Employing around half a million people and representing between $130 and $150 billion to the Australian economy per annum, franchises are an important feature of the Australian economic landscape.1
Around 5% of Australian businesses operate under a franchise agreement and a further 13% operate under “collaborative arrangements” of some kind (eg integrated supply chain, joint manufacturing etc).2
Australian workplace health and safety (WHS) laws are cast broadly and extend varying degrees of responsibility to cover most, if not all, participants in franchise or collaborative arrangements. Franchisees are highly visible to WHS regulators, as they are persons conducting business or undertakings (PCBUs) or employers of vast numbers of people over broad categories (ie officers through to work experience students) and across a diverse range of industries.
We outline the key questions to ask yourself if contemplating your own WHS role as either a franchisor or franchisee.
Who is in charge of the workplace, its layout and the premises?
Irrespective of whether you operate under harmonised WHS laws or not, certain statutory duties to ensure a safe workplace arise wherever you can or should exercise influence or control over an aspect of a workplace.
Victoria and WA
In Victoria and WA, the duty is confined to the extent to which a person (individual or body corporate) exercises control or management over something that affects the workplace. Franchisors, for example, may retain control over the layout of a franchisee’s premises. If so, a franchisor may attract a duty to ensure that their prescribed layout has been designed and assessed as safe and without risks to health, so far as is reasonably practicable.
On the other hand, a franchisee may, under the terms of a franchise agreement, be permitted to deviate from the franchisor’s recommended system or model. If a franchisee decides to pursue this course, then duties based on control or management will be adjusted to the extent that the franchisee actually takes on responsibility for the change. In this way, the scope of the statutory duties can be adjusted with a franchisee assuming more safety responsibilities.
Harmonised WHS states and territories
Franchise participants operating under the harmonised WHS laws, however, must be very careful in assessing the extent of their duties. In these states and territories, control or management cannot be determined by way of an agreement or the actual arrangements alone.
Under the harmonised WHS laws, a duty holder must:
Discharge the person’s duty to the extent which the person has the capacity to influence and control the matter or would have but for an agreement… to limit or remove that capacity.3
In this context, “capacity to influence” is open to interpretation, however, a franchisor may always retain such influence by virtue of supply arrangements or enforcement of conditions or rights under the agreement. Similarly, a franchisee should not assume that doing what they are told to do will be sufficient to discharge their duties where it is clear that they could have influenced the outcome (eg through grievance mechanisms under the agreement).
Developing your safety philosophy
The key lesson for a franchise participant in any part of Australia is to ask yourself “am I in control” of the workplace? If the answer is yes - have you assessed any hazards in the layout of the premises and other aspects of the franchise agreement ie adopting the franchisor’s Safety Management System (SMS)? If the answer is no, then, under the WHS laws, you must ask the additional question “Should I be”? If the answer is yes, then you need to work closely with your franchise partner to ensure you identify the best safety systems tailored to your business.
The importance of understanding how your franchise agreement and safety law intersect was demonstrated in Estreich v Parker Hannifin (Australia) Pty Ltd.4 In that case, an explosion in a franchisee’s van caused largely by adherence to the franchisor’s mandated SMS resulted in the franchisor being held liable and fined $110,000.
Also keep in mind that other participants may hold safety duties. Most franchises operate out of a business premises
- and/or building often not owned by either the franchisor or franchisee.
If a third party owns the land upon which your business operates then you must also consider consulting with the landlord on safety issues, such as the presence of asbestos, access and egress to the property and shared areas such as car parks and utilities.
Other special considerations
In addition to the broad duties, all Australian businesses are subject to a range of prescriptive obligations under safety laws. You should determine who
- franchisee or franchisor - holds the particular obligation or how it should be apportioned, bearing in mind some obligations might overlap. Here are some common examples:
Plant and equipment: Who supplies it? Does the franchisee have a choice? If it is supplied, who is responsible for training workers to use it? What steps can a franchisor take to ensure the franchisee is using it correctly?
Supply of goods: Is the franchisee required to use harmful chemicals supplied by the franchisor? If so, has the franchisor taken reasonable practicable steps to reduce risks before supplying them to the franchisee?
Consultation: Under WHS laws, a PCBU must undertake relatively broad consultation on safety matters. The same duty applies to employers to a more limited extent in Victoria and WA. Are you consulting effectively and compliantly with your franchise partner? If so, are you documenting it? Do you involve some or all franchisees in safety decision-making processes? Are you franchisee partners consulting with their workers who are or likely to be directly affected by the relevant safety matter?
Training, instruction and supervision: Who is providing the training to workers? Is it suitable for the franchisee’s needs and business? If you are a franchisor, are you checking that your franchisees are completing the recommended training? Does your agreement contemplate supervision of activities that are known to be hazardous? Are you ensuring that induction processes are in place and being conducted?
Bottom line for franchisors and franchisees
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