Franchise Fair Work
Case Study
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92%
24 of 26
$216,700
$16/hr
Case overview
A Fair Work Ombudsman investigation uncovered widespread workplace non-compliance across a major Australian fast-food franchise, with 24 of the 26 audited franchisees (92%) found to have breached workplace laws. Common issues included misclassifying delivery drivers as independent contractors, underpaying minimum wages and allowances, and applying incorrect award rates.
One example involved a Gold Coast franchisee who was penalised $216,700 after incorrectly classifying an Indian delivery driver as an independent contractor instead of an employee. The driver was paid a flat rate of no more than $16 per hour, despite being entitled to higher ordinary, overtime and public holiday rates, as well as superannuation, per-delivery payments and uniform allowances.
The Federal Circuit Court imposed penalties of $36,700 on the franchisee and $180,000 on the company. The driver was eventually back-paid in full. The case highlights the importance of correctly classifying workers, understanding applicable award requirements and ensuring employees receive their full workplace entitlements to avoid costly Fair Work penalties.
Case facts
What they should have done
The franchisee should have identified the staff person as an employee rather than an independent contractor. The franchisee should then have treated the person as an employee by paying them at least the minimum entitlements under the relevant award.
How Happy HR could have helped
Worker classification
Award Interpretation
Compliant onboarding
Happy HR ROI$216,700 penalty = 72 years of Happy HR subscription
Got questions?
Frequently asked questions
What happened in this Franchise Fair Work case study?
A Fair Work Ombudsman investigation uncovered widespread workplace non-compliance across a major Australian fast-food franchise. Of the 26 franchisees audited, 24 (92%) were found to have breached workplace laws. Issues included underpaying employees, applying incorrect award rates and misclassifying delivery drivers as independent contractors instead of employees.
Why were franchise businesses found to be non-compliant?
The investigation identified several common issues, including incorrectly classifying delivery drivers as independent contractors, failing to pay minimum hourly rates and allowances, and applying the wrong awards or outdated pay rates. These issues highlighted gaps in franchisees’ understanding of their workplace obligations.
What happened to the Gold Coast franchisee?
A Gold Coast franchisee and his company were penalised a total of $216,700 after incorrectly classifying an Indian delivery driver as an independent contractor. The franchisee was penalised $36,700, while the company received a further $180,000 penalty. The driver was also underpaid wages and other employment entitlements.
What is worker misclassification, and why is it a problem?
Worker misclassification occurs when a business incorrectly treats an employee as an independent contractor. In this case, the delivery driver was asked to provide an Australian Business Number (ABN) and paid a flat rate of no more than $16 per hour. However, the nature of the working relationship meant he was legally considered an employee and entitled to minimum wages, overtime, public holiday rates, superannuation and other benefits.
How could Happy HR have helped prevent these Fair Work issues?
Happy HR could have provided access to qualified HR support to help the franchisee understand worker classification, interpret applicable awards and establish compliant employment practices. This guidance could have helped identify potential HR risks, ensure workers received their correct entitlements and reduce the likelihood of costly Fair Work breaches.
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