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Swimland’s franchisees underpaid staff $1.4m

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Inside Franchise Business: Swimland franchise network underpaid workersA swim school franchise network found to have underpaid its staff across a six-year period has repaid workers, donated $50,000 to charity and taken measures to ensure compliance with workplace laws.

Franchisor Paul Sadler Swimland Pty Ltd and 12 franchisees have signed an Enforceable Undertaking (EU) with the Fair Work Ombudsman following the disclosure of widespread underpayments throughout its network, with workers underpaid a combined $1,425,477 between July 2010 and March 2016.

The Fair Work Ombudsman reports the franchisor and franchisees have fully co-operated; the franchisees have rectified all underpayments and also paid affected staff an additional five per cent voluntary payment, totalling $71,272 across the network.

The underpayments came to light following staff concerns at the Essendon franchise in 2015 and by early 2016 issues with pay arrangements had been identified across the network, prompting a full review.

The underpayments have breached both the Fitness Industry Award 2010 and individual enterprise agreements signed by each of the 12 franchisees in 2013.

Employees were incorrectly paid because the franchisees failed to accurately calculate their experience, implement junior workers’ age increments; or apply the Award’s transitional wage provisions. 

Total underpayments at each franchise ranged from $40,107 at the Braybrook business to $445,580 at Essendon. Individual underpayments for workers ranged from three cents to $14,891.

The franchisor reported the breaches to the Fair Work Ombudsman in late 2016. By this time the franchisor had already calculated the underpayments, with the assistance of an external audit team, and had begun repaying workers.

Paul Francis Sadler, the founder of the Swimland network, is the director of the franchisor and director or co-director of 10 of the franchisees.

Acting Fair Work Ombudsman Kristen Hannah “While the underpayments in this matter were not deliberate, this has been a significant, expensive wake-up call for Swimland and serves as a clear reminder to those in franchise networks that all are responsible for ensuring workers entitlements’ are met.”

Law changes passed last year and in effect from 27 October 2017 have since expanded the circumstances in which franchisors can be held responsible if their franchisees don’t follow workplace laws.

Hannah said the EU also includes “acknowledgment from the franchisor, where it was not the employer of the staff, that it was an accessory to these contraventions”.

In recognition of its contrition for the underpayments, under the EU the franchisor has also undertaken to make total donations of $50,000 to two charities, with The Smith Family and Western Chances to receive $25,000 each.

Hannah said an EU was an appropriate outcome in this matter given the full cooperation from the franchisor and franchisees and the rectification of back-payments.As part of the EU third party audits of the swim schools across Melbourne and Bendigo will be required during the next two years to ensure ongoing compliance.

Under the EU, the franchisor must not only commission an external audit of its, and its franchisees’, workplace compliance across two financial years and rectify any contraventions found, but also maintain a dedicated email address for current or former employees to make enquiries about any concerns or pay issues.

The franchisor must display notices in metropolitan newspapers and the company website, and the franchisees must display notices at their workplaces and on their Facebook pages, detailing the breaches as well as statements they regret and apologise to workers for their conduct. The franchisor and each franchisee must also register with the Fair Work Ombudsman’s online My Account portal.

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