Protecting Your Workers – And You!
Protecting Your Workers – And You!
Opening and operating a franchise is an exciting and opportunistic time, for both franchisor and franchisee. But it’s important to remember you have responsibilities and obligations to meet to ensure your workers are protected if they have an accident or become ill as a result of their work. You also need to protect yourself.
As an industry worth over $146 billion in Australia1, and $46 billion in New Zealand2, franchising helps grow businesses, provide jobs and stimulate the economy. With over half a million people directly employed in franchises across both countries, it is vital that owners and operators are aware of their legal obligation to insure all workers for workers’ compensation insurance.
Despite improved safety practices and heightened awareness, workplace injuries do occur. In 2015/16, there were 104,770 serious workers’ compensation claims made across Australia3 and 37,188 across New Zealand4. Such claims, where a worker requires more than a week off work, can become expensive. Workers’ compensation exists for this reason. It’s there to reimburse injured workers for lost wages, and help rehabilitate them by providing reasonable medical expenses and treatment with the aim of returning them to work. In Australia and New Zealand, workers’ compensation insurance is a legal requirement. In Western Australia, employers must have workers’ compensation insurance for anyone they employ who is defined as a ‘worker’. A worker includes full-time, parttime, casual, seasonal and piece workers; workers on commission; working directors; family members; and in some circumstancescontractors and sub-contractors. It is not always immediately clear whether a person engaged by your business would be considered as a worker, so it is important to seek advice on any grey areas.
In a situation where an employer, in this case a franchisee, does not have workers’ compensation insurance and their worker is injured, they are held personally liable for the claim, and this can be financially devastating for their business.
In 2016, a worker was injured in a Perth franchise and the franchisee did not have workers’ compensation insurance. The worker sustained significant injuries and had to make a claim against the franchisee. The claim resulted in a $45,071 settlement, and the worker was also paid $5,400 in weekly payments and $2,528 for expenses prior to settlement. This left the franchisee $53,000 out of pocket, which could easily have been avoided if they held workers’ compensation insurance.
But regardless of whether a worker is injured, there are penalties in WA for simply operating a business and employing workers without workers’ compensation insurance. Penalties can be in the form of fines or prosecution if employers are found to be without a valid workers’ compensation policy ($5,000 per worker), or fail to make payments to an injured worker ($2,000 per late payment). Additional costs may also include avoided insurance premiums going back five years. In 2017, the following Perth based franchise businesses were prosecuted and received a criminal record for failing to have workers’ compensation insurance whilst operating a business and employing workers:
- Retail massage business penalised $24,074
- Café penalised $25,275
- Self-storage company penalised $20,914
- Pizza store penalised $19,414.
Avoiding such significant consequences is not difficult, and is as simple as contacting your insurer or insurance broker to ensure you have a workers’ compensation policy in place for all your workers.
One of WorkCover WA’s responsibilities is to investigate and inspect workplaces who we believe are uninsured, and franchises are often investigated. What we’ve noticed is that many franchisees who are uninsured are under the impression they do have workers’ compensation, and these assumptions have occurred for a number of reasons:
“Doesn’t the franchisor arrange cover?”
This is a question we’ve heard from a lot of franchisees we speak to, when we find they don’t have a current policy in place, and they believe the franchisor or franchisor’s broker has already arranged cover for the workers. It is the employer’s duty to ensure they have a current workers’ compensation policy in place, and in franchising arrangements, the franchisee is considered to be the employer because:
- they set the workers’ hours;
- they supervise and control workers;
- they pay the workers’ wages; and
- they have the right to hire and dismiss them.
If you rely on a third party to arrange insurance cover, like an insurance broker,you should follow up and ensure current coverage is in place by obtaining a Certificate of Currency. In Western Australia, this is issued by a WorkCover WA approved insurer. Not being able to produce a Certificate of Currency is considered an offence under State legislation. Make sure you review your contract with your franchisor, and contact your insurer or broker to confirm you have adequate coverage.
“I thought my public liability insurance covers workers’ compensation.”
Public liability insurance helps protect a business against the financial risk of being liable for negligence, for example if food or drink sold by a franchisee causes serious illness to a customer. Workers’ compensation insurance is not covered by public liability insurance, because it operates under a ‘no fault system’. That is, an injured worker does not need to prove negligence on your behalf, like they would for public liability insurance, to make a claim. You will need both types of insurance to adequately meet your obligations as an employer.
“I have a business insurance package. Doesn’t that include workers’ compensation?”
Business insurance packages typically cover risks to property damage, interruption to business income, third party injury or property damage and machinery or electronic breakdown. Many business packages exclude workers’ compensation liability, and franchisees involved can face penalties for not having adequate insurance. If you currently have a business insurance package, make sure you contact your insurer or broker to check you have the correct coverage.
“I thought my workers’ compensation insurance automatically renews each year.”
Unfortunately, workers’ compensation does not automatically renew and it’s your responsibility to remember when your coverage expires. This means you need to obtain a new Certificate of Currency each year. A good way to remember when your coverage expires is to put the expiry date in your work diary or calendar as soon as you receive the new Certificate, or put in a reminder a couple of weeks before it expires to contact your broker or insurer.
If you’re now a little unsure whether you have adequate workers’ compensation, or haven’t previously considered it, please contact your insurer or broker to arrange for coverage or to confirm the currency of your policy. For franchisees in Western Australia, you can call our Advice and Assistance line on 1300 794 744 if you have any questions. The WorkCover WA website also has a range of resources, including short educational videos and publications that can assist you.
We want the franchising industry to continue to thrive and grow, so it’s essential all people involved in these arrangements are aware of their obligations and have adequate insurance in place to look after themselves and their workers.
1 Franchise Council of Australia, Franchising Australia 2016, January 2018
2 Franchise Association of New Zealand, Franchising New Zealand 2016, January 2018
3 Safe Work Australia: Australian Workers’ Compensation Statistics 2015-16, January 2018
4 Accident Compensation Corporation New Zealand: Statistics on our claims, March 2018
Stephen Psaila-Savona has 23 years’ experience in the Western Australian public sector, and is the General Manager Regulatory Services at WorkCover WA.
WorkCover WA is the government agency responsible for overseeing and administering the workers’ compensation and injury management scheme in Western Australia.
1300 794 744