An agreement reached between the Fair Work Ombudsman and
7-Eleven last week is set to introduce a new standard for
franchising in Australia.
The highly published inquiry into issues concerning underpayment
of employees and falsifying records by franchisees in the 7-Eleven
system has now progressed following months of negotiation with a
formal Proactive Compliance Deed now being entered into by the
The agreement commits 7-Eleven, as the franchisor, to introduce
and oversee a number of systems that creates an obligation on its
head office to closely monitor franchisees to ensure compliance and
strong accountability for all operators in its network. 7-Eleven is
expected to now take numerous steps to detect, investigate and
rectify underpayments that have occurred, and to stamp out the
culture that has permeated their franchisee network.
The agreement goes so far as to include admissions by 7-Eleven
of its moral and ethical responsibility as a franchisor, to ensure
compliance with the law in relation to all employees, and to meet
Australian community and social expectations.
"The measures in this deed are the most robust and
comprehensive that any franchise brand has in place in
Australia," said Fair Work Ombudsman (FWO), Natalie James.
The agreement reached is of particular importance considering
the level of liability that has been attributed to the franchisor
for the actions of its franchisees.
While it is not uncommon for a franchise agreement to clearly
state that it is solely the franchisee's obligation to ensure
compliance with relevant laws and statutory entitlements, as
demonstrated by 7-Eleven's experience a franchisor may still be
held accountable should its franchisee fail to comply.
The FWO noted in its original report on its inquiry into
7-Eleven, that the liability of 7-Eleven as franchisor was largely
due to the fact that the franchisor was receiving a direct
financial benefit from profitable stores, suggesting that it may
have been encouraged to turn a blind eye to non-compliant practices
where these lead to larger profits for stores and larger royalties
being paid to it as a result. In addition, the lack of action by
the franchisor, despite being made aware of numerous instances
where its franchisees had breached statutory requirements,
contributed to the FWO's motivation to seek a comprehensive and
extensive commitment by 7-Eleven to address the issues found.
As the FWO stated in April, there is an expectation that
"franchisors are sophisticated business operators who have the
capacity to work with their franchisees to ensure a high level of
"With the government committing to new laws to enhance
franchisor responsibility for workplace entitlements," Ms
James called on all franchises to "consider what steps they
might take to ensure their network is compliant."
Accordingly we suggest to all of our franchisor clients that
they may need to consider what steps they should be taking to
ensure that they don't find themselves in a similar position to
7-Eleven and how they might assist and oversee their franchisees in
order to monitor compliance with Australian workplace laws.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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