Brumby’s carbon tax controversy prompts franchisee legal warning

Franchisees have been warned that they are personally liable for their actions, in the wake of the Brumby’s carbon tax pricing furore.

Brumby’s came under fire last week after it was caught attempting to blame price rises on the carbon tax,  after a letter sent by the company to franchisees was leaked.

According to the correspondence, which is attributed to managing director Deane Priest, who has since resigned, Brumby’s told all of its franchisees they should start increasing prices as early as June and July, and to “let the carbon tax take the blame”.

The Australian Competition and Consumer Commission said it will be “making inquiries of Brumby’s”, after spending months warning businesses it would impose fines on any business increasing prices and blaming it on the tax.

If the ACCC finds wrongdoing, it can issue infringement notices of $6,600 or take court action, with fines of up to $1.1 million.

In light of the controversy surrounding Brumby’s, the Franchise Council of Australia has sent a memo to its members reminding them of their legal obligations.

FCA executive director Steve Wright told The Sydney Morning Herald it was a timely reminder for franchisees that they are considered individual businesses under the law.

“There’s no freedom from obligation – whether you’re the franchisor or the franchisee; the law applies equally to both,” he said.

“Nobody can tell you to do something which is against the law, regardless of what contract you’ve got between two parties.”

Jason Gehrke, director of the Franchise Advisory Centre, told StartupSmart franchisees can be inclined to think they are protected from legal misdemeanours.

“I think sometimes that’s the case,” Gehrke says.

“I’ve seen a number of issues in recent months where individual franchisees have been fined or prosecuted for underpayments of staff because they haven’t paid the correct wage.”

“There was one instance where franchisees were getting advice from their franchisor, and the franchisor acknowledged the advice was out of date, so it said [to the Fair Work Ombudsman], ‘Please don’t penalise our franchisees’.”

“The franchisees were still forced to pay back wages, although the Ombudsman didn’t fine the franchisees.”

“If there’s no evil or malicious intent, the Ombudsman wants to see the situation put right but they don’t like to see the business harshly dealt with.”

According to Gehrke, the carbon tax will see a “large amount of ignorance as to how that affects pricing”, so small businesses – including franchisees – need to keep themselves informed.