Franchise group workplace safety and complying with the new WHS Laws Recent changes to OH&S legislation have seen the introduction of a national “harmonised” approach to Workplace Health & Safety,
released in January 2012. And the changes have major implications for the franchising industry. Franchisors would be well advised to address these changes proactively and quickly, but what do Franchisors
and Directors (officers) of Franchise groups need to do to comply? Now more than ever, Franchisors and Directors need to demonstrate due diligence in workplace safety across their entire franchise network.
Due diligence means undertaking everything that is reasonable to ensure the health and safety of those in the working environment, and can be achieved by putting in place a safe system of work. Putting documentation such as policies, procedures and checklists in place is not demonstrating that you have created and maintained a safe system of work.
Having the required documentation is a great start, but to show a safe system of work, your franchisees and you as the franchisor actually need to demonstrate that you use, review and improve the system as required and regularly.
Having a workplace safety system that actually works should be high on the list of priorities for all franchise groups. Many business owners simply ignore Workplace Health and Safety and put it in the “too hard” basket. Other businesses address the most obvious risks and hope that they don’t have an accident or get inspected. “I’ve never had a workplace accident before, so I don’t think I need to do anything”, is a commonly heard comment. Using the same logic, why would you ever insure anything for fire damage, if you’ve never had a fire?
The Act acknowledges that while a PCBU may have a primary duty to the workplace health and safety of their workers, WHS initiatives and consequently compliance is administered by individuals. Those individuals whose actions can influence compliance with WHS laws and the culture within the PCBU are deemed to be officers and as such the Act imposes a duty of due diligence on them.
This duty requires that they take reasonable steps to create a safer workplace, that they allocate sufficient resources to workplace health and safety (including putting in place appropriate WHS policies, procedures and practices) and that they are accountable for their actions. Officers can be held personally liable for failing to meet their duties.
Essentially, the new WHS Act now places a primary duty of care (among other specific duties and obligations), where reasonably practicable, on any Person Conducting a Business or Undertaking (PCBU). This is a deliberately broader definition than “employer – employee” and is designed to take into account modern working arrangements – contractors and franchisors included.
A PCBU owes this duty to workers engaged or caused to be engaged by the PCBU, or whose activities are influenced or directed by the PCBU while at work – or more broadly as “a person who carries out work in any capacity for a person conducting a business or undertaking”.
Specifically, franchisors will owe this primary duty to franchisees by virtue of the fact that they:
- Supply franchisees with an Operations Manual (even if that is supplied by a third party);
- Supply franchisees with an OH&S manual (even if included in the Operations Manual);
- Allocate work to franchisees;Can contractually require compliance with relevant legislation;
- Can contractually require franchisees do not bring the brand into disrepute; or
- Can impose sanctions for non-compliance with the contract.
On this basis, it can be argued that a franchisor is the PCBU of the franchisee. It should also be noted that a franchisee can be a PCBU in his or her own right also, and will owe primary duties
to anyone considered to be their worker. You should also note that you cannot contract out of your duties.
Apart from the obvious motivation of ensuring that all those to whom you owe a duty get home safely from work each night, there are some very real and significant penalties incorporated in the new Act, as indicated below.
Three categories of penalties apply to breaches of the work health and safety duties:
for reckless conduct that exposes an individual to a risk of death or serious injury or illness and is engaged in without reasonable excuse,
failure to comply with a health and safety duty and exposing an individual to a risk of death or serious injury or illness, and
failure to comply with a health and safety duty.
The new Act now requires a business owner to take reasonably practicable steps to reduce risks in their business, taking into account the severity of the ramifications of an incident resulting from that risk and the likelihood of an incident occurring. This allows room for a defence, where a business is able to prove that they have taken “reasonably practicable steps”.
The concern for PCBUs is determining what they “ought reasonably to know”. This effectively puts the obligation back on a PCBU to attain knowledge of the risks in their business; ways to do this include:
- Consultation with workers;
- Consultation with others in their industry;
- Conducting risk assessments;
- Reviewing previous incidents and accidents;
- Referring to Regulations and Codes of Practice; and
- Considering any other relevant source of information.
PCBUs need to be proactive in identifying the risks, understanding the impact those risks could have and then in implementing actions to eliminate or reduce those risks.
It should be noted that the capacity of a PCBU to pay in relation to reducing or eliminating risks is not relevant.
Franchisors have been held criminally liable for health and safety incidents that have occurred in the workplaces of their franchisees. Such prosecutions have involved both significant cost (in terms of fines and legal costs) and loss of corporate reputation.
In 2000 two McDonalds (the fast food chain) companies were prosecuted after a worker at a McDonalds restaurant in Wollongong was killed. The worker died after being electrocuted when cleaning a faulty grill. It was a requirement of the relevant franchise agreement that the franchisee install and use the grill. The system of work in place to clean the grill was obviously unsafe. The electrical supply to the grill could not be terminated unless the equipment was moved creating the risk of electrocution that ultimately killed the worker.
In 2003 Yum! Restaurants Australia Pty Ltd (the operator of the Pizza Hut franchise in Australia) was prosecuted after a 15 year old worker suffered permanent injuries to her hand after it was caught in a dough rolling machine. The franchisee was also prosecuted. Again, the relevant franchise agreement required that the franchisee use this machine and specified the maintenance that was required. The machine was known to be faulty and the fault was advised to the franchisee. However, the franchisor did not follow up to ensure that the fault was remedied.
In 2011 Parker Hannifin, the franchisor of the Hose Doctor franchise, was prosecuted as a result of an explosion in a vehicle being driven by a franchisee. In this case there were health and safety systems in place, however they were inadequate because they failed to keep pace with developments in the industry.
There are many challenges in business in general, and franchising in particular around generating work, developing your brand and system and finding suitable franchisees. Workplace health and safety potentially adds another drain on finite resources.
While a franchisor cannot contract away his or her legal obligations, they can set up a safety management system with which a franchisee must comply. The information collected via this system will enable a franchisor to discharge the duties imposed by the Act quite easily and the franchisor only has to monitor the franchisees compliance with the system, with the obligation to supply accurate information passed back to the franchisee.
As a Franchisor, you should ensure that whatever you do, that your efforts are to make a genuine attempt to create a culture of safety within your business. You may have an OH&S policy or a Safe Work Method Statement (SWMS), but if no one in your business knows about them, your franchisees don’t follow them or you don’t enforce them, it is going to be hard to convince an inspector or a judge that you are serious about safety.
More importantly, having a workplace safety system should preserve your human workforce, save money and reputation.
This can be achieved by contacting Logic Business Resources. We can provide assistance in:
- Providing model WHS systems and policies for franchisees to adopt. A fee may be charged for this under the relevant franchisee agreement.
- Establishing systems to ensure that franchisees advise the franchisor of WHS incidents and risks and vice versa.
- Implementing a WHS audit system under the relevant franchise agreement to ensure that the systems and practices of franchisees are adequate.
- Establishing standardised safe work method statements for all common activities undertaken by franchisees and regularly review such documents.