevent it.
To determine whether reasonable steps were taken, a Court may consider:
- The franchise’s size and resources;
- The degree of influence or control the franchisor has over the franchisee in relation to the contravention;
- The actions the franchisor took to ensure the franchisee is informed of the requirements of the applicable provisions of the Act;
- The franchisor’s process for receiving and addressing complaints regarding possible contraventions;
- The franchisor’s processes for assessing franchisee compliance with workplace laws; and
- The franchisor’s arrangements and actions for requiring or encouraging franchisee compliance.