The recent court proceedings against 85 Degrees Coffee Australia Pty Ltd serve as a warning to franchisors about their potential liability for the conduct of their franchisees. This case highlights the need for franchisors to take “reasonable steps” to prevent underpayments and other contraventions by their franchisees, and to deal with any issues that arise.
Franchisors cannot simply rely on clauses in franchise agreements to limit their liability. They must take proactive steps to ensure that their franchisees are complying with workplace laws, including conducting actual checks, providing suitable training, and investigating suspicions of non-compliance.
Franchisors who fail to take these steps risk significant financial penalties, as well as damage to their reputation and brand. Moreover, the Fair Work Ombudsman has made it clear that it will not hesitate to take action against franchisors who do not take reasonable steps to prevent contraventions by their franchisees.
Ultimately, franchisors have a responsibility to ensure that their franchisees are operating in compliance with workplace laws, and failure to do so can have serious consequences. Taking proactive steps to prevent underpayments and other contraventions can not only protect franchisors from liability, but also benefit the franchise system as a whole by promoting a culture of compliance and fairness.
Business owners who operate franchised networks should seek advice from legal professionals to ensure that they are aware of their obligations under workplace laws and are taking appropriate steps to comply with them. Mark Gustavsson and Associates can provide advice and further information in this area.