Franchisors face wage liability risk

Fair Work Ombudsman guidance says franchisors in Australia can be held responsible for wage breaches by franchisees, adding legal risk for brand owners that do not police payroll compliance across their networks. The exposure sits alongside broader accessorial liability rules that can also extend to advisers, managers and other third parties involved in contraventions. The current framework was strengthened by the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, which inserted specific franchisor liability provisions into the Fair Work Act 2009. ### When does a franchisor become legally exposed? The Fair Work Ombudsman says a franchisor can be liable where it is a “responsible franchisor entity,” its franchisee breaches certain workplace laws, and the franchisor knew or could reasonably have been expected to know that contraventions would happen, or were likely to happen, and did not take reasonable steps to prevent them. The agency’s franchisor responsibility fact sheet says the rules apply to payment-related contraventions, including wages and some record-keeping obligations. (fairwork.gov.au) The 2017 law was drafted after sustained concern about underpayments in franchise networks. Parliament’s bill summary said the amendments were designed to hold franchisors and holding companies responsible where they knew, or ought reasonably to have known, of likely contraventions and failed to take reasonable steps to prevent them. ### Why did 7-Eleven become the reference point? (fairwork.gov.au) The Fair Work Ombudsman’s 2016 inquiry into 7-Eleven found allegations of significant underpayment and falsification of employment records across much of the chain’s Australian franchise network. In a statement released with the report, the agency said a number of franchisees had deliberately falsified records to disguise underpayments. (aph.gov.au) A 2015 Fair Work Ombudsman release on one 7-Eleven operator said the franchisee admitted deliberate breaches and producing false and misleading records by manipulating data entered into the head office payroll system. That case became part of a broader regulatory push that later produced the 2017 legislative changes. ### What counts as “reasonable steps” in a franchise network? (fairwork.gov.au) Fair Work Ombudsman guidance says franchisors should take steps to promote compliance across their networks to reduce legal and reputational risk. The agency’s franchisor page says those steps can include helping franchisees understand workplace laws, using tools and resources, and building systems that support compliance. The Ombudsman’s guide to promoting workplace compliance in franchise networks says franchisors should assess risk, train franchisees, monitor payroll practices and respond to warning signs. (fairwork.gov.au) The guide frames those measures as part of meeting franchisor liability obligations under the Fair Work Act. ### How is this different from accessorial liability? (fairwork.gov.au) Fair Work Ombudsman material says accessorial liability is broader than franchisor liability. It can apply to individuals and third parties such as human resources officers, accountants, advisers and bookkeepers who are involved in a contravention. Franchisor liability is a separate extension of responsibility aimed at certain franchisors whose franchisees break workplace laws. (fairwork.gov.au) A Senate committee report on the 2017 bill said the amendments did not create “joint employment” in the ordinary sense, because franchisees remain the direct employers responsible for their own wage bills. But the report said franchisors could still be ordered to compensate workers in defined circumstances under the new provisions. (fairwork.gov.au) ### What does this mean for boards, HR and legal teams? Fair Work Ombudsman guidance ties the issue to governance as much as payroll. The agency says franchisors should act to minimise the risk they will be held legally responsible, protect brand and reputation, and improve employment conditions across the network. That means HR, legal, payroll and operations teams need evidence that classifications, rates, records and franchisee oversight are being checked before complaints or audits emerge. (aph.gov.au) This last point is an inference drawn from the regulator’s compliance guidance and liability framework. On September 3, 2026, the practical reference points remain the Fair Work Act, the 2017 Protecting Vulnerable Workers amendments, and the Fair Work Ombudsman’s franchisor guidance pages and compliance tools for franchise networks. (legislation.gov.au) (fairwork.gov.au)