Fair Work Amendment Bill Expanding Employer Liability Threatens Franchise Industry

Bill would disrupt, if not eliminate, franchise model and stunt Australia’s economic growth

The International Franchise Association (IFA) today warned lawmakers in Australia that the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 will cripple the Australian franchise industry and lead to fewer jobs and slower economic growth.

“Australia is one of the world’s most franchised economies, and the proposed bill is threatening the franchising model as we know it,” said Robert Cresanti, President and CEO of IFA. “Proven to be one of the most successful business models in the world, the franchise industry is an ecosystem that encourages business ownership and creates a wealth of jobs for millions of Australians, including young and unskilled workers; opening opportunities and placing them on a path to employment with increased vocational training.”

In a franchise business relationship, the brand company provides a franchisee with its successful trademark, products, and its system of doing business. The franchisees – or independently owned small businesses – in return run the day-to-day operations, including all employment decisions. Despite the brand company having little to no control over the franchisee, the Australian Senate is now considering legislation that would hold franchises liable for a franchisee’s employment practices and decisions.

A similar attempt to expand employer liability, known as joint employer, is in the process of being overturned in the United States. 

“Expanding liability for employment actions in the U.S. proved to be wildly unsuccessful,” said Shelly Sun, founder and CEO of BrightStar Care, a U.S. based franchisor that provides home health care services through its network of more than 300 franchises. “As a franchisor myself, I was forced to reevaluate how I serviced each of my franchisees, offering fewer employment resources that helped these smaller businesses grow and survive. Australia has prospered for decades using the franchise model and should not underestimate the potential economic hardships it may cause.”

Currently, the 79,000 franchise businesses in Australia account for eight percent of the commonwealth’s GDP and employ 472,000 people. It is also one of the Commonwealth’s clearest paths to workforce development. The franchise industry hires people of all skill levels and provides job training and advancement for employees.

“The role the franchise industry plays in the employment and economic cycle is quite clear,” said Cresanti. “Franchise companies, entrepreneurs, and employees alike are all in danger under the proposed legislation. Before voting on the Fair Work Amendment Bill, Australian lawmakers must recognise the real economic and employment consequences this bill will have.”