When you buy a franchise, who recruits the staff?
When buying a business, it is important to consider how that business will be staffed, both immediately and in the future as the business grows.
While initially a franchisee may intend to operate the business personally or with their partner, as the business grows, the team will need to grow too.
So who is responsible for staff recruitment?
Typically a franchisee will be responsible for recruiting all staff for their business. While some franchise networks provide franchisees with access to labour hire procured by the franchisor, this is by no means standard and most franchisees will need to engage their own personnel.
An investment in a franchise means taking on a brand name, systems and process and complying with internal rules and regulations. Typically, franchisors will require a franchisee to comply with certain minimum standards and requirements when recruiting. These are usually in relation to:
- Training requirements (especially for a manager of the business);
- Uniforms; and
- Compliance with the law.
These requirements will be specified in the franchise agreement and associated operations manual, which details the day to day requirements for operating a business in the network. It is important for a franchisee to ensure that they have reviewed and are aware of these requirements.
In addition, some franchisors may provide franchisees with guidance regarding the relevant award, minimum rates of pay or provide template employment contracts for franchisees to use.
On the one hand, franchisors have an interest in requiring and assisting franchisees to comply with employment legislation. This is because the failure by an individual franchisee to comply can result in adverse publicity for the entire network.
In the wake of a number of high profile cases where non-compliance by franchisees has exposed franchise brands to negative media coverage, franchisors may be more motivated than ever to investigate and take enforcement action against franchisees who fail to comply with employment laws.
However, franchisees are still independent business operators and franchisors may also be reluctant to become too involved in a franchisee’s recruitment practices, for fear of exposing themselves to accessorial liability in the event of non-compliance by the franchisee.
To address the media attention raised by those high profile cases, the Government is pushing ahead with its plan to introduce the Protecting Vulnerable Workers Bill. If the Bill is passed, one of the things it will do is to make franchisors responsible for serious contraventions by their franchisees (e.g. underpayments, modern award or enterprise agreement breaches and record keeping breaches) where the conduct was deliberate and part of a systematic pattern of conduct.
However even if the Bill becomes law, franchisees will continue to be responsible for their own conduct so it is crucial that franchisees educate themselves on their legal obligations when it comes to employing staff - even if the franchisor offers some assistance.
Where to get help
Franchisees can also seek assistance from the Fair Work Ombudsman. The Ombudsman provides an information line and helpful tools and templates on its website. Although free tools and templates can be a great place to start, they will not always take into account an employer’s specific needs so we recommend that franchisees seek legal advice about minimum entitlements and obligations specific to their business – this is still the best way to ensure compliance.
Lastly, remember that compliance is an ongoing obligation. Franchisees should review pay rates, policies and templates regularly to make sure that they continue to be compliant. Minimum wage rates are reviewed (and generally increased) every financial year, and workplace laws change on a regular basis, particularly after a Federal election.
As the business grows and changes, so too might a franchisee’s obligations as an employer, but the responsibility to ensure compliance remains the franchisee’s.
Authors: Mills Oakley lawyers Lisa Anaf, partner, workplace relations; Diana Diaz, senior associate, workplace relations; Warren Scott, partner, corporate advisory; and Jacqui Murphy, corporate advisory.