To gain assurance of ethical and sustainable work practices, a franchisor should monitor and manage employment compliance risks throughout the life of a franchise contract.
Franchisors should focus on three key stages of the franchise contract life cycle:
- Pre-contract preparation
- Contract confirmation and documentation
- Monitoring during the life of the contract
Prior to taking on new franchisees, a franchisor should undertake work to facilitate compliance with employment standards and ensure that the franchisee is set-up to succeed.
This should include the following three steps.
1. Check if future franchisees have followed employment rules in the past
- Ask the applicant whether they are a party to any current or historic investigations in relation to employment standards breaches or Labour Inspectorate investigations. If there is an ongoing investigation, ask the applicant for more information about the circumstances of this, and if applicable, how any breaches were resolved.
- Check whether the applicant (individual(s), or companies etc) is or has been a director, chief executive, senior manager, shareholder, trustee, partner, and whether they have any record of breaching employment standards.
- Check Immigration New Zealand’s 'stand-down list' below for recent breaches, and the Employment Relations Authority and Employment Court databases for older breaches or breaches that might not have resulted in being placed on the stand down list.
- Check breaches the franchisor becomes aware of and asking the applicant for information on the breaches and how they have been remedied.
If the outcome of the above steps is unsatisfactory, franchisors should assess if they want to continue progressing the application.
2. Ensure that the franchisee understands their employer obligations
- Ask them what they think they must do to follow employment law. Franchisees should understand what it means to be an employer and the legislative requirements that this entails.
- As with other training such as operations and brand requirements prior to confirming their application, franchisors should require applicants to complete Employment New Zealand’s free online employer learning modules.
- Providing franchisees with templates of different types of legal employment agreements (casual, temporary, permanent full and part-time) that the franchisor must use in order to employ its workers. Check our employment agreement builder.
3. Ensure franchisees agree to a standard of ethical and sustainable behaviour
You will need to create the policy or code that outlines how employers and employees should behave and treat others, and how employees can speak up if they have concerns. It should also cover business ethics and expected workplace standards.
A work practice policy or code of conduct:
- should apply to all franchisees, outlining how they will treat their employees
- can communicate the aspiration values and desired behaviours of the franchise brand
- should, at a minimum, cover: expected behaviours, compliance with legislation, business ethics, treatment of workers and environmental standards and a channel that workers can use if they feel the employer is breaching this code.
All prospective franchisees should:
- be familiar with, and understand the intent of, and how, the policy works operationally
- be willing to sign the policy
- display the policy in their workplace.
This can also show employees which behaviours are acceptable in the organisation, so they can adhere to standards and are empowered to speak up if wrongdoing occurs.
Contract confirmation and documentation
Once you know you want someone as a franchisee, include requirements in the contract that make it a priority for them to treat workers well.
- Ensure the contract outlines what laws they must comply with – and includes a brief description of its purpose and where to find more information. At minimum these should include:
- Employment Relations Act 2000 (external link)
- Holidays Act 2003 (external link)
- Wages Protection Act 1983 (external link)
- Minimum Wage Act 1983 (external link)
- Parental Leave and Employment Protection Act 1987 (external link)
- Equal Pay Act 1972 (external link)
- Health and Safety at Work Act 2015 (external link)
- Human Rights Act 1993 (external link)
- Privacy Act 1993 (external link)
- Protected Disclosures Act 2000 (external link) .
- Ensure that the contract provides for spot-checks and audits to be undertaken on workplace practices including compliance with employment standards.
- Have a contractual requirement that all franchisees promptly inform the franchisor if they are investigated for, or found to have committed, a breach of employment related legislation.
- Have a contractual requirement that the franchisee commits to the code of conduct by signing the document and ensuring their employees have access to it.
- Have a contractual requirement that the franchisee will ensure all their employees are informed of their employment entitlements. For example, through displaying an employee rights poster or encouraging them to complete the Employment New Zealand online employee e-modules
- Have a contractual requirement that allows the franchisor to survey regularly workers (and customers) employed by the franchisee.
Document how you will support franchisees to meet their legal requirements. How will you help them if they have difficulties? Will you negotiate reduced fees for franchisees to get legal advice from a law firm?
Monitoring during the life of the contract
Monitoring franchisees’ compliance to the work practice policy or code of conduct should occur throughout the lifetime of the contract.
A “set and forget” approach to franchisees should not be taken. Regular check-ins can show if they have correctly implemented the agreed terms of the contract.
If a franchisee changes their business operating model, this can, even inadvertently, lead them to no longer meeting employment standards and therefore breaching the terms of the franchise contract.
The following steps should be taken to mitigate the risk (probability and impact) of non-compliance with employment standards across a franchise.
1. Ensure regular monitoring
Checks for compliance to employment standards should be included as part of regular franchisee reviews relating to operational matters such as stocktakes and brand standards.
Checks should be conducted annually and could be as simple as requiring the franchisee to complete a self-assessment, using a self-audited checklist process. An example of a checklist is the Employment New Zealand self-assessment tool.
Alternatively, a franchise may choose to use a checklist that they design and/or supply themselves.
In all cases franchisees should be required to give proper evidence to back up their responses or claims, or they are fully verified using an independent audit process.
The checklist can also have a dual purpose in educating franchisees on what they must be complying with. At a minimum, should a franchise use their own tool, they should ensure all the key messages are covered which are available in the Employment New Zealand self-assessment tool and checklist. This includes specific legislative, legal requirements and references for more information.
2. Ensure employees are told of expectations
The franchisee should communicate the work practice policy or code of conduct to all employees. Ideally it should be displayed prominently in the workplace and included in recruitment documents.
3. Use employee voice tools
The franchisor can use an employee voice tool to confirm that the work practice policy or code of conduct expectations are being met by collecting information about the workplace anonymously from franchisee staff. Each franchisee needs to have enough employees for their individual responses to not be identifiable.
There are free survey tools available such as Survey Monkey if employees have unique email addresses. Otherwise, paper surveys could be handed out, as long as the employees are able to submit them anonymously if they want to.
In addition to questions about employment standards, franchisors can ask open-ended questions about how the employee would improve things, and to what extent the views of employees align with an ethical and sustainable workplace.
The following employee views could be canvassed using scale-based questions (for example, how satisfied are you with…? Scale from extremely satisfied to extremely dissatisfied). Other questions could include:
- How valued do you feel at work?
- How much would you recommend this franchise to other potential employees?
- How long do you want to stay working here?
- How motivated are you to use your discretionary effort?
- How fairly do managers treat you?
- How much do you understand the business goals?
- How important is health and safety to your employer?
- How much training is available to you for current and future roles?
- How much does your place of business value diversity and inclusion?
4. Make sure that franchisees tell their workers of their employment rights and obligations
Franchisees should inform new and existing employees of their legal rights and obligations under employment related legislation, and ensure that the employees understand these.
This could involve the franchisee providing:
- an information sheet that explains their rights and what to do if these are not met.
- all employees with such information in their first language if possible.
The Employment New Zealand 'Know your employment rights quick guide' is available in 18 languages, along with a free basic employee e-module introducing employee rights.
5. Make sure franchisees and their workers keep learning about employment rights
Workers should be able to learn about their rights and responsibilities not just when they join, but also when they are promoted or when legislation changes. They should also have a chance to refresh their learning throughout their employment. We offer free online courses for employees.
6. Promote good practice and lessons learned
Franchisors can make employment a feature topic or a regular section of any franchise newsletter or updates. This could include health and safety matters as well as other areas relating to employment, such as:
- franchisees who have managed a particular aspect well could be celebrated and sticking points raised and addressed
- celebrating diversity and promoting inclusiveness by focusing on individual employees or groups through events such as cultural celebrations and employee achievements.
If an issue arises with one franchisee, the issue and the resolution should be communicated to the other franchisees to develop a sense of collective responsibility and ensure all franchisees can benefit from the learnings.
Encourage franchisees to discuss matters with each other when they arise, while at the same time protecting the privacy of individuals, so learning can be shared.
7. Ensure issues are reported
Franchisees should be required to inform franchisors promptly if they are investigated for, or are found to have committed a breach of employment related legislation eg. employment standards, health and safety or immigration requirements:
- Franchisees should sign an agreement that confirms they will inform the franchisor in a prompt manner.
- Franchisors can check the Immigration New Zealand stand-down list frequently to stay up to date on employers who are not able to support visa applications as a result of receiving a penalty (or similar) for not having complied with employment standards.
There will need to be an open and trusting communication line for franchisees to feel confident to be transparent in this space.
8. Offer a way to report problems confidentially
Often a barrier to staff raising employment issues is being able to do so confidentially and anonymously.
To help staff, franchisors can provide or make available a confidential point of contact for franchisee employees to raise issues:
- Make sure there is a proper process to effectively deal with issues as they arise.
- Any investigation conducted should comply with employment law provisions, including privacy and natural justice principles.
In some industries there are many vulnerable workers (migrant, young and mature staff):
- They may not be confident of speaking up if they believe they are not receiving their entitlements.
- Their needs should be integrated into the business code of conduct.
- They should have tools to enable them to be empowered to raise any concerns.
A less formal and anonymous reporting system could be considered that could be actioned by:
- Appointing one person (who the employees choose) as the representative to raise issues with confidentially if the industry is not unionised.
- Having a system where employees can raise potential issues and give the employer the opportunity to fix any problems.
That will reduce the risk of receiving adverse publicity, court costs, or penalties should breaches occur.
If the franchise also has a procurement function or a supply chain, read our guidance for procurers.
Tools and Resources
Employment standards: employer self-assessment guide - PDF 934KB
Supporting information for the checklist.
Employment standards: employer self-assessment checklist - PDF 654KB
Check that your business is meeting employment standards.