Franchisors face tougher penalties for deliberate and systematic underpayment of workers after the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 passed the Parliament on 5 September.

The new law will hold certain franchisors and holding companies responsible for underpayments by their franchisees where they knew, or reasonably should have known, about the contraventions and failed to take reasonable steps to prevent them.

The laws will apply to franchisors that have a significant degree of influence or control over the franchisee’s affairs.

These regulations come into effect the day after the Bill receives royal assent, except for the new franchisor and holding company liability which will start six weeks later.

Franchisors and other employers now face higher financial penalties for ‘serious contraventions’ which are 10 times the current maximum penalties. A court could impose these higher penalties where an employer knew they were breaching their obligations and this conduct is part of a systematic pattern of behaviour.

In such cases maximum penalties of $630,000 and $126,000 per contravention could apply to corporations and individuals respectively.

The new regulations also double the maximum penalties for record-keeping and pay slip breaches, to $12,600 per contravention for individuals and $63,000 for companies, and triple existing penalties in cases where employers give false or misleading pay slips to workers, or provide the Fair Work Ombudsman with false information or documents.

Last financial year two-thirds of the FWO’s court cases involved alleged record-keeping or payslip contraventions with nearly one third involving allegations of false or misleading records being provided to the FWO.

Amendments moved by the Senate will also provide that where an employer has not met their record-keeping or pay slip obligations, the employer will have to disprove a wage claim put before a Court unless the employer has a reasonable excuse for not keeping records or issuing pay slips.

James said “The Fair Work Ombudsman will work with any franchise that is serious about doing the right thing by its workers.”

What has changed in the law?

• Certain franchisors and holding companies become responsible for underpayments by their franchisees or subsidiaries where they knew, or reasonably ought to have known, about the contraventions and failed to take reasonable steps to prevent them

• A new category of serious contraventions has been introduced, with penalties that are ten times the current maximum where employers knowingly contravene and it is part of a systematic pattern of contravening conduct

• New penalties for providing Fair Work inspectors with false or misleading information or records, and new prohibitions for hindering or obstructing them

• The prohibitions against unreasonably requiring employees to make payments, commonly seen as cashback arrangements, have been strengthened and extended to prospective employees

• Maximum penalties for record-keeping and pay slip breaches have been doubled, and the maximum penalty for false or misleading employment records has been tripled.  New penalties apply for giving false or misleading pay slips

• Employers who do not meet record keeping or pay slip obligations and cannot show a reasonable excuse, will need to disprove wage claims made in a court

• The Fair Work Ombudsman’s evidence-gathering powers have been strengthened.

How the FCA reacted to Senate amendments, and  8 things franchisors can do now.