FRANCHISORS – CAN YOU ACCESS YOUR FRANCHISEE’S EMPLOYMENT RECORDS TO CONDUCT FAIR WORK COMPLIANCE AUDITS?

With the recent amendments to the Fair Work Act 2009 (Cth) to protect vulnerable workers, many franchisors are considering what they can do to protect themselves from liability for contraventions to the Fair Work Act by their franchisees.

A key compliance activity many franchisors are considering undertaking as a priority is the auditing of franchisee payroll and employment records.  Part of this compliance activity will involve requiring franchisees to disclose employment records to the franchisor for their scrutiny.

Before taking that step, however, it is important for franchisors to consider whether they actually have the right to access such records.

What’s the problem?

The very simple problem is this: the franchisee’s employment records are not actually the franchisor’s records. Nor are those records entirely the property of the franchisee.

They – or least the information contained within these employment records – are also the property of the individual employees.

How does this happen?

The issue is one of privacy.

Much of the information recorded in an employment record is personal information within the meaning of the Privacy Act 1988 (Cth), as it relates to an identified or identifiable individual, i.e. an employee. 

Individual employees have the right, under the Australian Privacy Principles, to retain control over their personal information.

This means that an employee’s personal information, including their employment records, cannot be disclosed to a third party (in this case, the franchisor) without the employee’s consent.

But what about the franchise agreement?

The terms of any franchise agreement will be key.

Franchise agreements come in many forms, but the most common clause that we at NRA see about the disclosure of employment records to the franchisor is that the franchisee ‘must obtain all necessary consents’ from employees, to enable the disclosure.

In other words, the franchisee needs to ask each of their employees for their consent to disclose their employment records to the franchisor.

Whilst this sounds simple in theory, it hits a wall if an employee says ‘no’ – because that’s an employee whose employment records the franchisor cannot then technically see or audit.  This would be disastrous with the recent changes to the Fair Work Act and the importance of compliance going forward for all franchise businesses.

What can you do to address this so it is not a constraint in your franchise business?

In our experience, most franchise agreements in the retail, fast food and restaurant industries will not include much dealing with these privacy issues.  This should be something franchisors consider implementing immediately in their franchise agreements going forward. NRA Legal can provide specific advice to franchisors on how to do this.

There may also be other ways around this, for example, if there is a requirement at the franchisee to implement key policies and procedures of the franchisor at the store level.  Implementing a privacy policy immediately, that each employee is then required to review and sign as part of their induction is a sure way to resolve these issues going forward. This policy would need to cover all the relevant Australian Privacy Principles.  Again, the team at NRA Legal can assist in preparing such policies to ensure that franchisors and franchisees can work together effectively in compliance.

We recommend you contact NRA Legal today to discuss how these issues might impact your franchise business and what you can do to ensure it does not restrict your ability to conduct compliance audits going forward.

What happens if we don’t do this?

It is important to remember that there are significant monetary penalties for breaching the provisions of the Privacy Act 1988 (Cth), as well as penalties for breaching the Fair Work Act.

If you repeatedly interfere with the privacy of an individual or individuals – for example, accessing the personal information of numerous franchise employees without consent – you could face penalties of up to $420,000.

We are also quickly moving into an unprecedented environment in Fair Work, where maximum penalties of $630,000 for businesses and $126,000 for individuals can be imposed for non-compliance.

Not getting these things right can therefore be an extremely expensive exercise for your business.

How can NRA and NRA Legal help your franchise business?

NRA Legal can assist in re-negotiating and drafting key terms of franchise agreements on an NRA member-discounted hourly rate.

NRA Legal can also help by drafting a fully compliant privacy policy for the fixed price of $550 plus GST.

At NRA, we understand that the recent changes to the Fair Work Act are going to be difficult and confusing to navigate.  In conjunction with NRA Legal, we have developed Fair Work Boot Camps for both franchisors in the retail and fast food industries, as well as Fair Work Boot Camps just for franchisees, to assist you in determining whether your business is Fair Work fit and identifying the steps you can take to ensure you are compliant and avoid the risk of massive penalties for breaches for non-compliance.


To find out more, call NRA Legal today on (07) 3240 0100

Remember, our lawyers work in the retail and fast food industries every day and many of our members are franchise businesses, so we can provide you with up to date and relevant advice specific to your industry and needs.