A Warning for Employers and Franchisors

On 1 August 2025, the Federal Court (the Court) in Magar v Khan [2025] FCA 874, found that the applicant Ms Magar, was sexually harassed and victimised by the principal of a Mad Mex franchise in Sydney’s Hills District.

The Court accepted Ms Magar’s evidence regarding several incidents involving Mr Khan. She described an incident where Mr Khan made intrusive and sexualised comments about a bruise on her neck and she recounted ongoing sexual remarks made by Mr Khan and other staff at the store. Justice Bromwich noted that workplace culture at the store tolerated overt and outspoken sexist and boorish behaviour, both collectively and individually. Senior staff, including Mr Khan, fostered an environment that was indifferent to sexist conduct and, in fact, was reticent or even conducive to its continuation. The Court concluded that such workplace culture can normalise sexualised behaviour towards women and potentially escalate into more severe behaviour, such as sexual harassment.

The Court also delved into the notion of sex-based harassment (which is distinct from sexual harassment), as outlined in section 28AA of the Sex Discrimination Act 1984 (Cth) (SDA). This provision, introduced following the Respect@Work inquiry in 2020, addresses unwelcome conduct based on sex that is demeaning, intimidating, or offensive. However, the Court determined that the conduct in question did not meet this standard, as it was not considered harassment “in relation to” Ms Magar within the meaning of the provision.

One striking aspect of the case was that Ms Magar had to reach out via LinkedIn to Mad Mex’s People and Culture Manager to lodge her complaint. This raised two important questions:

• why was there no clear internal pathway for employees to report serious workplace misconduct, including to the franchisor?
• was this a training failure, or a lack of visibility in franchise oversight?

Even where there is no direct liability between an employee and a franchisor, from a risk management perspective, franchisors should take note because potential harm to brand reputation, workplace culture and employee safety require the franchisor to provide clear escalation pathways for workplace complaints and to proactively engage in the monitoring of franchisees’ compliance with workplace laws. Franchisors should also consider reviewing its franchise arrangements to ensure it has visibility over workplace conduct in franchisee stores and clearly sets out consequences for breach.

After Ms Magar lodged internal complaints to the franchisor, she also received threats of defamation proceedings from Mr Khan’s personal lawyers. The Court found this tactic amounted to victimisation under section47A of the SDA.

The outcome: a record award for general damages:

The Court awarded Ms Magar:

• $160,000 in general damages for sexual harassment;

• $10,000 in general damages for victimisation;
• $5,000 for aggravated damages;
• $90,000 for past economic loss; and
• $40,000 for future economic loss.

Total: $305,000

Key lessons for employers & franchisors

Employers have a positive duty to take proactive, reasonable and proportionate measures to eliminate unlawful sex discrimination. This responsibility extends to franchisors as it seeks to manage potential damage to its reputation.

Measures should include:

• implementing clear sexual harassment policies
• offering robust escalations pathways for workplace complaints and providing visible contacts across organisational levels including to the franchisor;
• reviewing franchise contracts and oversight to ensure workplace complaints can be received and acted upon quickly; and
• providing workplace behaviour training to staff and franchisees, with a focus on understanding, reporting and preventing sexual harassment.