Significant OHS Implications for Franchisors

In Australia, both franchisors and franchisees are subject to a number of legal occupational health and safety ('OHS') obligations. This is further complicated for businesses operating nationally, as obligations vary from state to state depending on where the business is undertaken. OHS obligations in the franchise industry are particularly important given the increased likelihood of employing workers who are at a significantly higher risk of sustaining a workplace injury such as young workers, casuals and part-timers.

OHS legislation does not specifically deal with the regulation of franchises. Accordingly, the concept of `control' over work premises is important in determining who has responsibility for discharging OHS obligations. Case law in some jurisdictions has adopted the position that where a franchisor controls a workplace, the franchisee, then the franchisor and then the actual employer may be held liable for a workplace incident or other breach of OHS legislation.

This concept of 'control' is embedded in health and safety legislation in several jurisdictions.

What are your OHS obligations and duties?

Franchisors

Franchisors may have a duty to ensure any business systems provided to franchisees adequately protect the health and safety of relevant persons affected by that business. This can include the safety of employees, contractors, customers and, members of the general public. This duty is usually couched in terms requiring the 'controller' of the workplace, the 'employer' or even 'supplier' to take all reasonably practicable steps to ensure workplaces are safe and without risks to health.

This duty is relatively broad and may extend to ensure the health and safety of the work premises (including means of access and exit), plant and substances, work systems and working environment. For example, in NSW section 10(4) of the Occupational Health and Safety Act 2004 ('OHS Act') defines a person who has "control" of premises, plant or substances to include a person who only has limited control (although the duties under the legislation are limited to those matters over which the person has control). Given the object of OHS legislation, it is expected the Courts would interpret this definition broadly.

Work Cover Authority of NSW v McDonalds' Australia Limited & Anor

In 2000, McDonalds Australia Ltd (`McDonalds') was prosecuted for a fatal incident at a Wollongong franchise where an employee was electrocuted while cleaning a kitchen grill. The Industrial Court of New South Wales determined that McDonalds, as a franchisor, exercised considerable control over the way its franchisees operated. In particular, this "control" extended to supplying manuals and instructions for operating and cleaning a grill that was found to be defective. McDonalds pleaded guilty to breaching the duty of a "controller" to ensure work premises are safe and without risks to health under what is now s 10 of the OHS Act and was fined $120,000. McDonalds' subsidiary property company who owned the restaurant building and had control over its design was also prosecuted and fined $150,000.

Franchisees

OHS legislation across Australia provides employers must ensure the health, safety and welfare of persons in the workplace. This broad and positive duty requires, but is not limited to, franchisees implementing workplace policies, procedures, provision of adequate supervision and information, safe systems of work, risk and hazard identification and control, training and consultation.

Not only must franchisee employers have in place comprehensive OHS policies and procedures, they must also ensure these policies and procedures are actively enforced by company management. Proactive OHS measures should be adopted and work practices which encourage involvement by all employees (including casuals, part timers and young workers) in OHS processes should be implemented.

Common OHS issues in the franchise industry

The franchise industry generally employs a higher proportion of workers who are exposed to a greater level of OHS risks, such as young workers or staff who are engaged on a casual or part-time basis.

Young workers are particularly susceptible to workplace injuries because of their lack of experience in the workforce and skills. Young workers may also be reluctant to proactively raise OHS issues for fear their OHS concerns will be considered trivial or insignificant. In Victoria, young workers have the highest proportion of work related injuries – 17 per cent higher than average, according to WorkSafe Victoria.

There have been several prosecutions for workplace incidents involving young workers. The McDonalds case above involved a 19 year old in his second week at work. On 20 October 2004, a Victorian KFC franchise was ordered by Judge Gebhardt of the County Court to pay $10,000 to charity after a 17-year-old worker fell into a hot oil vat at the restaurant. Alistair Salmon, a specialist in OHS and partner with law firm FCB, believes all franchise systems must learn from these-examples.

"The McDonalds case and others demonstrates the importance of establishing an open dialogue between the franchisor, franchisee and their workers regarding OHS so that policies and procedures are developed, understood and reinforced on a daily basis.

The importance of comprehensive induction processes and proper supervision must not be underestimated," Salmon said. Employers are required to fulfil the same OHS duties in relation to casual, part time and seasonal workers as they do for full time employees. These workers may also be at higher risk of injury at work for similar reasons as young workers. Less job security can also mean that casual workers are less likely to raise issues regarding OHS for fear of being viewed as a "disruptive" or "difficult" employee. They may also have less workplace training or be unaware of certain hazards in the workplace.

Casual workers may fail to get involved in the consultative process with employers as they are not exposed to workplace processes on a permanent basis. It may be the case that casual workers are not paid to attend consultative meetings and therefore do not attend, or that work rosters or casual status mean that it isn't practical for them to attend. Special attention should be focused on communicating OHS issues to casual workers to ensure they are aware of relevant policies and procedures and any variations to these, which may commence during a period in which the casual is not engaged.

The First Step

The first step toward franchisees and the franchisor meeting their OHS obligations is to conduct an audit of their OHS documentation and work practices with a view to addressing the issues raised above. In addition, the commercial arrangements between franchisees and franchisors and the extent of "control" exercised by franchisors must also be reviewed to limit exposure and ensure compliance with relevant OHS obligations.

By Richard Breden - Partner with FCB – Workplace Relations Lawyers and Consultants and Managing Director of PeopleInsite .

This article appears courtesy of The Franchise Review