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Franchising Update: End of Financial Year 2017/18

June 18, 2018

By Alex Millman and Lindsay Carroll, NRA Legal

As the financial year which saw the franchise model under close scrutiny, it is worth taking this opportunity to look back on the year that was and the matters which will follow us into the next.

Fair Work Amendment (Protecting Vulnerable Workers) Act 2017

In October 2017 the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Vulnerable Workers Act) came into force.

In case you missed it, this Act not only increased penalties for ‘serious contraventions’ of the Fair Work Act 2009, but also rendered franchisors liable for any breaches of that Act by their franchisees, unless ‘reasonable steps’ had been taken to prevent those breaches.

So far, the courts have not handed down any decisions with respect to franchisor liability under these new provisions, so the franchise sector is still lacking judicial guidance on the amorphous expression of ‘reasonable steps’.

Although not wanting to wish ill fortune on any compatriot, the silver lining to any franchisor being the first to be prosecuted under these provisions means that, win-lose-or-draw, the sector will hopefully have some guidance around how these provisions will operate in practice.

Fair Work Ombudsman updates its guidance for franchisors

On 14 June 2018, the Fair Work Ombudsman officially launched its latest practical resource to help franchisors ensure compliance within their networks. NRA is pleased to have been involved in the development of this resource.

The 20-page guide outlines methods and strategies that franchisors may implement in an effort to avoid being on the wrong side of an Ombudsman prosecution, and is available at www.fairwork.gov.au/find-help-for/franchises/franchisors.

It is important to remember that the Ombudsman’s guide is not a silver bullet, as that office has stated many times that what are ‘reasonable steps’ to protect a franchisor will depend on the circumstances of each particular case.

Parliamentary inquiry into the effectiveness of the Franchising Code of Conduct

On 22 March 2018, Nationals Senator John Williams (NSW) moved a motion, passed by the Senate, for a joint Parliamentary inquiry into the effectiveness of the Franchising Code of Conduct.

The Committee received 257 written submissions to the inquiry (140 of which are not published due to the authors requesting confidentiality), including a submission from NRA, and conducted its first round of public hearings in Brisbane on 8 June 2018.

Further public hearings will be held in Melbourne on 22 June 2018 and in Sydney on 29 June 2018.

The Committee is reasonably balanced along political lines so any report that it makes, due 30 September 2018 at this stage, is likely to be the result of bipartisan support from each side of politics.

Whatever the outcome of this inquiry, we consider it likely that amendments to the Franchising Code of Conduct will be proposed. We will keep our members informed of any developments in this space.

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