There has been a large number of franchisees under scrutiny for underpaying their employees recently. In this article Principal Lawyer, Stephen Booth, outlines the benefits of Foodco Group entering a partnership agreement with The Fair Work Ombudsman and the outcomes that were achieved as a result of this partnership.
Foodco Group operates the Muffin Break and Jamaica Blue cafe chains, with 323 cafe outlets between them. Franchisees operate 95% of the cafes and employ around 4,000 staff, 25 per cent of whom are under the age of 16, and a significant share of whom are migrant visa workers, including international students, so there is a significant “vulnerable worker” risk.
Two different Muffin Break franchisees gave compliance undertakings to the Fair Work Ombudsman (FWO) after underpayments, one in 2014 of $20,000 (to one employee), and the other in 2016 of $46,000 (2 employees), were identified and rectified.
In the same period, the FWO met with the Franchise Council of Australia to discuss employment issues effecting franchises and invited a number of FCA members, including Foodco, to enter into pro-active compliance partnerships with the FWO. Foodco Group was the only FCA member to respond, and in 2017 began a two-year compliance partnership with the FWO, under the terms of a Proactive Compliance Deed with the FWO. Foodco did so to publicly demonstrate its commitment to compliance, and to ensure system wide compliance within its franchise network.
The proactive arrangements fostered by the partnership with the FWO involved:
- interactions with franchisees and head office staff providing information about the compliance partnership and resources available;
- providing resources to franchisees to assist communication with vulnerable workers including young workers and their parents, and migrant workers, about entitlements;
- supporting franchisees with standard letters of engagement and information about award entitlements and regular advice about employment of young employees;
- FWO staff being notified of the partnership and being instructed to direct relevant enquiries to a dedicated contact;
- Foodco sharing workplace relations training information with the FWO and receiving input form the FWO;
- inclusion of detailed workplace law compliance information in training for new franchisees;
- training for Foodco staff on compliance issues;
- Foodco staff and franchisees signing up to FWO’s My Account service and completing training modules supplied by the FWO;
- Foodco updating its systems and processes to promote ongoing compliance with workplace laws, including an employment relations hotline, an anonymous survey, an ongoing training and 6-monthly reviews over the 2-year duration of the compliance program; and
- Foodco engaging a specialist employment adviser to conduct an external audit of its franchise network.
The employment relations hotline received 170 enquiries, all of which were resolved without the need for further external investigation. The anonymous survey allowed input from employees who were not comfortable in raising issues directly, or who wished to maintain confidentiality. The 375 survey responses provided a cross-checking tool against other information provided by franchisees. The external audit identified underpayments of $4,244.00 affecting 152 employees, all of whom were reimbursed. The FWO referred twelve enquiries it received to Foodco, which were investigated and resolved by Foodco (fourteen employees sharing $22,317.00), avoiding the need for any further FWO action.
As a combination of intensive education, system review, a strong compliance focus, and prompt action to resolve issues, the partnership between Foodco and FWO provides a model for any franchisee wanting to get ahead of the game on compliance with workplace law.
Given the substantial compliance risks to franchisees and franchisors arising from the complexity of the Award system, intensified by the vulnerable workers legislation, and the serious risk of severe reputational damage from mainstream and social media reporting of underpayment issues, there is much to be said for taking a proactive approach.
If you need any assistance with respect to underpayment or other compliance issues in the franchising context, please contact a member of the Coleman Greig Employment Law team: