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Upcoming changes to the Franchising Code of Conduct

In August 2020, the Government released its response to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the operation and effectiveness of the Franchising Code of Conduct report: Fairness in Franchising.

The response outlines a number of changes that will be made to the Franchising Code of Conduct (Code) which include the following:

  • Cooling Off/Disclosure Period – the Code will clarify that the cooling off and disclosure periods are measured in calendar days and clarify that the 14-day disclosure period must begin at least 14 calendar days before signing a Franchise Agreement
  • Cooling Off – cooling off rights will be extended to the transfer of an agreement to a new franchisee and where the franchisee enters a substantially new agreement with the franchisor (a deemed transfer) but not to renewals or extensions
  • Early Termination – the Code will allow a franchisee to terminate the Franchise Agreement at any time up to 14 days after the last of certain events have occurred, such as:
      • the agreement being signed;
      • payment being made;
      • disclosure documents being received; and
      • a copy of the terms of the lease having been received (if applicable)
  • Format – Disclosure Document and Franchise Agreement must be made available in both electronic and hard copy format
  • Information Statement (Annexure 2 of the Code) must be provided to prospective franchisees separately and prior to providing the Disclosure Document and other disclosure materials
  • Legal fees – the Code will prohibit (and have pecuniary penalties for) franchisors passing on the legal costs of preparing, negotiating and executing documents to the franchisee (except where it is already incorporated into a joining fee)
  • Lease – clause 13 of the Code (“Copy of lease”) will be amended to require a franchisor’s interests in a leasing arrangement to be disclosed in a new Key Disclosure Information Fact Sheet
  • Penalties for Breaches Doubled – penalties for a breach of the Code will be doubled
  • Financial Information – any financial information provided must be part of the Disclosure Document, which must include a statement on the accuracy and appropriateness of the franchisor’s financial information
  • Significant Capital Expenditure – the Code will:
      • prohibit franchisors from requiring franchisees to undertake significant capital expenditure, except where it has been disclosed before  entering into a Franchise Agreement, is legally required, or is agreed to by the franchisee during the term
      • introduce an obligation to discuss expenditure prior to entering into a Franchise Agreement
      • require disclosure of the circumstances under which the franchisee is likely to recoup the expenditure
      • require franchisors to specify the amount, timing and nature of the expenditure (as practically as possible)
  • Dispute Resolution Processes introduce conciliation and voluntary binding arbitration. The Code will also clarify that, if the person conducting the dispute resolution process determines it is appropriate to conduct a multi-party process, the franchisor cannot refuse to take part in that process
  • Supply Arrangements require franchisors to disclose more information on supplier rebates, commissions and other payments and to disclose any master franchisor controls and/or rebates from suppliers
  • Marketing Funds clarify requirements relating to the treatment and reporting of marketing funds and introduction of penalties for breaches of clauses that relate to the use of marketing funds
  • Exit Arrangements ensure end-of-term arrangements for franchisee goodwill are clearly specified in the Disclosure Document and clarify a franchisee’s entitlement to goodwill in the Franchise Agreement
  • Termination clause 29 of the Code will be amended to require the franchisor to provide the franchisee with 7 days’ notice of a proposed termination in special circumstances (e.g. for fraud or public health and safety), so that a mediator or arbitrator can assist the parties to negotiate
  • Restraint of Trade technical changes will be made to clause 23 regarding the effect of restraint of trade clauses in Franchise Agreements (if the agreement is not extended)

A new mandatory Key Disclosure Information Fact Sheet will be introduced containing information taken from the Disclosure Document and highlighting key information, obligations and risks associated with entering a particular Franchise Agreement (such as financial information to assist prospective franchisees in assessing the time that they will need to commit to the business, franchisee entitlement to goodwill etc)

Information Statement

The Information Statement (Annexure 2 of the Code) will be updated to include the following information:

  • Encourage prospective franchisees to refer to the Disclosure Document to see if a franchise system has a high turnover of sites (to look out for possible ‘churning and burning’)
  • Outline risks with estimating labour costs, particularly for greenfield sites
  • Place an obligation on prospective franchisee to obtain information about employment matters and compliance with employment law
  • Clarify that if the franchisor becomes insolvent, the prospective franchisee may lose the benefit of shared funds (such as marketing funds)
  • Warn prospective franchisees of the need to obtain advice about restraints of trade before entering the agreement
  • Prospective franchisees will be made aware of the use of ‘no agent’ and ‘entire agreement’ clauses

If you require specific advice regarding the content of your Franchise Agreement or would like us to review your franchise documents, please contact us at enquiries@tanglaw.com.au.

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Additional Changes to JobKeeper Payment

We recently published an article detailing the changes to the JobKeeper payment and the extension announced by the Federal government: https://tanglaw.com.au/jobkeeper-payment-eligibility/

Due to the increased lockdown measures in Victoria forcing several industries to cease working, on 7 August 2020 the Treasurer Josh Frydenberg announced additional changes to the JobKeeper payment.  We provide the following update on these changes.

The changes include moving the relevant date of employment for employees and changing the employer’s eligibility requirements for the JobKeeper extension. The relaxation of the eligibility requirements means more support to employers and their workers.

Employer eligibility

Under the previous guidelines, a business would have needed to record an actual GST turnover loss for the June, September and December quarters of this year to be eligible for the JobKeeper extension.

The new changes for employer eligibility are:

  • From 28 September 2020, eligibility will be determined by assessing actual GST turnover in the September quarter, 2020 only;
  • From 4 January 2021, eligibility will be determined by assessing actual GST turnover in the December quarter, 2020 only.

Employee eligibility

From 3 August 2020 the relevant date of employment moved from 1 March 2020 until 1 July 2020, meaning an employee who was employed before 1 July 2020 will be eligible for the JobKeeper payment provided their employer is eligible. This includes:

  • casuals who have been with their employers on a regular and systematic basis and have achieved 12 months service by 1 July 2020; and
  • employees who hold a permanent visa or a Special Category (Subclass 444) visa as at 1 July 2020.

Further information can be found at: www.ato.gov.au/General/JobKeeperPayment/Employers/.

If you require specific advice concerning the interaction between the Fair Work Act 2009 and the JobKeeper Payment program, please contact us at enquiries@tanglaw.com.au.

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JobKeeper Payment to be extended until 28 March 2020 – Are you eligible?

On 21 July 2020, Prime Minister Scott Morrison announced that his government will continue to support households and businesses during the CVOID-19 pandemic. The Prime Minister confirmed that the JobKeeper subsidy will be extended until 28 March 2021 and the Coronavirus Supplement for those on JobSeeker will be extended until 31 December 2020.

When the JobKeeper payment was revealed in March 2020, it was due to end on 27 September 2020. However, the Prime Minister stated that the extension of the JobKeeper Payment is intended to provide further support to businesses and bolster the economy.

Is the JobKeeper payment the same from 28 September 2020?

No. From 28 September 2020 until 28 March 2021, the JobKeeper payment will be reduced incrementally from the current $1500 per fortnight to $1000 per fortnight. Further, for employees who work less than 20 hours per fortnight, their employer will receive a reduced payment. Employers will need to nominate which payment rate they are claiming for each eligible employee.

JobKeeper Payment rates from 28 September 2020 to 28 March 2021:

Date Full rate per fortnight Reduced rate – when less than 20 hours worked per fortnight
28 September 2020 to

3 January 2021

$1,200 $750
4 January 2021 to

28 March 2021

$1,000 $650

If my business is currently receiving the JobKeeper payment, will I continue to do so after 28 September 2020?

Yes, but only if you can demonstrate that you have suffered a reduction in the June quarter (April, May, June) and September quarter (July, August, September) turnovers. You will need to demonstrate that your business has experienced a decline during both of those quarters to be eligible for payment in the December quarter.

To receive payment for the period of 4 January 2021 to 28 March 2021, you will need to again demonstrate that the turnover has fallen in each of the June, September, and December quarters (October, November, December) of 2020 in comparison to the same quarters in 2019.

If my business was not eligible for JobKeeper previously, but it is now, can I still apply?

Yes, the JobKeeper payment is still available for new participants who meet the eligibility requirements during any of those periods mentioned above.

What are the eligibility requirements for businesses and not-for-profits?

You will need to demonstrate that you have experienced a decline in turnover of:

  • 50 per cent for those with an aggregated turnover of more than $1 billion;
  • 30 per cent for those with an aggregated turnover of $1 billion or less; or
  • 15 per cent for Australian Charities and Not-for-profit Commission-registered charities (excluding schools and universities).

I received a rent reduction because I was eligible for JobKeeper. How will the extension of the JobKeeper payment impact on my lease?

The announcement of the JobKeeper extension does not directly impact the state-based Commercial Tenancies (COVID-19 Response) Act 2020 or the associated WA code of conduct. It is likely that the WA Government will consider this issue in the near future. We will keep you updated when further information is available.

For more information on the eligibility requirements, please visit:
https://www.ato.gov.au/general/JobKeeper-Payment/

If you require specific advice concerning the interaction between the Fair Work Act 2009 and the JobKeeper Payment program, please contact us at enquiries@tanglaw.com.au

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Promotion and Change of Rate of Mr Adam Ward

We are pleased to announce the promotion of our Associate, Mr Adam Ward, to Senior Lawyer with effective on 3 July 2020.

AW-EDM

Adam’s new hourly rate will be $400 (exclusive of GST), this will apply to clients who retain the legal services of Tang Law after 3 July 2020.

We are truly honoured to have Adam in our team and we look forward to his leadership in strengthening and growing the Firm.

Should you have any queries in regards to the content above, please do not hesitate to contact us on 08 9328 7525.

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New Ruling : Casual Staff and Annual Leave Entitlements

An important recent decision by the Full Court of the Federal Court in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 has confirmed that a casual employee can be deemed to be a permanent employee, despite the wording of the employment contract and the payment of a casual loading. Rossato follows the Full Court’s decision of WorkPac Pty Ltd v Skene [2018] FCAFC 131 which considered a similar issue involving the same employer. Interestingly enough it was WorkPac which commenced proceedings in Court following the Skene decision finding that an employee was deemed to be a permanent employee despite wording of the written contract.

Background

Mr Rossato was an employee of WorkPac from 28 July 2014 to 9 April 2018 under six consecutive contracts of employment. WorkPac treated each employment period as causal employment and deemed Mr Rossato as a casual employee. Following the Skene decision, Mr Rossato claimed that he should be considered as a permanent employee and sought outstanding entitlements to paid annual leave, paid personal/carer’s leave, paid compassionate leave and public holiday pay in accordance with the Fair Work Act 2009 (Act) and the relevant enterprise agreement, commensurate with that status.

WorkPac commenced proceedings and sought declarations that Mr Rossato was a casual employee. WorkPac argued that:

  • pursuant to Mr Rossato’s six contracts of employment, at common law and for the purposes of the Act and the enterprise agreement, Mr Rossato was a casual employee;
  • Mr Rossato’s pay incorporated a 25% casual loading and WorkPac was entitled to set off the entitlements owing to Mr Rossato;
  • due to total failure of consideration or by mistake, Workpac was entitled to recover part of the remuneration paid to Mr Rossato in accordance with the enterprise agreement.

Full Court decision

The Full Court confirmed that a defining attribute of a casual employee is that they do not have firm advance commitment from the employer. On the other hand, Mr Rossato’s employment contracts demonstrated firm advance commitment for the following reasons:

  • Mr Rossato worked regular and predictable hours;
  • Mr Rossato was offered free on-site accommodation during his shifts;
  • Mr Rossato could accept and reject the shifts offered to him;
  • Mr Rossato’s shifts were pre-programmed long in advance;
  • WorkPac could stand down Mr Rossato in circumstances of a strike, breakdown of machinery, or any stoppage of work for any cause for which WorkPac could not be held reasonably responsible;
  • the extended nature of the contracts which stated that the length of an assignment is a guide only and may vary; and
  • the language of the contract, which stated that the standard ordinary hours were 35 to 38 hours per week, which are the same as the ordinary hours of full-time employees under the enterprise agreement.

Further, the Full Court held that due to the wording of the contracts, the entitlement to leave could not be satisfied by set-off payment instead of taking leave.

Recommendations for employers

  • Review your current casual contracts to ensure the set off provisions are clearly drafted and that the casual loading is a separate identifiable amount – statements of ‘in lieu of those benefits’ may not hold when tested
  • Review your casual-to-permanent arrangements and ensure that there is documentation stating that an employee consents to remaining casual
  • Review the Modern Award that applies to your employees and check when the business has to offer permanency to casual employees and ensure that you are meeting the requirements of the Modern Award
  • Ensure that you do not roster your employees’ shifts too far in advance as this may indicate firm advance commitment associated with permanent status

To obtain further employment information or to have your current arrangements reviewed please contact the team at Tang Law on +61 8 9328 7525 (Perth) +61 3 9013 7313 (Melbourne) or at enquiries@tanglaw.com.au

#Casual Staff Entitlement #Casual Staff Contract Review


About Writer

Martin Koshy is the Litigation and Dispute Resolution Partner at Tang Law.  Martin practices in the areas of Employment Law, Commercial Litigation and Personal Injury and Compensation Law.

Tang Law represents both employers and employees in a wide range of employment law matters, including drafting and review of employment and other workplace contracts and representation in unfair dismissal claims.

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