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Health and Safety Update: Franchisors

Written by Glenn Finnigan, PARTNER; Darryl King, PARTNER on December 1st, 2015.    

Health and safety update

We recently published an update on the new Health and Safety at Work Act which comes into force in April 2016.  Under the new Act, business owners will have to take a more hands-on approach to health and safety.  Franchisors are in the unique position of having two “layers” of health and safety duties to consider.  The first layer is for the business of the head franchisor itself, its premises in respect of its employees and any subcontractors it engages (e.g. cleaners, electricians, IT support).  The second layer is one not often considered by franchisors – the health and safety processes for the individual business of each franchisee.

The new Act has a broader definition of who owes the primary duty from just “employers” to “Persons Conducting a Business or Undertaking (PCBUs)”.  A franchisor is in the business of providing a successful business model to franchisees and will be a PCBU.  This means that it must ensure, so far as is reasonably practicable, the health and safety of its workers and people who may be put at risk as a result of providing that business model.  There are now prescriptive steps which a PCBU has to go through when analysing hazards and risk (and carrying out due diligence) to comply with this duty.

What about my franchisees?

A franchisor cannot contract out of its health and safety duties, but that does not mean that a franchisee has no obligations either.  The new Act is clear that more than one PCBU can owe the same duty at the same time.  Further, the Act confirms that both PCBUs (franchisor and franchisee) have to consult and cooperate with each other in respect of that duty.

A PCBU only owes a duty to the extent that it has the ability to influence or control that matter.  A simple rule of thumb is that the more prescriptive your franchise model is, the more effort you will have to put into health and safety.  For example, there are duties for PCBUs who manage or control a workplace, or control, install or supply fittings, fixtures or plant at that workplace.  If you are a franchisor which requires its franchisees to have a certain premises, type of fit-out or machine, then you will have to ensure (so far as is reasonably practicable) that people’s health and safety is not put at risk by those things.  This is a serious business consideration, as franchisors need to retain a certain degree of control to protect the integrity of their brand.

What can I do?

The best starting point is to have a comprehensive health and safety programme which sets up processes to ensure compliance (with a minimum of administration time or cost).  This programme should cover the risks and hazards involved with the franchisor’s own employees and contractors, but also with elements of the franchise model within the franchisor’s control.  Many franchisors are considering providing such programmes for all their franchisees to retain total control of health and safety processes and to ensure that nothing is missed.

We recommend including a comprehensive health and safety clause in all franchise agreements.  Most agreements have a generic requirement to comply with all laws (which will include the new Act), however a more detailed clause will set out the explicit steps and powers necessary to allow a franchisor to ensure compliance and reduce the risk of accidents and a potential Worksafe prosecution.

The senior management of the franchisor (called “Officers”) have new due diligence duties.  These duties require periodic consideration of specific issues and should be clearly documented.  We recommend that Officers take specific advice on this duty as it cannot be delegated to others.

The information contained in this publication is of a general nature and is not intended as legal advice.  It is important that you seek legal advice that is specific to your circumstances.
All rights reserved © Jackson Russell 2015

Glenn Finnigan Publications2
Glenn Finnigan,

Darryl King Publications2
Darryl King,

Level 13, 41 Shortland Street, Auckland 1010, New Zealand

PO Box 3451, Auckland 1140, New Zealand

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