Franchisors Beware – Major Court Ruling on Workplace Law Liability

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A landmark ruling by the Full Federal Court has major implications for franchisors and multi-site business models across Australia.
The Court dismissed an appeal and upheld that a franchisor could be liable for half of an alleged $1.2 million underpayment by a franchisee. Why? Because the franchisor knew about non-compliance but took no reasonable further action to stop it.
The Court’s Key Findings
Franchisors are considered responsible franchisors under the Fair Work Act and may be liable if:
  • They knew, or
  • Should reasonably have known,
that a contravention was likely.
The case reinforces that:
  • A reverse onus of proof applies if the network lacks proper record-keeping and oversight.
  • Franchisors must show they took all reasonable steps to prevent breaches.
What This Means for Franchisors
Compliance oversight is now a legal obligation, not a nice-to-have.
What to Do Now
  • Conduct regular compliance audits
  • Ensure franchisees understand Award obligations
  • Document corrective actions
  • Provide system-wide HR and payroll training
  • Monitor payroll and rostering trends
Multi-site and franchise businesses face increasing scrutiny—Explore Potential can help protect your business from risk.
Phone: 7095 1830