Franchisor found liable for underpayments

In a major underpayments case, the Federal Court has found that the Director and co-founder of a major franchise liable for underpayments from the businesses’ franchisees. The franchise is accused of short-changing workers in excess of $170,000, by failing to pay penalty rates.

Under Fair Work legislation, Directors, founders and managers can be personally liable for underpayments – even if they had no knowledge of the underpayments. The franchise attempted to object on the grounds that they paid “Chinatown market rates” and didn’t understand the requirements or the Awards, but this was rejected by the Court.

Judge Manousaridis clarified that it’s not necessary to prove the Director knew or believed that the conduct was unlawful – even though he found the Director did not think he made the Franchise engage in unlawful activity. The case heads to a penalties hearing later this month.

Ignorance no excuse

It’s an old saying that ignorance of the law is no excuse, and the principle again rears its head in this case. The Franchise claims not to be aware of breaches or of the provisions in the act were flatly rejected by the court.

While most franchisors have a strong knowledge of the requirements of Awards, like penalty rates and entitlements, the case also shines a light on the importance of ensuring franchisees are compliant.

Franchisor Compliance in the spotlight

It’s one thing for everyone at head office to understand the rules, but it’s even more important that franchisees both know and are compliant with the specifics of Award rules. Many franchisors have taken to mandating compliance systems across their networks – or at least giving franchisees a choice of several systems – to stay on the right side of the law.

The case underlines the importance of head office taking a rigorous attitude towards compliance right across the franchisee network. As part of Tanda has compiled a webinar on the top five compliance issues that businesses need to monitor to stay on the right side of the law.

If you’d like to find out more about how Tanda’s software can help your business stay compliant, you can click here to book a demonstration.