Full Federal Court confirms reverse onus of proof applies to franchisors liability proceedings

Handed down on 16 October 2025, the Full Federal Court's unanimous decision in Bakers Delight Holdings Ltd v Fair Work Ombudsman [2025] FCAFC 144 confirmed that the 'reverse onus' provisions, under section 557C of the Fair Work Act 2009 (Cth), can apply to franchisor liability proceedings, and are not confined to employer franchisees.

In practical terms, this means that where a franchisee/employer fails to keep proper employment records, the franchisor can be required to prove that underpayments did not occur, even if the franchisee is in liquidation and unable to defend the allegations.

This case arose from proceedings against a Tasmanian franchisee (now in liquidation) and Bakers Delight as franchisor and concerned alleged underpayments totalling over $642,000 to 88 employees.  The Court rejected arguments that imposing this burden on blameless franchisors would be unjust, noting specifically that the extended liability provisions were designed to capture franchisors who were able to supervise and influence franchisees’ conduct.

While the substantive underpayment claims have yet to be determined, this ruling on the reverse onus and the franchisor presumed liability for its franchisees under the Fair Work Act, represents something of a strategic win for the Fair Work Ombudsman.

Key Takeaways for Franchisors:

• Liability consequences of poor record keeping by your franchisees in underpayment cases can flow back to you. Maximum penalties can reach $4.95 million or three times the value of the underpayments.

  
  

• Because of the reverse onus under the Fair Work Act, liability is presumed to exist - unless you can prove otherwise.

  
  

• Review your systems and controls for monitoring and checking your franchisee compliance over rostering, time and attendance and pay records. What level of assurance do you have from that?

  
  

•  Consider whether your franchise agreements have addressed the Fair Work Act’s pay record keeping requirements. Do the contractual arrangements deal with and allocate the risks adequately between the parties?

  
  

• Could you demonstrate suitable support and training for Fair Work Act wage compliance is in place across franchise arrangements and the network?

If you would like to know more about the issues raised in this article, or wish to discuss any employment law issues please contact:

Mark Flaherty  +61 423 576 052

Grace Brunton-Makeham  +61 424 839 981

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This is commentary published by Makeham Flaherty for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories.

Makeham Flaherty 2025.