A recent decision of the Industrial Court of New South Wales in Inspector Estreich v Parker Hannifin (Australia) Pty Ltd highlights the fact that franchisors have ongoing health and safety obligations for their franchisees.

The Defendant Parker Hannifin operates ‘The Hose Doctor’ franchise in which Franchisees lease or purchases a Hose Doctor van which is painted, customised and stocked at the franchisee’s expense. The rear of the van is customised as a mobile service centre, with gases and other hazardous goods stored in them.

In June 2008, a franchisee’s vehicle exploded. The vehicle was written off and there was significant damage to neighbouring vehicles and buildings. The franchisee suffered a cut to the head requiring seven stitches.

WorkCover NSW’s investigation into the incident found that the explosion was caused by acetylene emissions from a tank in the rear of the vehicle, as the tank valve hadn’t been fully closed. It also found that the vehicle did not meet Australian Standards for ventilation in the transport and storage of dangerous gases.

The Findings

Parker Hannifin pleaded guilty to a breach of the Occupational Health and Safety Act 2000 (NSW). The Court found that:

Parker Hannifin had control in the course of it’s trade, business or undertaking of the ‘premises’, being the mobile service centre at the rear of the franchisee’s vehicle.

The ‘premises’ were used by a person who was not an employee of the Defendant but was its franchisee.

Parker Hannifin failed to ensure that the ‘premises’ were safe and without risks to health.

The Court noted that while Parker Hannifin had a well developed health and safety system in relation to its employees, it had erroneously assumed it was not required to make any safety arrangements concerning the operations of the franchisees who were a significant part of the manner in which it undertook its business. The Court found that the relationship between Parker Hannifin and its franchisees was no different to a principal/contractor relationship. Parker Hannifin had substantial control over it’s franchisees and was therefore in a position to ensure that their vehicles were properly ventilated if they were to carry dangerous gases.

Notwithstanding the early plea and Parker Hannifin’s full co-operation with the Workcover NSW investigation, it was fined $110,000.

Lessons Learnt

This case demonstrates that regardless of the formal terms of their franchise relationships, franchisors are likely to have ongoing obligations for the health and safety of their franchisees. A detailed health and safety system, including:

  • proper documentation  
  • training  
  • support  
  • ongoing monitoring  

should be in place for employees, contractors and franchisees alike. If they are not in place and an incident occurs, the consequences, both financial and non-financial, could be severe.