Home About Us Membership Information Events Awards Media Education Representation Partnership Contact Us

Fair Work Act: Why there's still more work to be done

Written on the 3 March 2017 by Stephen Giles

The Australian Government this morning introduced legislation (The Fair Work Amendment - Protecting Vulnerable Workers Bill 2017) to amend the Fair Work Act to make parent companies and franchisors liable for the workplace relations breaches of subsidiaries and franchisees in certain circumstances.

Focusing on franchising, a "responsible franchisor" is a franchisor that has significant control or influence over a franchisee. A responsible franchisor will be responsible for certain breaches of workplace laws where it knew or ought to have known of the breach, unless it can establish it took reasonable steps to prevent the contravention.

The devil is in the detail of the legislation, which is likely to add substantial compliance cost and cause some businesses to question whether they ought to continue to operate using a franchise model. The peak industry body, the Franchise Council of Australia, has been working with Government on two fronts - to attempt to persuade the Government not to legislate, and to moderate the drafting of the legislation so it is workable and compliance cost minimised if introduced.   Although significant progress has been made, the FCA still is unable to support the legislation, as the FCA believes it falls short of these objectives. 

The major concerns with the legislation are:

1.  It singles out franchising, when the issues concerning underpayment of workers apply across all business models. Labour outsourcing arrangements, highly controlled supply chains, non-franchised product distribution and other areas where workplace abuses have been identified are not covered.

2. It applies a one-size-fits-all approach to franchising, which is a business method not an industry, and covers 1,100 different business models, from convenience to post offices to fast food to lawn mowing to caravan parks to cooperatives to car dealerships to gutter cleaning to real estate to mortgage broking. In some franchises the franchisor exercises substantial control over workplace matters, in others the franchisor has no knowledge. Although most franchisees are small businesses, some franchisees are very large companies and even publicly listed. The attempt to introduce some form of control test to narrow the application of the legislation and bring it closer to its stated policy intent is clumsy, and needs refinement. The test for a "responsible franchisor" should be control or substantial influence over workplace relations matters, not the current very general control test. This issue is of particular concern to foreign franchise systems, who may have some technical control through master franchise or franchise agreements, but have realistic capacity to direct Australian workplace law compliance.

3.  The current test of significant control or influence is too broad almost every franchisor would through the franchise agreement have some capacity to "influence". The intent of the legislation purports to be to address franchisor involvement in non-compliance, not the theoretical capacity to "influence" this is a bridge too far.

4.  The legislation goes far beyond the stated objective of impacting the underpayment of vulnerable workers, and contains a shopping list of general workplace compliance obligations (EG: record keeping) for which a responsible franchisor can be held liable. This will impose unnecessary duplication and compliance costs, particularly as current industry solutions are achieving substantially improved compliance, and the FCA and the Fair Work Ombudsman and others are working on additional industry programs to further enhance compliance.

5.  The "reasonable steps" defence is opaque, and should be clarified so that franchisors, as third parties who are not directly involved as the employer, can know exactly what they need to do to avoid liability. The FCA has suggested that there should be a clear defence if a franchisor has in place an approved compliance program.
It is hard to predict what will happen from here, as the Government does not control the Upper House, and Labor and the Greens have themselves made policy commitments in relation to alleged worker exploitation.  Referral of the Bill for more detailed consideration by a Parliamentary Committee seems sensible. 

Workplace law compliance is a global challenge. Australia should not rush to be the  first country to try and find a legislative solution, as this ignores the fact that there are complex new issues in the workplace that are a function of broader social issues.  The real driver behind the problematic behaviour is not franchising - they are issues such as immigration, lack of genuine cultural diversity in the workplace and challenges to our legal framework posed by new entrants who bring with them different cultural and social norms and values.

Author: Stephen Giles

Latest News

The impact on businesses and communities from the bushfires that have impacted many parts of Australia has been devastating. The franchise secto...
The Franchise Council of Australia has honoured some of the nation's best and brightest in business at the MYOB FCA Excellence in Franchisin...
The Franchise Council of Australia (FCA) has recognised franchising's best in South Australia at the 2019 SA Excellence in Franchising Award...

Upcoming Events

WA Coffee Catch-Up: How to Create an Amazing Franchise Team

Start Time: 7:30am
Date: Thursday 6th February 2020

NSW: Foundation Field Manager Bootcamp

Start Time: 8:30am
Date: Wednesday 12th February 2020


About the FCA Board of Directors Hall of Fame Hall of Fame Eligibility Criteria



Promote your business Have a complaint?


About Membership Member Benefits How to Join FCA Member Standards



Advertise your business Sponsorship & Exhibition Testimonials Become an FCA Partner


FCA Representation Franchising Code of Conduct FCA International


Media and Communication

Franchise Review FCA Media ReleasesFranchising in the Media

Franchise Council of Australia

Postal Address

Level 19, 567 Collins Street

Melbourne VIC 3000

Phone: 1300 669 030

Fax: +61 3 9508 0899


Website Proudly Developed by:



Women in FranchisingFranchise AcademyFranchise Council of Australia