Fair Work Ombudsman v Chatime Australia Pty Ltd

The Fair Work Ombudsman (FWO) brought proceedings against Chatime Australia Pty Ltd (Chatime) and its franchisee, Chatime Australia Pty Ltd (the franchisee), alleging contraventions of the *Fair Work Act 2009* (Cth) (the Act). The dispute concerned allegations that Chatime and its franchisee had failed to pay minimum lawful entitlements to employees at a Chatime store located in Melbourne. The FWO contended that Chatime was involved in the contraventions by the franchisee, and that both entities were therefore liable for the underpayments.

The primary legal issue before the court was whether Chatime Australia Pty Ltd was "involved in" the contraventions of the *Fair Work Act 2009* (Cth) by its franchisee, within the meaning of section 550 of the Act. This involved determining whether Chatime had the requisite knowledge or intention to be considered involved in the franchisee's failure to pay minimum lawful entitlements to its employees. The court was required to assess Chatime's role in the operational and financial aspects of the franchisee's business, and whether this involvement amounted to being knowingly concerned in, or a party to, the contraventions.

Manousaridis J found that Chatime was involved in the contraventions by the franchisee. The court reasoned that Chatime's extensive control over the franchisee's operations, including pricing, staffing, and financial management, demonstrated a level of involvement that extended beyond a mere franchisor-franchisee relationship. Chatime's ability to dictate operational procedures and its knowledge of the financial pressures faced by franchisees, coupled with its role in setting the pricing structure which contributed to the underpayments, led the court to conclude that Chatime was knowingly concerned in, or a party to, the contraventions. The court applied the principles of secondary liability under section 550 of the Act, focusing on the degree of knowledge and participation of Chatime in the franchisee's unlawful conduct.

The court ordered Chatime Australia Pty Ltd to pay pecuniary penalties for its involvement in the contraventions.