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Franchisee responsibility as an employer by Corinne Attard of Holman Webb Lawyers

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Unless you are buying a single person operated business, when you buy a franchised business, like any business you are going to need to employ staff. Franchisees are subject to the same employment laws and have the same rights and responsibilities as any Australian employer.

Being an employer in Australia means you are subject to a whole range of laws about minimum wages, awards, safety, discrimination, rules about recruitment and dismissal, superannuation, leave, training, etc. There are processes, such as investigations, and financial penalties which are utilised to enforce compliance with these legal requirements.
If you are buying into a franchise system and you have no experience of these things you should first ask your franchisor about what assistance they can offer.

As well as giving you direct assistance on recruitment and rostering, many established systems have out-sourced payroll services, HR, and other providers they can recommend. You can of course expect to pay for these services but the legal consequences of doing the wrong thing are much worse. The provider your franchisor uses or recommends should be familiar with your type of business and will know the correct pay rates and conditions that will apply to staff.

If your franchisor is not willing to provide you with as much help as you might expect don’t be surprised. Franchisors sometimes have a reluctance to get involved in a franchisee’s employment issues as they may fear being blamed for providing incorrect legal advice or for being considered an “accessory” to any breach of the Fair Work Act. In most cases this fear is unnecessary as the franchisee is the employer and is the one who will be liable if staff are not paid correctly or unfairly dismissed for example. Franchisors should be concerned to ensure that their franchisees have all the information and support they need to do the right thing and not damage the brand’s image.

If you use a company to operate your business and employ staff you may, as a director, be personally liable as an accessory if you deliberately or knowingly breach the laws and fail to pay correct wages for example. You may then be liable to personally pay any underpayments or penalties even if your company is wound up.
Most franchise agreements require that you comply with the law so if you are found to have breached the employment laws you may be in breach of your franchise agreement also.

You should obtain as much expert advice as you can on this important area before you start your business. As well as your franchisor a great place to start is the website of the Fair Work Ombudsman which has information for small business owners and franchisees in particular:

About the author: Corinne Attard – Holman Webb Lawyers

Corinne Attard Corinne is a franchising and retail specialist with more than 25 years franchising and retail industry experience including extensive in-house experience as general counsel with responsibility for over 350 franchised stores. Corinne’s approach is outcome oriented and risk management based and combines practical business advice with legal solutions. She acts for primarily retailers, franchisors, master franchisees and multi-unit franchisees.

To ask Corinne a FREE legal question regarding franchising, you can contact her here.