The Domino’s effect continues for large franchisors in Australia

We are almost mid-way through 2017 and the spotlight is yet again on another large franchise network. Following 7-Eleven and Crust, it is now the Domino’s franchise network which finds itself at the centre of a PR scandal for widespread underpayments, wage fraud and exploitation of vulnerable workers.

After exposure by Fairfax Media in January for underpayments and deliberate wage fraud, Domino’s Pizza is in the firing line with the Fair Work Ombudsman who are expanding their investigations into the fast food giant, revealing a further 10 new investigations have commenced, bringing the total within the network to 26.

The Ombudsman are putting significant resources into its investigation which has resulted in multiple raids across the country. While Domino’s has committed to investigating its franchise network, including undertaking audits on 740 stores across the country, it is apparent the significant scale of the wage fraud has proved challenging and more extensive than first thought.

Understandably, the extensive media attention arising from the allegations and resulting investigations have had a negative impact upon Dominos’ reputation as their share prices have fallen by 10% since January 2017.

 

What the Vulnerable Workers Bill would mean for Domino’s?

The claims surrounding Domino’s franchise network is precisely the kind of conduct targeted by the new Protecting Vulnerable Workers Bill, which we will likely see take effect before the end of the financial year.

In addition to a 10 fold increase in civil penalties for serious contraventions, the legislation will introduce a joint liability structure that holds franchisors, such as Domino’s, liable for underpayments and employment breaches in instances where they ought to have known of the non-compliance in their network.

Franchisors that turn a blind eye to contraventions such as wage fraud will be targeted by the new legislation and will face penalties of up to $540,000 per contravention for body corporates and $108,000 per contravention for individuals!

 

‘Reasonable steps’ and mitigating risk:

Corporate offices know what their franchisees turnover as they have access to wages and profits and therefore cannot play the wilful blindness card to avoid liability, nor can they have a ‘tick the box’ approach to compliance in their network.

Whilst wilful blindness will be no defence, franchisors who take reasonable steps to avoid and address contraventions will not be liable. The Explanatory Memorandum of the Bill suggests reasonable steps will depend on the size and complexity of the network, however may include:

  • Auditing of companies within the franchise network;
  • Establishing a phone number for employees to report any potential underpayments;
  • Ensuring the franchise agreement require franchisee compliance

How HR Assured can help

HR Assured has extensive experience in working with franchisors to develop strategies to mitigate their risk in anticipation of the new legislation.

HR Assured can assist in ensuring franchisors and the franchise network remain complaint by offering a complete compliance review to identify potential risks and claims and correct non-complaint processes before they spiral into multitude of investigations and adverse business reputation.

 

To confidentially discuss the proposed changes and the ways in which HR Assured can assist you contact us today for a free initial consultation.