Expanding employer liability threatens franchise industry

The International Franchise Association (IFA) has 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,” IFA President and CEO Robert Cresanti said.

“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 making all employment decisions.

The Australian Senate is 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 liability, is in the process of being overturned in the US.

“Expanding liability for employment actions in the US proved to be wildly unsuccessful,” said Shelly Sun, founder and CEO of BrightStar Care, a US-based franchisor that offers home-healthcare services through its network of more than 300 franchises.

“As a franchisor myself, I was forced to re-evaluate 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 (the proposed legislation) may cause.”

Currently, the 79,000 franchise businesses in Australia account for eight per cent of the Commonwealth’s GDP and employ 472,000 people. Mr Cresanti says it is also one of the Commonwealth’s clearest paths to workforce development.

“The role the franchise industry plays in the employment and economic cycle is quite clear,” Mr Cresanti said. “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.”

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