Earlier this year the Fair Work Ombudsman released a report about its inquiry into the 7-Eleven franchise which found that the franchisor could have taken steps to prevent the illegal underpayment of wages. So what can franchisor’s do to ensure their franchisees do not underpay their employees and potentially damage the franchise name and brand?
Not only had some 7-Eleven franchisees been underpaying their employees but they had been falsifying records by recording half of an employee’s rostered time and inflating the amount the employee was paid. Some franchisees had been paying their employees above the minimum award rate but then requiring the employee to pay a portion of their wage back in an unrecorded cash transaction.
While the investigation found that the franchisor was not legally responsible for the franchisee’s conduct, as it was not knowingly involved, the ombudsman was critical of the way the 7-Eleven franchise system operated, saying that there should have been better systems for auditing and monitoring and had better employee complaint procedures in place.
The Labor party and the coalition have announced separate workplace reviews ahead of the election in response to the underpayment and exploitation, particularly of workers with temporary work visas. The coalition plans to introduce new offence provisions for franchisors who fail to address exploitation by their franchisees.
Franchisors should review their systems and franchise agreement.
In particular, Franchisor’s should consider having a clause in their agreement requiring franchisees’ to comply with workplace laws and a right for the franchisor to terminate the agreement if the franchisee breaches this clause and fails to rectify the breach within a reasonable period.
If a franchisor becomes aware of a breach they should immediately obtain advice and act accordingly.