Franchise contracts for employees and contractors
Becoming a franchisee can be an exciting opportunity. However, it is important to remember that although franchisors will provide franchisees with many of the documents and procedures needed to run a franchise, the obligation to comply with employment laws remains with the franchisee.
What award or industrial instrument applies to your new franchise?
The first step is to determine which Modern Award applies to your new franchised business. An award contains the minimum standards that apply to employment within a specific industry or occupation. For example, if your franchise is a fast food franchise, it is likely that the Fast Food Industry Award 2010 applies to your employees. However, awards are complicated documents and you need to ensure that you understand whether the award covers your employees as sometimes, similar types of businesses fall under different awards. It is also worth remembering that not all occupations or industries are covered by an award.
The award sets out the minimum privileges that an employee is entitled to. This includes things such as minimum pay rates, hours of work, penalty rates, meal breaks and other important employment conditions.
In order to determine the specific rates of pay applicable to an employee, you need to consider the “classification” of each employee as different classifications have different rates of pay.
An award is a safety net
The award that applies to your employees is generally known as a “safety net”. It contains the minimum provisions that apply to employees covered by the award.
However, that does not mean that you should not have employment contracts in place to comprehensively deal with the employment relationship. Employment contracts have significant benefits including:
- They can record aspects of the award that must be communicated in writing to an employee;
- They can include additional matters not covered by an award but which are important to protect your franchised business;
- They set out conveniently, in one document, the terms and conditions which you expect your employee to abide by in their employment; and
- They can be specifically adapted to deal with different employees and different employment roles.
Can I use contractor agreements?
There has been a lot of controversy in recent years about employers such as Uber entering into contractor agreements with drivers rather than employment contracts. The question of whether or not these arrangements were better characterised as employment agreements in disguise has caused a lot of controversy.
However, a recent High Court decision has given franchisees and other employers more certainty in this area. The High Court found that a written contract is the most important factor in determining whether a person is a contractor or employee.
It is more important than ever to ensure an experienced franchise employment lawyer prepares a document which comprehensively sets out in a written contractor agreement between the parties the terms of engagement between a franchisee and a contractor. If the relationship is not comprehensively recorded in an agreement, this may allow a contractor to challenge the contract and argue that the contractor was in fact an employee.
Our employment lawyers will also provide you with advice as to whether such arrangements can be challenged as a “sham” which is another basis upon which the contract can be successfully challenged.
Let us protect your franchise
An employment contract is an excellent investment for a new franchisee which can save money and time down the track if an employment relationship doesn’t go as planned. The employment contract can also be relied on to dismiss an employee for misconduct or poor performance.
It is not wise to use contracts of employment that you find on the internet. Often these precedents are poorly drafted and they do not take into account your specific circumstances and business needs.
A failure by a franchise business to comply with its employment law obligations can have a significant financial and reputational impact on the business.
We understand that running a franchise business can be stressful and made even more stressful trying to navigate complex employment laws. However, our experienced franchise and employment lawyers can take the stress out running your business by ensuring you have compliant contracts of employment and contractor agreements which properly protect your business.
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