The Fair Work Ombudsman is taking franchisor 85 Degrees to court in a landmark case that franchisors will watch closely.
The legal proceedings relate to alleged underpayments by franchisees and it is the first time the FWO has lodged such a case.
FWO alleges that 85 Degrees was liable as a “responsible franchisor entity” under the Fair Work Act for alleged non-compliance by eight franchisee-operated outlets in Sydney in 2019.
It argues the franchisor is legally liable because it should reasonably have known its franchisees would underpay the workers or commit similar contraventions.
85 Degrees in landmark case
There was an Enforceable Undertaking between 85 Degrees and FWO in 2015, to address underpayment and record-keeping contraventions in the network. The FWO also alleges the franchisor knew franchisees’ financial circumstances and that they had limited English and limited awareness of workplace laws.
Fair Work Ombudsman Sandra Parker said franchisors need to take action to prevent breaches in their networks.
“Under federal law, where franchisors operating in Australia do not take reasonable steps to prevent contraventions by their franchise outlets, we will act.
“In this case we allege 85 Degrees – who had been on notice for many years about compliance issues – should reasonably have known some of its franchisees would underpay their workers and breach record-keeping and pay slip requirements.”
Between January 1 and December 31, 2019, nine workers were allegedly underpaid minimum rates, overtime entitlements, annual leave entitlements, penalty rates for weekend, public holiday and evening work. Individual underpayments ranged from $239 to $15,198.
The FWO discovered the alleged underpayments, pay slips, and record-keeping breaches when it conducted proactive audits.
The alleged contraventions occurred in relation to workers at the 85°C Daily Café franchisee outlets in Parramatta, Castle Hill, Hurstville, Campsie, Chatswood, Burwood, Eastwood and Chippendale.
The franchisees back-paid the workers in full as a result of the FWO’s proactive audit and are not the subject of court action.
However 85 Degrees is also legally liable for alleged record-keeping and pay slip contraventions, the FWO suggests. These allegedly occurred across the relevant franchisee outlets and affected 20 workers (including the nine allegedly underpaid).
The company faces penalties of up to $63,000 per contravention.
Last year the Federal Court fined 85 Degrees $475,000 for exploiting eight Taiwanese students under the guise of a “purported internship” arrangement. The cafe chain underpaid them between $50,213 and $58,248 each over a period of just under 12 months