Federal Court of Australia

Bakers Delight Holdings Ltd v Fair Work Ombudsman [2025] FCAFC 144

ORDERS

THE COURT ORDERS THAT:

1.    Leave to appeal from the Court’s orders made on 12 December 2024 be granted.

2.    The applicant’s draft notice of appeal dated 20 January 2025 stand as the notice of appeal against the Court’s orders made on 12 December 2024.

3.    The appeal be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    Bakers Delight Holdings Ltd, the fourth respondent to this proceeding, seeks leave to appeal from orders made on 12 December 2024 giving answers to a separate question.

2    The underlying proceeding is an application by the Fair Work Ombudsman for civil penalties and other relief against Make Dough Enterprises Pty Ltd (in liq), BDH and two individuals. At the relevant times, Make Dough operated a retail bakery business under the brand “Bakers Delight” from three locations in Tasmania: Eastlands, Kingston and Lindisfarne. Make Dough is now in liquidation and the primary judge observed at [10] that the liquidators have not engaged with the proceeding. The Directors of Make Dough, John Vince Puglisi and Lisa Kay Puglisi, are respondents to the proceeding and relief is also sought against them personally under s 550 of the Fair Work Act 2009 (Cth). However, they were said by the primary judge to have not actively participated in the separate question: Primary Judge’s Reasons at [10].

3    Broadly, the civil remedy provisions in issue in the proceeding concern either the wages and entitlements of workers employed by Make Dough, or the obligations of Make Dough under the FWA, such as keeping proper records about payments made to workers. The FWO also proceeds against BDH as the franchisor, alleging a contravention of s 558B of the FWA.

4    It is not in dispute that Make Dough operated its bakery business pursuant to a franchise agreement with BDH, although BDH does dispute it is a “responsible franchisor entity” for the purpose of Div 4A of the FWA.

5    The primary judge gave a helpful description of the civil remedy provisions in issue in his Honour’s reasons at [11], which we set out below at paragraph [14].

6    The separate question came about because of a disagreement between the parties about how s 558B operated against BDH; in particular what the FWO needed to prove about Make Dough’s contraventions of the civil remedy provisions. The disagreement centres on the operation and effect of s 557C(1), which imposes a reverse onus of proof on an employer in certain circumstances. In circumstances where a franchisor (BDH) is alleged to have contravened s 558B of the FWA, can the FWO as applicant in the proceeding rely on the operation of s 557C in establishing the employer/franchisee contravention, such contravention being the first element of franchisor liability under s 558B?

Relevant provisions and summary of decision

7    The basis for BDH’s liability is alleged to be s 558B of the FWA, which provides [emphasis added]:

Responsibility of responsible franchisor entities and holding companies for certain contraventions

Responsible franchisor entities

(1)    A person contravenes this subsection if:

(a)     an employer who is a franchisee entity of a franchise contravenes a civil remedy provision referred to in subsection (7); and

(b)    the person is a responsible franchisor entity for the franchisee entity; and

(c)    the contravention by the franchisee entity occurs in the franchisee entity’s capacity as a franchisee entity; and

(d)    either:

(i)    the responsible franchisor entity or an officer (within the meaning of the Corporations Act 2001) of the responsible franchisor entity knew or could reasonably be expected to have known that the contravention by the franchisee entity would occur; or

(ii)    at the time of the contravention by the franchisee entity, the responsible franchisor entity or an officer (within the meaning of the Corporations Act 2001) of the responsible franchisor entity knew or could reasonably be expected to have known that a contravention by the franchisee entity of the same or a similar character was likely to occur.

Note:    This subsection is a civil remedy provision (see this Part).

Holding companies

(2)    A person contravenes this subsection if:

(a)    the person is a body corporate; and

(b)    a subsidiary (within the meaning of the Corporations Act 2001) of the body corporate who is an employer contravenes a civil remedy provision referred to in subsection (7); and

(c)    either:

(i)    the body corporate or an officer (within the meaning of the Corporations Act 2001) of the body corporate knew or could reasonably be expected to have known that the contravention by the subsidiary would occur; or

(ii)    at the time of the contravention by the subsidiary, the body corporate or an officer (within the meaning of the Corporations Act 2001) of the body corporate knew or could reasonably be expected to have known that a contravention by the subsidiary of the same or a similar character was likely to occur.

Note:    This subsection is a civil remedy provision (see this Part).

Reasonable steps to prevent a contravention of the same or a similar character

(3)    A person does not contravene subsection (1) or (2) if, as at the time of the contravention referred to in paragraph (1)(a) or (2)(b), the person had taken reasonable steps to prevent a contravention by the franchisee entity or subsidiary of the same or a similar character.

(4)    For the purposes of subsection (3), in determining whether a person took reasonable steps to prevent a contravention by a franchisee entity or subsidiary (the contravening employer) of the same or a similar character, a court may have regard to all relevant matters, including the following:

(a)    the size and resources of the franchise or body corporate (as the case may be);

(b)    the extent to which the person had the ability to influence or control the contravening employer’s conduct in relation to the contravention referred to in paragraph (1)(a) or (2)(b) or a contravention of the same or a similar character;

(c)    any action the person took directed towards ensuring that the contravening employer had a reasonable knowledge and understanding of the requirements under the applicable provisions referred to in subsection (7);

(d)    the person’s arrangements (if any) for assessing the contravening employer’s compliance with the applicable provisions referred to in subsection (7);

(e)    the person’s arrangements (if any) for receiving and addressing possible complaints about alleged underpayments or other alleged contraventions of this Act within:

(i)    the franchise; or

(ii)    the body corporate or any subsidiary (within the meaning of the Corporations Act 2001) of the body corporate;

as the case may be;

(f)    the extent to which the person’s arrangements (whether legal or otherwise) with the contravening employer encourage or require the contravening employer to comply with this Act or any other workplace law.

(5)    Subsection (4) does not limit subsection (3).

Civil proceedings in relation to contravention by franchisee entity or subsidiary not required

(6)    To avoid doubt, a reference in paragraph (1)(a) or (2)(b) to a contravention by a franchisee entity or subsidiary includes any contravention whether or not an order has been sought or made against the franchisee entity or subsidiary under Division 2 for the contravention.

Relevant civil remedy provisions

(7)    The civil remedy provisions are the following:

(a)    section 44 (which deals with contraventions of the National Employment Standards);

(b)    section 45 (which deals with contraventions of modern awards);

(c)    section 50 (which deals with contraventions of enterprise agreements);

(d)    section 280 (which deals with contraventions of workplace determinations);

(e)    section 293 (which deals with contraventions of national minimum wage orders);

(f)    section 305 (which deals with contraventions of equal remuneration orders);

(g)    subsection 323(1) (which deals with methods and frequency of payment);

(h)    subsection 323(3) (which deals with methods of payment specified in modern awards or enterprise agreements);

(i)    subsection 325(1) (which deals with unreasonable requirements on employees to spend or pay amounts);

(ia)    subsection 325(1A) (which deals with unreasonable requirements on prospective employees to spend or pay amounts);

(j)    subsection 328(1), (2) or (3) (which deal with employer obligations in relation to guarantees of annual earnings);

(k)    subsection 357(1) (which deals with misrepresenting employment as an independent contracting arrangement);

(l)    section 358 (which deals with dismissing an employee to engage as an independent contractor);

(m)    section 359 (which deals with misrepresentations to engage an individual as an independent contractor);

(n)    subsection 535(1), (2) or (4) (which deal with employer obligations in relation to employee records);

(o)    subsection 536(1), (2) or (3) (which deal with employer obligations in relation to pay slips).

8    Like s 558B, s 557C was introduced in 2017, as part of a suite of amendments to the FWA made by the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 which dealt with the circumstances facing workers who had been employed by franchise operators and who claimed they had not received all their wages and entitlements.

9    Section 557C is a “reverse onus provision”. It provides:

Presumption where records not provided

(1)    If:

(a)    in proceedings relating to a contravention by an employer of a civil remedy provision referred to in subsection (3), an applicant makes an allegation in relation to a matter; and

(b)    the employer was required:

(i)    by subsection 535(1) or (2) to make and keep a record; or

(ii)    by regulations made for the purposes of subsection 535(3) to make available for inspection a record; or

(iii)    by subsection 536(1) or (2) to give a pay slip;

in relation to the matter; and

(c)    the employer failed to comply with the requirement;

the employer has the burden of disproving the allegation.

(2)    Subsection (1) does not apply if the employer provides a reasonable excuse as to why there has not been compliance with subsection 557C(1)(b).

(3)    The civil remedy provisions are the following:

(a)    section 44 (which deals with contraventions of the National Employment Standards);

(b)    section 45 (which deals with contraventions of modern awards);

(c)    section 50 (which deals with contraventions of enterprise agreements);

(d)    section 280 (which deals with contraventions of workplace determinations);

(e)    section 293 (which deals with contraventions of national minimum wage orders);

(f)    section 305 (which deals with contraventions of equal remuneration orders);

(g)    subsection 323(1) (which deals with methods and frequency of payment);

(h)    subsection 323(3) (which deals with methods of payment specified in modern awards or enterprise agreements);

(i)    subsection 325(1) (which deals with unreasonable requirements to spend or pay amounts);

(j)    any other civil remedy provisions prescribed by the regulations.

10    As we explain, the real issue in the separate question, and on this appeal, is the operation of s 558B(1)(a): in a proceeding against a franchisor, how can an applicant (here, the FWO) establish that an employer/franchisee has contravened a civil remedy provision in s 558B(7)? If it has relied on s 557C against the employer/franchisee and a contravention of a civil remedy provision has been established, is that sufficient as against the franchisor?

11    For the reasons set out below, s 558B should be approached no differently to the accessorial liability provision at s 550 of the FWA, and so the answer is that an applicant such as the FWO can rely on s 557C against an employer, and if the contravention has been established by this process, it is capable of satisfying subsection (1)(a). The primary judge was to that extent correct in the answer his Honour gave.

12    Leave to appeal should be granted but the appeal should be dismissed.

Leave to appeal

13    The FWO opposes the grant of leave to appeal. We consider leave should be granted. The operation of s 558B, and the role of s 557C, are issues with ramifications beyond this proceeding. As the primary judge’s decision, and the submissions of the parties, demonstrated, the issue is not an easy one. The issue is also of significance in the conduct of this proceeding and certainty should be given to the correct approach about the allegations made against BDH.

The alleged contraventions

14    At PJR [11], his Honour summarised the civil remedy provision contravention allegations made against Make Dough by the FWO:

The FWO alleges that Make Dough:

(a)     breached the record keeping obligations in the FW Act and Regulations;

(b)     provided false information to a Fair Work Inspector and hindered or obstructed a Fair Work Inspector in the exercise of his duties;

(c)     contravened a substantial number of clauses in the Bakers Delight (TAS) Enterprise Agreement 2012, thereby breaching s 50;

(d)     failed to comply with various annual leave obligations and carers’ leave obligations in contravention of the National Employment Standards (thereby contravening s 44(1));

(e)     breached s 323(1), by failing to pay employees in full in relation to the performance of work and by deducting amounts payable for annual leave on termination of employment;

(f)     breached s 325(1), by requiring employees to pay a bond for a uniform on commencement of employment; and

(g)     breached s 712(3), by failing to comply with two notices to produce records or documents.

15    In its allegations against BDH in respect of a contravention of s 558B(1) of the FWA, the FWO relies on the civil remedy provisions in s 50 of the FWA; namely breaches by Make Dough of the Bakers Delight (TAS) Enterprise Agreement 2012 (Statement Of Claim [225]):

BDH knew or could reasonably be expected to have known that each of the Franchisee Contraventions would occur; and further, or alternatively, knew or could reasonably be expected to have known that contraventions by Make Dough of the same or a similar character to each of the Franchisee Contraventions were likely to occur

16    The “Franchisee Contraventions” are set out in paragraphs [82] to [84], [85] to [87], [88] to [90], [91] to [93], [94] to [96], [97] to [99], [100] to [102], [103] to [105], [110] to [115] and [116] to [121] of the SOC. Broadly, as the Particulars to [216] in the SOC state, these alleged contraventions relate to payments made to workers employed by Make Dough to perform work in “Bakers Delight” stores operated by Make Dough.

17    One example, from [82] of the SOC, is underpayments to workers who were 21 years and over or who were apprentices of any age. The SOC sets out what the Enterprise Agreement stipulated as the ordinary wage rate per hour. The FWO alleges that these workers were entitled to be paid a total of $901,521.62 by Make Dough, but were not paid the applicable rates and were only paid a total of $817,564.93 by Make Dough, resulting in a collective underpayment of $83,956.74 by Make Dough (SOC [83]).

18    In total, the FWO alleged (SOC [226]) that BDH is liable as responsible franchisor for the sum of $642,162.66, being the total employee underpayments during the nominated period (after the introduction of s 558B). In its application for leave to appeal, BDH contends that the proceeding relates to 88 separate employees of Make Dough.

19    Thus, taking this underpayment example in [82]-[84] of the SOC, if the applicant/FWO can establish this collective underpayment and contravention of s 50 of the FWA as against Make Dough, including by relying on s 557C, is that sufficient to establish the first element in s 558B(1)(a), or does the FWO have to prove all those contraventions separately against BDH, without relying on the reverse onus in s 557C?

20    While for the purposes of the separate question there are no admissions made by BDH about contraventions of the civil remedy provisions themselves, limited admissions were made by BDH about contraventions of the record keeping provisions in ss 535(1) and 535(2) of the FWA. Those admissions were made in relation to two employees of Make Dough. The purpose of those admissions in BDH’s Defence was to establish, for the purposes of the separate question, that the preconditions to the reverse onus in s 557C were engaged, because it could be agreed Make Dough had failed to adhere to its record keeping obligations. See PJR at [13].

The separate question and answer

21    The separate question (as amended by orders made on 1 July 2024) was:

“In the circumstances set out in paragraphs [49] to [57], [80] to [81], [83] and [216] of the Statement of Claim and paragraphs 1 to 4 of the Reply, and paragraphs [49], [80] to [81], [83], [118] to [119], [216] and [225] of the Further Amended Defence of the fourth respondent, does s 557C(1) of the Fair Work Act 2009 (Cth) apply as against the fourth respondent, and if so, how?”

22    The answer given by the primary judge, in orders made on 12 December 2024 was:

Yes. Section 557C of the Fair Work Act 2009 applies to establish the contravention referred to at s 588B(1)(a) and it is open to a responsible franchisor to discharge the burden of disproving the relevant allegations.

23    While in framing the question, the parties may have invited the primary judge to focus on s 557C, as his Honour’s answer reveals, the more appropriate focus is on s 558B and how the element in subsection (1)(a) can be established. That is the focus we adopt in these reasons.

Primary Judge’s reasons

24    The primary judge held (at PJR [39]) that

It is not correct to compartmentalise and confine s 557C in its operation only to allegations made in a proceeding against the employer. To do so is to ignore that the first element of liability of the responsible franchisor is derivative on establishing a contravention by a franchisee.

25    The primary judge pointed out that s 558B involved, as its first step, a derivative liability imposed on the responsible franchisor from the contravention by an employer.

26    Of the legislative history, on which both parties at first instance and on appeal placed some reliance, the primary judge said (at PJR [51]):

The legislative history does not reveal an intent to confine the reverse onus only to proceedings against an employer. Parliament simply did not address the interplay between the reverse onus and first requirement to establish the derivative liability of the responsible franchisor. It may be inferred that by requiring a contravention by the employer as the first element of the derivative liability of a responsible franchisor, it was assumed that the proof mechanism would apply.

27    At [52] his Honour added:

The construction of the Ombudsman is supported by other considerations. It avoids the possibility of inconsistent findings on the same factual question. It harmoniously connects the provisions which have as their core purpose the protection of vulnerable workers from exploitation where the employer fails in the obligation to keep employment records, which makes proof of underpayment and other types of exploitation difficult: Ghimire at [11]-[14].

28    The reference to Colvin J’s decision in Ghimire v Karriview Management Pty Ltd (No 2) [2019] FCA 1627; 290 IR 331 is a refence to the following passages:

[11]    Record keeping obligations are an important part of the protections afforded by the Fair Work Act. As stated by Reithmuller FM in Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258 at [66]-[67] in dealing, prior to the enactment of s 557C, with the importance of compliance with the obligation under the Regulations to issue pay slips to employees:

The need to ensure compliance, particularly with respect to vulnerable workers, such as those on work visas, those who come to Australia without strong language skills, and those with little education is crucial to a just society, and the avoidance of exploitation.

Whilst the record keeping obligation with respect to pay slips only appears in the Regulations, its central importance in industrial matters cannot be underestimated. Proper pay slips allow employees to understand how their pay is calculated and therefore easily obtain advice. Pay slips provide the most practical check on false record keeping and underpayments, and allow for genuine mistakes or misunderstandings to quickly be identified. Without proper pay slips employees are significantly disempowered, creating a structure within which breaches of the industrial laws can easily be perpetrated.

[12]    These statements have been cited with approval in this Court: Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [548] (Katzmann J) and Fair Work Ombudsman v South Jin Pty Ltd (No 2) [2016] FCA 832 at [55] (White J).

[13]    Section 557C of the Fair Work Act states in terms that where in proceedings relating to a contravention by an employer of a civil remedy provision an applicant makes an allegation in relation to a matter and the employer was required (by specified provisions) to keep a record in relation to the matter and the employer failed to comply with the requirement (and there is no reasonable excuse as to why there has not been compliance) then 'the employer has the burden of disproving the allegation'. The civil remedy provisions include s 45 which provides that a person must not contravene a term of a modern award.

[14]    Section 557C provides for more than an evidentiary burden on the defaulting employer when it comes to an absence of records. It is not a mere reversal of the evidentiary onus. Further, it is not a provision, for example, that operates to deem a matter to be proved in the absence of evidence to the contrary. In such cases, an issue may arise as to whether the obligation is to adduce some evidence which raises a genuine issue as to whether the matter occurred or whether the burden of disproving the matter falls on the party who disputes the matter. Rather, s 557C states expressly that the defaulting employer bears the burden of disproving the allegation. It is a provision concerned with the overall burden of proof.

29    As Colvin J went on to observe at [16], to displace the effect of s 557C an employer must “affirmatively prove” that a worker did not work the hours that they claimed. In Fair Work Ombudsman v Woolworths Group Ltd [2025] FCA 1092 at [146]-[148], Perram J expressed his agreement with Colvin J. We also respectfully agree.

BDH’s argument

30    BDH contends the primary judge erred because s 557C can only be engaged in a proceeding against an employer/franchisee, whether or not the proceeding includes – as a separate allegation – contraventions against a franchisor under s 558B. BDH contends an applicant (here, the FWO) bears the ordinary legal burden of proof of the contravention of the civil remedy provision by the franchisor, without reliance on s 557C, and irrespective of whether a contravention might be separately established against an employer/franchisee, invoking s 557C and the reverse onus.

31    BDH submits that, for example, even if an employer/franchisee has made admissions and in that sense agreed to findings of contravention (for example of s 50), that admission cannot be used to establish s 558B(1)(a) has been met, nor can any declaratory or other relief granted against an employer/franchisee be relied upon against a franchisor to satisfy s 558(1)(a). BDH submits the applicant (here the FWO), must prove the employer/franchisee contraventions afresh, for the purposes of establishing franchisor liability under s 558B.

32    This interpretation, BDH contends, is consistent with the legislative history of s 557C being limited to employers, it affords procedural fairness to franchisors (who may not have been a party to earlier proceedings against employers and may not have had an opportunity to be heard), and recognises that a “blameless franchisor” cannot take advantage of the “reasonable excuse” exception in s 557C(2). As to the legislative history, BDH says neither the Explanatory Memorandum or Second Reading Speech for the Amendment Act suggest the Parliament intended the reverse onus in s 557C to apply to the franchisor.

33    In response to a submission made by the FWO, that on the construction advanced by BDH the Court might need to consider twice whether a contravention of a civil remedy provision is established (once in relation to the employer, and again in relation to the franchisor), BDH submitted:

If the BDH construction is accepted, the FWO will not be required to prove anything twice. There will be only one hearing where the evidence of all parties is adduced, once only. What the Court would then do is to work through the allegations made by the FWO and the orders that are sought as against each party, having regard to the evidence before the Court and the submissions of each party. In the case made as against the employer, the Court would apply s 557C where applicable, whereas in the case made against BDH, the Court would not. The Court would be determining the case only once but applying different evidentiary rules in relation to different parties.

34    In other words, while BDH accepted that under s 550, the contravention by the employer does not separately have to be proved against the accessory, its case on appeal rested on a distinction being drawn, and intended by Parliament to be drawn, between ss 550 and 558B.

The context of the provisions in issue

35    Section 558B is located in Div 4A of Part 4-1, entitled “Responsibility of responsible franchisor entities and holding companies for certain contraventions”. Section 557C is located in Ch 4, Part 4-1, Div 4 – entitled “General provisions relating to civil remedies”.

36    The whole of Ch 4 is concerned with “Compliance and Enforcement”, and s 537 describes Part 4-1 as being about civil remedies.

37    The general accessorial liability provision is s 550, located in Div 4. It provides:

Involvement in contravention treated in same way as actual contravention

(1)    A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.

Note:    If a person (the involved person) is taken under this subsection to have contravened a civil remedy provision, the involved person’s contravention may be a serious contravention (see subsection 557A(5A)). Serious contraventions attract higher maximum penalties (see subsection 539(2)).

(2)    A person is involved in a contravention of a civil remedy provision if, and only if, the person:

(a)    has aided, abetted, counselled or procured the contravention; or

(b)    has induced the contravention, whether by threats or promises or otherwise; or

(c)    has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

(d)    has conspired with others to effect the contravention.

38    It is s 550 which is alleged to be the basis of liability for Mr and Mrs Puglisi in this proceeding.

39    Section 550 has been in effect since the introduction of the FWA in 2009. A substantially similar provision was introduced into the former Workplace Relations Act 1996 (Cth) in March 2006 by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth). The section mirrors in substance and form other accessorial liability provisions: s 75B Competition and Consumer Act 2010 (Cth), s 2 of the Australian Consumer Law set out in Sch 2 of the Competition and Consumer Act 2010 (Cth), and s 79 Corporations Act 2001 (Cth). Thus, s 550 was not intended by Parliament to introduce any new approach to accessorial liability. The words of the section are drawn from the long history of accessorial liability in the criminal law and their application in other legislation: see Brennan J in Yorke v Lucas (1985) 158 CLR 661 at 673-4 considering s 75B of the Trade Practices Act 1974 (Cth).

40    This Court has held that s 550 should be construed in the same way as those similar regulatory provisions: Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034; 152 ALD 209 at [950] (Katzmann J).

41    However, unlike the provision considered in Yorke v Lucas, s 550 operates as a deeming provision, imposing liability on accessories for a contravention by another of a primary civil remedy provision where the requisite level of “involvement” is established. The accessorial nature is confirmed by the terms of s 557A (which deals with a person’s involvement in a “serious contravention” by reference to “involved in” as defined by s 550), where the primary contravener is described as “the principal”.

42    In contrast, s 558B creates a stand-alone civil remedy provision. BDH contended this meant its operation should not be approached in the same way as s 550. We return to that contention below.

43    Section 550 applies to a wide range of civil remedy provisions: see s 539(2). This includes the civil remedy provisions contained in the general protections provisions of the FWA, in Part 3-1 of Ch 3 of the FWA, including for example s 340, the adverse action provision. This part of the legislative scheme also contains a reverse onus provision: s 361. Section 361 provides:

Reason for action to be presumed unless proved otherwise

(1)    If:

(a)    in an application in relation to a contravention of this Part, it is alleged that a person took, or is taking, action for a particular reason or with a particular intent; and

(b)    taking that action for that reason or with that intent would constitute a contravention of this Part;

it is presumed that the action was, or is being, taken for that reason or with that intent, unless the person proves otherwise.

(2)    Subsection (1) does not apply in relation to orders for an interim injunction.

44    A reverse onus provision has existed, in various forms and contexts, in the FWA and its predecessors since the original Conciliation and Arbitration Act 1904 (Cth).

45    It has been held that the reverse onus in s 361 does not apply to claims against accessories under s 550. In Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union [2016] FCAFC 99; 248 FCR 18, Rangiah J stated at [448]:

The primary judge correctly held that s 361 of the Fair Work Act did not apply to the allegations against Mr Green [the accessory], and that the applicants (the present respondents) were required to prove that he was knowingly concerned in PKCT’s contraventions. The respondents were required to establish that Mr Green had knowledge of each essential element of the contravention: Yorke v Lucas (1985) 158 CLR 661 at 670 (Mason ACJ, Wilson, Deane and Dawson JJ). They were required to prove that Mr Giddings’ Union roles or industrial activities were among the substantial and operative reasons for Mr Green’s decision to terminate Mr Giddings’ employment. They were required to prove that matter in accordance with the Briginshaw standard.

46    In Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50 Greenwood, Flick and Rangiah JJ stated at [59]:

The effect of s 361(1) of the FWA is that in an adverse action case where it is alleged that a respondent took action for a particular reason or with a particular intent, it is presumed that the action was taken for that reason or with that intent, unless the respondent proves otherwise. Section 361(1) does not usually apply to an allegation of contravention of s 340(1) through the operation of s 550: see Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union [2016] FCAFC 99 at [448], Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Visy Packaging Pty Ltd (No 3) (2013) 216 FCR 70 at [241]. The applicant alleges “knowing involvement” within the meaning of s 550 of the FWA against the Downer entities. To be knowingly involved, those respondents must have intentionally participated in the contravening conduct, with actual knowledge of the essential facts which constituted the contravention: see Yorke v Lucas (1985) 158 CLR 661 at 667. It may be that s 361(1) of the FWA has application to the question of whether the respondents intentionally participated in the contravening conduct, but the point was not argued before the primary judge or in the appeal and it is unnecessary to decide it. The immediate point in respect of paragraph 28B of the ASOC is that the applicant carries the onus of proving that the Downer entities had the requisite knowledge.

47    Neither case presents more analysis. Those cases pre-date the introduction of ss 557C and 558B. Those decisions have been applied a number of times, including; Australian Municipal, Administrative, Clerical and Services Union v Commissioner of Taxation [2022] FCA 1225 at [482] and [485] (Jagot J); Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 4) [2021] FCA 1242 at [779] (Katzmann J); and Australian Red Cross Society v Queensland Nurses' Union of Employees [2019] FCAFC 215; 273 FCR 332 at [97] (Greenwood, Besanko and Rangiah JJ).

48    These authorities are consistent with the proposition that the reverse onus in s 361 is directed at the primary contravener’s reason for acting, whereas s 550 is directed at the accessory’s conduct and knowledge of the essential elements of the primary contravention, by the principal actor (to whose conduct the reverse onus applies).

49    In our view, the same approach should be taken to the relationship between s 558B and s 557C. The latter is directed towards the proof of a contravention by an employer/franchisee, not a franchisor. That said, as we will explain, s 558B remains in its character an accessorial liability provision. Therefore, for a moving party to satisfy the requirements of s 558B(1)(a), it is not necessary for that moving party separately to prove a contravention by the employer/franchisee without the assistance of s 557C. As against the employer/franchisee, s 557C is in play, just as s 361 is in play against a primary respondent in an adverse action proceeding.

50    In both circumstances, there must be a principal, or primary actor, who contravenes a civil remedy provision.

51    Once the primary contravention or liability is established (including by reliance on any reverse onus), the focus of the accessorial liability provisions is on the nature and character of the involvement of the party said to be liable under the accessorial provisions.

The enactment of section 558B and section 557C

52    Sections 558B and 557C were part of a suite of amendments to the FWA introduced by the Amendment Act.

53    In the Second Reading speech for the Amendment Act, the Minister stated:

We know that the majority of employers do the right thing, but it is also apparent that there are some cases of widespread underpayment or coercion of workers, such as the well-publicised exploitation of workers by some 7-Eleven franchisees. These are the instances this bill seeks to address.

54    Having noted the increased penalties introduced, and the prohibition on employers asking for cash payments back from their employees, the Minister said:

The bill will also clarify the accessorial liability provisions to make them more effective. These changes will ensure that franchisors and holding companies that exercise significant control over their franchisees or subsidiaries will be responsible for underpayments where they turned a blind eye or were complicit in such a breach.

Where the franchisor or holding company should have known of the breach, or a similar breach, but did not take reasonable steps to try to prevent it then they may be liable for the underpayments.

55    The Minister then noted the qualifications in the Amendment Act around the need to establish franchisors had a sufficient level of control over the employment practices of employers/franchisees before liability for employer/franchisee contraventions would be imposed. He then stated:

The bill will not absolve franchisees or subsidiaries of their responsibility under workplace laws. These employers will remain liable for any breach of the Fair Work Act under existing laws.

56    Finally, in a passage emphasised by BDH, the Minister noted the strengthening of the evidence gathering powers of the Fair Work Ombudsman to assist in investigating contraventions “even if there is no paper trail”. Relatedly, BDH submitted the focus, at least at that time, was on the Ombudsman having additional powers, without any suggestion that a reverse onus would be imposed upon the franchisor.

Previous reports and inquiries

57    The Minister’s reference to the 7-Eleven franchise situation is reflected in a report issued in April 2016 by the Fair Work Ombudsman about the outcomes of an inquiry into the 7-Eleven franchise network: Identifying and addressing the drivers of non-compliance in the 7-Eleven network.

58    The inquiry had been initiated in 2014, and related to allegations that significant underpayment of wages and falsification of employment records were occurring across much of the 7-Eleven franchisee network. The Executive Summary stated:

The Inquiry found 7-Eleven’s approach to workplace matters, while ostensibly promoting compliance, did not adequately detect or address deliberate non-compliance and as a consequence compounded it. In particular, instances where franchisees created false and misleading records to satisfy 7-Eleven’s auditing and payroll regime while continuing to underpay employees.

59    At section 4.7 of the report, the Fair Work Ombudsman discussed the importance of employment record keeping, and its fundamental role in the enforcement of workplace rights and obligations:

The failure to keep proper records and to issue payslips: disempowers employees, undermines the effectiveness of workplace inspectors, and creates a structure where breaches of workplace laws may be easily perpetrated.

Making false records, particularly if intended to mislead a Fair Work Inspector that a business is compliant with its obligations, is of serious concern to us for several reasons:

•    it frustrates an employee’s capacity to know, and hold an employer accountable, for their minimum entitlements

•    impedes our ability as a regulator to properly and promptly investigate whether an employer is compliant with the law

•    deprives us of crucial evidence, leading to the use of significant public funds to undertake extensive investigation and analysis of multiple sources of evidence that wouldn’t otherwise be required

•    can prevent us from assessing underpaid entitlements and taking enforcement action when necessary.

60    This Court has also recognised the importance of record-keeping: see Ghimire at [11]-[12].

61    Amongst the recommendations in the report were recommendations that the Fair Work Ombudsman:

5.     Continues to maximise use of accessorial liability to ensure those involved in serious breaches of workplace laws are held accountable, noting the evidentiary requirements and our lack of capacity to require any person to answer questions on the record in relation to alleged contraventions of workplace laws.

62    Earlier, in 2016, the Senate Education and Employment References Committee published a report entitled “A National Disgrace: The Exploitation of Temporary Work Visa Holders”. As the FWO submitted to the primary judge, this report considered the effects of the absence or fabrication of wages records by franchisees, including 7-Eleven. While the report had a focus on a number of immigration related issues, the Senate Education and Employment References Committee also recommended that there be an independent review of the “penalty, accessory liability, and sham contracting provisions under the Fair Work Act 2009” and the review should, amongst other matters, make “recommendations on the utility of the accessory liability provisions under the Fair Work Act 2009”.

Course of the Fair Work Amendment (Protecting Vulnerable Workers) Bill

63    Following on from these inquiries and reports, the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 was introduced into the House of Representatives on 1 March 2017.

64    On 23 March 2017, the Senate referred an inquiry into the provisions of the Bill to the Senate Education and Employment Legislation Committee for inquiry and report by 9 May 2017.

65    The Senate Education and Employment Legislation Committee’s report acknowledged (at [3.5]) that:

Under the Fair Work Act's current accessorial liability provisions, franchisors and holding companies with no knowledge of contraventions within their networks cannot be found to have been 'involved in' the contraventions.

66    While noting that the new provisions did not displace or reduce the obligations of employers/franchisees, the Committee emphasised that the criterion in the Bill for franchisor liability rested on the concept of a “significant degree of influence or control” over the relevant employer/franchisee's affairs, while also providing a “reasonable steps” defence. The Committee expressed the view it was “appropriate that the bill seek to supplement the existing accessorial liability provisions in the Fair Work Act” (at [3.54]).

67    In relation to the proposed increase in penalties for failures in record keeping, the Senate Education and Employment Legislation Committee expressed the view that (at [5.33]):

The committee believes that stronger penalties for breaches relating to record-keeping requirements are necessary to deter a small minority of employers who deliberately fail to keep appropriate records as part of a systematic plan to underpay workers and disguise their wrongdoing.

68    The Senate Education and Employment Legislation Committee’s overall view was expressed at [2.12] of its report:

The committee is of the opinion that the bill addresses a growing body of evidence that indicates that the Fair Work Act needs to be strengthened in order to better protect vulnerable workers, and appropriately punish those who deliberately and systematically break the law.

69    Recommendation 6 of the Labor Senator’s Additional Comments on the report related to a reverse onus of the kind enacted in s 557C:

1.23 Labor senators recommend that the government amend the bill to include a failure to address complaints about alleged underpayments to the list of conduct in proposed subsection 557A(2) to be considered when assessing whether conduct constitutes a serious contravention.

Increased penalties for record-keeping failures

1.24 Labor senators support the increased penalties for record-keeping failures proposed in the bill.

1.25 However, in addition to increased penalties, Labor senators consider that a reverse onus of proof in wage disputes where an employer fails to keep or provide employee records is also necessary to encourage compliance with record-keeping obligations.

1.26 As the WEstjustice submission detailed:

In order to eliminate the incentive for employers to avoid keeping employee records, and create a culture of compliance, we propose that a reverse onus of proof be imposed on employers who are respondents to claims for unpaid wages and have failed to keep or produce employee records where required by law. Employers who had not kept records could still discharge the onus in another way, for example via us of CCTA footage or rosters.

To achieve this we suggest including a new provision in Division 4 of Part 4-1 to reverse the onus of proof in respect of civil remedy provisions concerning payment of wages where the employer had not kept and/or provided employee records as required by sections 535, 536 of the Fair Work Act or regulation 3.42 of the Fair Work Regulations.

[Footnotes removed]

70    The Greens members of the Senate Education and Employment Legislation Committee made a similar point at 1.7 of their Additional Comments:

The failure of an employer to keep records can result in the burden of proof falling to vulnerable workers when attempting to prove wage theft. In these instances, as WEstjustice points out, the current legislative framework rewards employers who fail to keep employee records. It is also apparent that penalties do not always act as an adequate deterrent to exploiting workers, particularly if the penalties can be easily absorbed by the franchisor. The Greens support the increase of penalties, however the bill should be amended to reverse the onus of proof when employees make claims and the employer has failed to keep records in accordance with the law. This will incentivise employers to maintain adequate records.

The introduction of s 557C

71    When the Bill was introduced into the House of Representatives, s 558B was present but s 557C was not.

72    Consistently with the position of the Greens members of the Senate Education and Employment Legislation Committee’s Report, a reverse onus provision was introduced by Adam Bandt MP, for the Greens Party. The proposal was voted down in the House of Representatives.

73    The Bill proceeded to the Senate, was read a first time, and debate resumed about appropriate amendments to the Bill, including the first version of what would become s 557C. Through several days in mid-August 2017 and early September, the Bill (including a newly proposed s 557C, introduced by Senator Cameron on behalf of the then-opposition Labor Party) was debated in the Senate. The debate included references to government reservations about the potential for unscrupulous workers to exploit the provision, and the government not being prepared to endorse the reverse onus. Other speakers recounted accounts of employers/franchisees not keeping or producing accurate pay records, and the terms of the “reasonable steps” exception in sub-section (2). There was no real debate about the reverse onus as a concept. There was also no debate about how the reverse onus was to be read together with s 558B, other than the following reference by Senator Cameron on 14 August 2017 (emphasis added):

This bill purports to make franchisors and holding companies responsible for underpayments by franchisees or subsidiaries. This is aimed at responding to the 7-Eleven scandal, but there are flaws with the new civil liability offence in this bill, which shows that the government's response is weak. The government's offence will not reverse the onus of proof, which means that it will remain very hard for workers and the Fair Work Ombudsman to successfully prosecute franchisors. Many large businesses do not use a franchise model and will therefore not be liable, and businesses that use a franchise model are likely to move out of that model or design their business relationships in order to escape prospective liability under the offence. Labor's amendments address all of these flaws. They are essential to giving this bill real teeth. The government must support them if it truly wants to stamp out underpayments across our economy.

74    On 4 September 2017 Senator Marshall, for the Opposition, stated:

I support the position that we support these amendments and what's been discussed and negotiated with Senator Xenophon, even though the government's not pursuing it, because I think it is important to move forward. If an employee or alleged employee can establish that they did work for a business or an employer, and the employer either has deliberately not kept the records or doesn't want to show the records because they will prove that they were underpaying, it ought to be a reverse onus of proof because the employee is in such a vulnerable position. How do they establish those facts? They can't establish those facts. They're being ripped off in the first place. As if the employer is going to make it easy for them to come and prove that they were going to be ripped off! I know some people say cases where this business model's in place are rare. Well, I'm telling you: they're not rare. They're across industry, and in hospitality in particular.

75    The government maintained its position that it would not support the provisions.

76    In support of the version of s 557C (including changes to sub-section (2)) that he had introduced, Senator Cameron stated:

We don't believe that where an employer has failed to deliver on what is an obligation under the existing act to provide a pay slip there should be any impediments put before an employee to actually prove that they haven't been paid. It really is a problem created by the employer in not providing a pay slip, which is their legal obligation to provide, and then hiding behind that and indicating to a worker that the worker needs to provide the proof. We understand that you don't reverse the onus of proof easily, but when an employer is breaching the act as it stands then there is, in my view, an obligation on parliament to make sure that that employee doesn't have unnecessary hurdles to jump before they can undertake a case to get what is their legitimate right. If an employer is not complying by providing a pay slip then there should be a reverse onus of proof.

…

So, we are very clear that this is another protection for vulnerable workers, by having a reverse onus of proof. In actually bringing a case against a powerful employer—an employer who has all the facts, an employer who may have been exploiting the worker—the worker may have some difficulties if they don't have a pay slip. So, the employer has an obligation under law to provide the pay slip, and you can't have noncompliance with legal obligations making it harder for a vulnerable worker, a worker in an exposed position, to actually make a claim for their rights under the law and their rights to get paid for what they've worked. A 'reasonable excuse' has to be reasonable, and the employee cannot be put in a position with the employer because of an omission, either deliberate or non-deliberate, by the employer, where they cannot get a fair day's pay for a fair day's work.

77    On 4 September 2017, the Senate transmitted all of its proposed amendments back to the House of Representatives, and the Bill was passed with those amendments on 5 September 2017.

78    The Explanatory Memorandum to the Amendment Act stated (at [35]-[39]):

Part 2 of Schedule 1 amends the Fair Work Act to insert new provisions to hold ‘responsible franchisor entities’ (referred to as franchisors) and ‘holding companies’ responsible for certain contraventions of the Act by businesses in their networks. The new provisions supplement and do not override the existing accessorial liability provisions (section 550).

Some franchisors and holding companies have established franchise agreements and subsidiaries in their corporate structure that operate on a business model based on underpaying workers. Some have either been blind to the problem or not taken sufficient action to deal with it once it was brought to their attention.

Recent highly publicised cases of exploitation of vulnerable workers, including by
7-Eleven franchisees, demonstrate more needs to be done by franchisors and holding companies to protect vulnerable workers employed in their business networks. A number of case studies are provided in the Senate Education and Employment References Committee’s report entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, March 2016 and reports of the Fair Work Ombudsman.

Under the existing laws a person may be held responsible for being ‘involved in’ a contravention, even if they are not the direct employer (section 550). This is known as accessorial liability. There is no accessorial liability if a person genuinely ‘did not know’.

The provisions only apply to responsible franchisor entities which have a significant degree of influence or control over the relevant franchisee’s affairs. By definition, holding companies have control over the affairs of their subsidiaries. Control relates to the affairs of the franchisee or subsidiary broadly, not only as to minor matters that would not have any impact on the management and operational decisions of the business.

79    In terms of the intended relationship to the existing accessorial liability provisions in the FWA, the Explanatory Memorandum stated at [35] that:

the new provisions supplement and do not override the existing accessorial liability provisions (section 550).

Conclusion on the legislative history

80    While the Explanatory Memorandum predates the introduction of s 557C after the debate in the Senate, it nevertheless provides important context for the Parliament’s objectives in introducing liability for franchisors.

81    The legislative history clearly demonstrates that the Parliament recognised, consistently with the inquiries and reports which led to the Amendment Act, that the terms of the accessorial liability in s 550 were not adequate to capture the circumstances where workers were employed by franchisees. Parliament recognised that there was a sufficient factual basis to suggest that some franchisors were not undertaking appropriate supervision of the way franchisees were treating workers, and were not adequately supervising franchisees’ compliance with employment and industrial laws. Parliament recognised that, with legislative safeguards, it was appropriate to impose a new form of accessorial liability on franchisors, where contraventions by employers/franchisees had been established, the franchisors likely being the entities more likely with capacity to compensate workers and pay appropriate penalties.

82    This context is critical to the correct interpretation of s 558B, and the role of s 557C. Nevertheless, it is true that the legislative history does not squarely explain what Parliament intended to be the operational relationship between the two provisions.

Applicable interpretation principles and the use of extrinsic materials

83    The parties agreed the current general approach to statutory interpretation was set out by Kiefel CJ, Nettle and Gordon JJ in SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; 262 CLR 362 at [14] (cited recently by Gageler CJ, Gordon and Edelman JJ in R v Rohan [2024] HCA 3; 280 CLR 288 at [25]):

The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense.

    [Citations removed]

84    In having regard to the context of s 558B, it is appropriate to take into account the pre-existing law. This relevantly includes s 550 and how that provision applies to principals and accessories. In Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42; 254 CLR 247 at [42] Crennan, Bell and Gageler JJ explained:

The pre-existing law and the legislative history should not deflect the Court from its duty to resolve an issue of statutory construction, which is a text-based activity. However, both parties recognised that the task of statutory construction in this case required some appreciation of the pre-existing law and the legislative history of relevant provisions. Undoubtedly, questions of policy can inform the Court’s task of statutory construction.

[Citations removed, emphasis added]

85    In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Qantas Airways Limited [2020] FCAFC 205; 282 FCR 130, Rares and Colvin JJ applied this passage in Alphapharm in the context of industrial law at [35]:

Particularly in a field like industrial law where there is a history of legislative provisions that deploy concepts that have their origins in earlier statutes the terms of which have been interpreted by the Courts to form a body of associated law, the pre-existing law may provide part of the context in which to consider the statutory provisions: Electrolux Home Products Pty Ltd v Australian Workers' Union [2004] HCA 40; (2004) 221 CLR 309 at [165] (Gummow, Hayne and Heydon JJ); and Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42; (2014) 254 CLR 247 at [42]. Terms may be carried into legislation on the basis that they have acquired a particular meaning through past usage within the particular context being addressed by the legislation or may be adopted to change or alter the effect of past approaches. In either case, the context may be important in determining the intended meaning.

86    Consistent with Alphapharm and Qantas, and the extrinsic material excerpted above, we consider that Parliament, in creating s 558B, did so expressly in the context of the pre-existing law in s 550 and intended to add to it to provide a consistent, but more tailored, mechanism to address the situation of franchisors and franchisees.

87    Section 15AB(1) of the Acts Interpretation Act 1901 (Cth) provides that recourse may be had to “material not forming part of the Act [which] is capable of assisting in the ascertainment of the meaning of the provision”, in circumstances including where “the provision is ambiguous or obscure”. This material includes “any relevant material … in any official record of debates in the Parliament or either House of the Parliament”: s 15AB(2)(h). Section 15AB “supplements, but [does] not displace, the common law” (Ravbar v Commonwealth [2025] HCA 25; 99 ALJR 1000 at [120] (Gordon J).

88    However, as Gordon J explained in Ravbar (at [137]-[138]), reliance on statements in Parliamentary debates may only be of assistance in ascertaining Parliament’s intention where there is a link between what is in the debates and the text of the legislation as enacted. That is what supplies an indication of objective Parliamentary intention. That link is present here, as we have outlined above.

89    In Ravbar at [377], Jagot J made these observations about the use of statements from individual members of Parliament:

It may be accepted that legislative purposes are not to be divined from private communications. Parliamentary debates, however, occur in the public domain. Further, once it is accepted that the objective circumstances which called forth the legislation are relevant to the ascertainment of legislative purpose, it must also be accepted that ensuring that, for the period of the administration, the C&G Division would not engage in political activities, including political communications, formed part of those objective circumstances. To characterise this objective as a mere subjective reason that some individual legislators or the legislature as a collective wanted to enact Pt 2A may be convenient but is not convincing. There is no justification to accept one publicly stated legislative purpose – to restore functionality to the C&G Division – and yet to ignore another publicly stated legislative purpose – to ensure that the C&G Division would be prevented from political activity including political communications during the period of administration. No doubt individual legislators may have had different reasons or motives for wanting to achieve this objective. It is those reasons and motives which are to be disregarded, not the objective itself.

90    In the present circumstances, the Senate debates inform why, and explain how, s 557C came to be introduced. They also inform its perceived role in remedying what Parliament saw, based on the many instances given in the reports and inquiries which preceded the Amendment Act, as an imbalance and unfairness imposed on workers seeking to recover what they alleged they were due, where employers/franchisees failed to keep, or supply, accurate pay and entitlement records.

91    The debates and the extrinsic material all demonstrate that Parliament viewed s 558B as a form of accessorial liability, supplementing the existing forms already in the FWA such as s 550, and providing a more tailored mechanism to address the situation of franchisors and franchisees. Parliament did not see s 558B as any different in character and purpose to s 550, but did recognise the need for a specific approach.

92    None of the extrinsic material provides any support for BDH’s contended approach that s 558B creates some new and different form of liability, and should be approached differently from s 550 in terms of what has to be established about the contravening conduct of a primary actor. BDH accepted that, under s 550, the primary contravention by the employer does not separately have to be proved against the accessory. We consider s 558B should be approached in the same way.

93    The common law principle that apart from any reliance upon s 15AB, a court may have regard to extrinsic materials to “ascertain the mischief which a statute is intended to cure” (CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ)) is also applicable. One of the mischiefs to which s 558B was directed was the perceived role of franchisors in the exploitation of workers employed by franchisees, and the unsuitability of s 550 to address this. The Amendment Act provisions were intended to cure this by imposing a more appropriate form of direct legal responsibility on franchisors. Parliament’s legislative judgment about when such imposition was appropriate centred on a franchisor’s level of influence or control over a franchisee’s affairs, while also recognising in the amendments that a defaulting franchisee was often unlikely to supply the documentary evidence needed to establish underpayments and other contraventions of workers’ entitlements.

Conclusion on the legislative scheme

94    Section 558B was intended by Parliament to be a further form of accessorial liability, to strengthen the enforcement of the civil remedy provisions in the FWA in circumstances where an employer was also in a franchisee arrangement, and it was objectively appropriate to sheet home to a franchisor legal responsibility for the failure of the employer/franchisee to meet its obligations under the FWA, especially as to record keeping, and payment of wages and provision of entitlements. The clear history of default demonstrated by the inquiries and reports which preceded the Amendment Act was the mischief Parliament sought to remedy by the introduction of a series of provisions in 2017, including but not limited to s 558B.

95    Section 550 was regarded as inadequate to cover the circumstances of the franchisee/franchisor relationship, and a more tailored form of accessorial liability was seen by Parliament to be necessary.

96    There is no basis in the text, context or purpose of s 558B and the other provisions of the Amendment Act which accompanied it to see s 558B as somehow distinct or different in purpose from s 550. It was intended to supplement the liability imposed by s 550 and, as we have explained, tailor it more specifically to what Parliament considered appropriate where there was a franchisee/franchisor arrangement.

97    We reject the heavy focus BDH sought to impose on the other provisions in the Amendment Act which strengthened the role of the FWO and gave the FWO more investigative powers. While that is undoubtedly a policy component of the Amendment Act, an applicant in respect of a contravention of s 558B might well be a party other than the FWO. Under the terms of ss 539 and 540 of the FWA, a range of persons can apply for orders in relation to contraventions of civil remedy provisions: including inspectors, employees, and employee and employer organisations (as defined in s 12 of the FWA). Section 558B must accordingly be construed in a manner which gives the provision a consistent operation, as an accessorial liability provision, no matter who the authorised applicant is in respect of alleged contraventions by employers/franchisees and franchisors.

Operation of section 558B, read with section 557C

98    Accessorial liability as a concept has been drawn from the criminal law, as Yorke v Lucas makes clear: at 666-7 (Mason ACJ, Wilson, Deane and Dawson JJ) and 673 (Brennan J). Liability is derived from the conduct of a principal actor, but more is needed. Accessorial liability always turns upon proof of some kind of independent conduct or state of mind of the accessory as well; the attribution of liability to an accessory is generally not automatic. In the way the civil law, and especially statutory and regulatory law, has sought to use accessorial liability, different legislative judgments are made about what level of knowledge or involvement is required in a given circumstance.

99    In Productivity Partners Pty Ltd v Australian Competition and Consumer Commission [2024] HCA 27; 98 ALJR 1021 at [257] Edelman J said:

An accessory is a person to whom the liability of a principal for a crime or civil wrong is attributed. The accessory did not commit the crime or other wrong but will have attributed to them the liability of the person who did. Since the focus is upon attribution of liability for a wrong found to have been committed by another, it has rightly been said that "[t]he very basis of secondary liability is different from that of a principal".

100    In s 558B, subsection (1)(a) expresses the wrong of another – the employer/franchisee – as a precondition to any liability for a franchisor arising. There is no doubt the liability is accessorial: it would not arise without the underlying contravention by an employer/franchisee. Of course, more must be established against the franchisor – in particular, control or supervision of the franchisee’s affairs (including its compliance with FWA requirements), and at least constructive knowledge of the employer/franchisee contraventions.

101    As the extrinsic material demonstrates, the standard in s 550, interpreted in the light of Yorke v Lucas, was seen by the Parliament as inappropriate for the franchisor/franchisee situation. Instead Parliament focussed on what kind of conduct by a franchisor should lead to legal responsibility for FWA contraventions by a franchisee. In doing so, Parliament settled on a precondition which is expressed as a fact that must be established: a contravention by an employer/franchisee.

102    Satisfaction of the subsection (1)(a) precondition might occur in a number of ways. In terms of determining the correct operation of s 558B, the operation of the provision needs to be considered in a range of scenarios.

103    There might have been an admission provided by an employer/franchisee for the purposes of avoiding contested civil proceedings against it, and the employer/franchisee may have consented to certain relief being granted against it. In that situation s 558B(1)(a) may be satisfied upon proof of the admission and any relief granted.

104    Or, an employer/franchisee might also be a respondent party to the civil proceeding brought against the franchisor. In that situation, unless there is a finding of contravention against the employer/franchisee in the proceeding, the precondition in s 558B(1)(a) will not be met and no liability could attach to the franchisor. If an employer/franchisee successfully defends the contravention allegations against it, by (amongst other matters) discharging the reverse onus in s 557C, s 558B cannot operate.

105    A third possible scenario is where an employer/franchisee is also a respondent party but is placed in liquidation, as Make Dough was here, and (again as here) the liquidators elect not to participate in a proceeding against the employer/franchisee company, leaving the allegations against the company essentially undefended.

106    In our view, s 557C may be engaged in this third scenario and is available to a moving party such as the FWO. That proposition is no more than an application of the terms of s 557C, which are engaged in “proceedings relating to a contravention by an employer”.

107    The phrase “relating to” is of wide import, but does require a connection to or between subject matter, and the nature of the relationship or connection may vary depending on the context and purpose in which the phrase is used , see generally: Oceanic Life Ltd v Chief Commissioner of Stamp Duties [1999] NSWCA 416; 154 FLR 129 at [56] (Fitzgerald JA) and the cases cited therein. Considering the context and purpose of s 558B in the legislative scheme, and the interdependence between franchisee and franchisor liabilities, a sufficient connection exists because the employer/franchisee contravention is the first element of s 558B. In our view, neither party’s submissions adequately recognised that as a matter of construction, a proceeding under s 558B against a franchisor could be a proceeding “relating to” a contravention by an employer.

108    The purpose and effect of s 557C is to impose a burden of proof on an employer. It does so by moving the burden in relation to the underlying facts alleged to constitute a contravention from an employee to an employer: see Woolworths Group at [129]-[130] (Perram J). The exclusion in s 557C(2) again operates in its terms on the provision by an employer of a “reasonable excuse”. There is no reason to apply its terms any differently when the employer is also a franchisee, and the franchisor liability provisions of the FWA are also in issue in a proceeding. Nor is there any objective basis in the legislative scheme to distinguish between solvent and insolvent employers/franchisees, or participating or non-participating employers/franchisees, bearing in mind active participation as a respondent party will be a forensic choice.

109    To that extent, BDH is correct in its submissions that in a s 558B proceeding, s 557C does not contemplate that a franchisor can assume the burden imposed on the employer/franchisee, nor that a franchisor can provide a “reasonable excuse” on behalf of the employer/franchisee for the purposes of s 557C(2) and the restoration of the ordinary legal burden of proof on the moving party for contraventions of civil remedy provisions listed in s 557C(3).

110    A fourth scenario is that the employer/franchisee is not a party at all. BDH contends this is addressed by s 558B(6). BDH submitted that this provision

makes it plain that a contravention of s 558B(1) does not require the “employer” to be a party to any litigation as against a responsible franchisor under s 558B, nor is it necessary for any orders be sought against the employer to seek orders as against a responsible franchisor.

111    Section 558B(6) provides:

To avoid doubt, a reference in paragraph (1)(a) or (2)(b) to a contravention by a franchisee entity or subsidiary includes any contravention whether or not an order has been sought or made against the franchisee entity or subsidiary under Division 2 for the contravention.

112    The effect of that provision is not quite as BDH contends. The provision clarifies that there need not be relief sought or granted against an employer/franchisee. For example, if leave to proceed against the employer/franchisee here (Make Dough) had not been granted, then the fact Make Dough was in liquidation would have prevented any relief being granted against it, but the effect of s 558B(6) is that this would not have prevented the proceeding against BDH. The same reasoning applies to the circumstances of Mr and Mrs Puglisi. There might be any number of other forensic reasons why a moving party (whether the FWO or another person) might choose not to seek relief against an employer/franchisee, but seek relief against a franchisor. Including, but not limited to, a forensic judgment about which respondent is more likely to be able to satisfy orders made by the Court.

113    On the other hand, an employer/franchisee might seek to be joined to a proceeding, even if no relief is sought against them, in order to be heard about the contraventions of civil remedy provisions alleged against it for the purposes of s 558B, but that again is a forensic decision in a given case, which does not affect the construction and operation of s 558B. In contrast, an employer/franchisee may elect not to participate in a proceeding, even if relief is sought against them. The operation and engagement of the provision cannot depend on the various forensic choices that might be made in any given piece of litigation.

114    We do not accept BDH’s contention that the policy and purpose behind s 557C cannot be intended to extend to franchisors in an alleged contravention of s 558B, because franchisors are not the persons with the record keeping obligations. First, as we have explained above, the whole point of s 558B was to impose liability on those franchisors which had the capacity to supervise and affect the performance of their franchisees in terms of their FWA obligations. The list of civil remedy provisions in s 558B(7) includes the record keeping obligations: see ss 558B(7)(n) and (o). There is nothing incompatible with the purpose of these provisions for s 557C to be given its express effect for the purpose of proving an employer/franchisee contravention as the first (but only the first) element of franchisor liability under s 558B. While BDH’s contentions described the policy and purpose of the provisions as being that “a defaulting employer should not profit from their default”, when s 558B is properly characterised as an accessorial liability provision, it is evidence that a further purpose of the provisions is to impose legal responsibility to franchisors for the defaults of employers/franchisees, where the franchisor (paraphrasing the key element) knew or could reasonably be expected to have known that the contravention by the franchisee entity would occur.

115    In its submissions BDH invites the Court to gloss over the potentially inconsistent outcomes in a trial where an applicant such as the FWO seeks to prove primary contraventions against an employer/franchisee and accessorial contraventions against a franchisor. However as soon as the context and purpose of s 558B is understood, it is apparent that this purpose would be undermined by giving s 557C no operation in a proceeding against a franchisor. In the franchisor proceeding, the focus is not on the primary contravention but on whether the preconditions set by Parliament for accessorial liability have been met: a significant degree of influence or control over the franchisee’s affairs, and an objective basis to know the franchisee contravention might occur. Contrary to BDH’s submissions, to set up a different burden of proof for an applicant (who may or may not be the FWO) in respect of the primary contravention from that which applies against an employer/franchisee itself (possibly in the same proceeding) would not give effect to the role of s 558B as an accessorial liability provision.

116    In this sense, it is also incorrect to describe a franchisor as “blameless”: see BDH reply submissions at [4]. Parliament intends to impose legal responsibility on a franchisor for a franchisee’s contraventions if all the statutory conditions are met. If “blame” be a relevant concept (which we doubt) and if all statutory conditions in s 558B are met, then a franchisor is liable because the franchisor has failed to exercise appropriate supervision and control over the franchisee’s affairs, leading to the civil remedy contraventions. To BDH’s contention that it would be open to a franchisor to seek a separate trial under r 9.06(b) of the Federal Court Rules 2011 (Cth) and thus avoid the operation of the reverse onus, it can be accepted that an application for separate trials is a forensic option available to a respondent party where an applicant is proceeding against more than one party. Here, we infer BDH means against both the employer/franchisee and the franchisor. It will be a matter for the Court whether any such application should be granted. Whether or not such a forensic decision would avoid the operation of s 557C in a separate proceeding would depend on the construction given to the phrase “in proceedings relating to a contravention by an employer of a civil remedy provision referred to in subsection (3)”. We have explained above that the phrase “relating to” requires a connection, but the authorities suggest the connection may arise in various ways. It is not appropriate to say more in these reasons about what is, for the moment, a hypothetical issue. Suffice to say that even if separate trials were ordered, there would remain a question whether the separate trial (against the franchisor) was nevertheless a “proceeding[s] relating to a contravention by an employer of a civil remedy provision referred to in subsection (3)”, because of the terms of s 558B(1)(a).

The primary judge’s reasoning about the franchisor assuming the burden of disproving the allegations against the employer

117    The primary judge found that, if s 557C is engaged in respect of the first element in s 558B(1)(a), its effect can be disengaged by the franchisor discharging the reverse onus imposed on the employer: see [42]-[47].

118    The primary judge relied upon the authorities and processes dealing with the rights of third parties to contest findings in a proceeding where their liability is affected by or may depend upon those findings.

119    The primary judge observed that basic principles of procedural fairness suggest that a franchisor would need to be able to contest the allegations about employer/franchisee contraventions (here, of an enterprise agreement, relying on s 50 of the FWA). His Honour referred to the reasons of Dixon CJ and Webb J in Commissioner of Police v Tanos (1958) 98 CLR 383 at 395-396. His Honour also drew on the third party procedures available in this Court:

[45]     In multi-party proceedings it is elementary that respondents with the same or similar interests may each contest the applicant’s claim. A close analogy for present purposes is the third-party procedure, in this Court by a cross-claim commenced by a respondent against a cross-respondent by invoking the procedure at r 15.01 of the Rules. The liability of a third-party (cross-respondent) is derivative. A party to a cross-claim may apply for an order permitting a cross-respondent to defend the claim of the applicant, or any other cross-claim, either alone or with another party: r 15.13. It is common for orders to be made in cross-claims to the effect that a cross-respondent has the right to cross-examine the applicant’s witnesses, to call evidence and to make submissions for the purpose of defending the primary claim. The whole point of the procedure is to bind the third-party to the outcome of the principal claim and to ensure that the third-party has full participation rights: Barclays Bank v Tom [1923] 1 KB 221 at 223-224, Scrutton LJ.

[46]     The third-party is entitled to “full procedural fairness” in defence of the primary claim: Insurance Exchange v Dooley (2000) 50 NSWLR 222; [2000] NSWCA 159 at [16], Handley JA.

120    As we understand it, the primary judge’s reasoning is that s 557C should not be construed as depriving the franchisor of a forensic choice to attempt to disprove the employer/franchisee contravention, irrespective of the position adopted by the employer/franchisee, and irrespective of whether the employer/franchisee is a party, or an active party, to the proceeding. His Honour then explains further, by reference to the Court’s powers in s 23 of the Federal Court of Australia Act 1976 (Cth), being a “broad power to make orders which are just and efficient in the administration of justice”, and citing Ilumba Pty Ltd v Malouf [2019] FCA 2095 at [15] (Derrington J).

121    We take the alleged contraventions which we have set out at [17] above as an example. To recall, the FWO alleges underpayments to workers who were 21 years and over or who were apprentices of any age, contending these workers were entitled to be paid a total of $901,521.62 by Make Dough, but were not paid the applicable rates under the enterprise agreement and were only paid a total of $817,564.93, resulting in a collective underpayment of $83,956.74 by Make Dough (SOC [83]). On the primary judge’s reasoning, one forensic choice open to BDH as franchisor in defending the case against it under s 558B would be, in substance or effect, to assume the burden cast by s 557C on Make Dough and seek to prove that this group of workers were not underpaid by the amount alleged (or, on one forensic choice) by any amount.

122    The parties did not address this aspect of his Honour’s reasoning on the appeal, focussing instead on the anterior question about whether s 557C could be engaged at all in allegations made against a franchisor. However, in other submissions BDH certainly did emphasise what it described as the potential denial of procedural fairness to franchisors if s 557C were engaged. His Honour’s analysis seeks to address that very issue. However care must be taken in invoking the observations in Tanos in relation to s 558B, because on the central aspect of this contravention – the conduct and position of the franchisor – a franchisor of course would be heard fully. Indeed, BDH’s defence in this proceeding illustrates the kinds of contentions that might be made.

123    Since the parties did not engage with this aspect of the primary judge’s reasoning, we do not consider it is appropriate to express a final opinion on whether and if so how a franchisor might seek to disprove allegations made against an employee/franchisee, adopting the burden imposed by s 557C(1). Suffice to say that we respectfully agree with the primary judge that s 557C should not be construed as precluding this course, and that s 23 of the FCA Act may well be a source of power by which the Court can make orders permitting a franchisor to assume this burden, if in its forensic decision making it chooses to apply to do so.

124    In the realities of alleged underpayments and FWA contraventions of the kind under consideration in this proceeding, one might wonder how often that forensic choice would be made, rather than concentrating on the aspects of s 558B which are about franchisor liability. Especially given there may be inaccurate, incomplete or perhaps even fraudulent records that have been kept by an employer, being the premise for s 557C to operate. Nevertheless, circumstances in individual proceedings vary enormously and it is not for the Court to speculate about when such a forensic decision might be made. To go further would, in our respectful opinion, be to enter into a realm of speculation that is unnecessary to determine the appeal.

The separate question and its answer

125    Separate questions often pose challenges not always apparent in the initial enthusiasm of the parties and the court to try to save time and resources by separating out an issue. There is no doubt that the separate question process can be of great utility and maintain a cost-effective approach to litigation: see Bass v Permanent Trustee Co Ltd [1999] HCA 9; 198 CLR 334 at [51].

126    However, there are also risks in fragmentation. In Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1 at [168]-[170], Kirby and Callinan JJ (Gaudron J agreeing at [52], at least in relation to tort claims) said:

[168]     The appeal should be allowed. However, we should not leave this case without making four comments. Both Mason P and Fitzgerald JA were critical of the course of limiting the issues to be tried that the primary judge adopted. In Perre v Apand Pty Ltd [(1999) 198 CLR 180] attention was drawn to difficulties that can be caused when that course is adopted. In light of the experience in this case, what was there said should be restated with emphasis. The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap.

    …

[170]    Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question.

[Citations removed]

127    As the FWO submitted, the separate question was framed by reference to particular allegations in the statement of claim, which focused on what was alleged against BDH, but also what was alleged against Make Dough in relation to contraventions by it of various civil remedy provisions, including record keeping. However the question then asked:

“does s 557C(1) of the Fair Work Act 2009 (Cth) apply as against the fourth respondent, and if so, how?”

128    As we have explained, since s 558B is an accessorial liability provision, of the same character as s 550, the contravention of the principal actor (or contravener) must be proven by the moving party. With the benefit of hindsight, the question might have been better framed as:

“does s 557C(1) of the Fair Work Act 2009 (Cth) apply in a proceeding against the fourth respondent for contravention of s 558B, and if so, how”

129    Nevertheless, as the question was framed, and read in the context of his Honour’s reasons, the answer given by the primary judge in the orders is correct. His Honour was correct in finding that s 557C “applies to establish the contravention referred to at s 588B(1)(a)”.

130    As to the second part of the answer given by the primary judge, as we have stated above, since the parties did not address the Court on this issue specifically, we do not consider it is necessary for the Court on appeal to express any concluded views. These matters should await trial, and a full forensic context.

Conclusion

131    Our rejection of the contentions advanced by BDH about the operation of s 557C in a proceeding where allegations under s 558B are made against a franchisor means that the appeal must be dismissed.

132    No orders as to costs were sought, or would be appropriate, given the terms of s 570 of the FWA.

Associate:

Dated:    16 October 2025

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