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Entries in joint employer liability (2)

Friday
Aug252017

Six Ways Franchisors Can Reduce Joint Employer Liability Risk

CalBar Certified Franchise & Distribution Law Specialist

 

by Barry Kurtz

818-907-3006

 

In January 2016, the National Labor Relations Board (NLRB) determined that indirect control or the reserved right to control, even if unexercised, could be sufficient grounds to find a joint employer relationship between a franchisor and a franchisee. As a result, employees of McDonald’s, Dominos and many other systems initiated class action and individual lawsuits, naming the franchisor as a “joint employer” in wage and hour and other complaints.

Last June the Department of Labor withdrew the NLRB guidance.

Though good news, it doesn’t necessarily change the law – the action simply reflects the current administration’s friendlier attitudes towards business. But franchisors are still at risk. The  multitude of civil and administrative actions pending against franchisors in various courts on the joint employer issue are not affected by the Department’s action.

Because joint employer liability is still a risk for franchisors, consider taking these precautions:

1. Names: Prohibit franchisees from using your brand name when establishing their franchisee-entities; and consider enforcing the rule for existing franchisees as well as new owners. Virtually all Franchise Agreements forbid unit owners from doing so, but these provisions are not uniformly enforced.

2. Employment Materials: Require franchisees to prominently include their own entity name (rather than the system’s brand or logo) on employment applications, vendor and utility applications, checks, stationary, business licenses, employee manuals and the like.

3. Ownership: Require franchisees to post placards stating units are independently owned and operated under a license from you. If practical, consider providing your franchisees with such placards to maintain uniformity of message within your system.

4. Acknowledgements: Require franchisees to obtain written acknowledgments from all existing and new employees that that state the employee is employed by the franchisee and only the franchisee, and that the franchisor has no direct or indirect control over hiring, firing, compensation, discipline, supervision or scheduling policies. Again, consider providing franchisees with a standard-form acknowledgment to maintain uniformity if practical.

5. Reviews: Examine the various controls you have over operations in your franchise agreements, operating manuals and by custom and practice. Would you issue a default notice if a currently required action was not performed? If not, consider eliminating or modifying requirements that are not essential to the protection of your brand and brand standards.

6. Training: Educate field personnel. Teach them to avoid involvement in franchisees’ employment matters and the direct training of franchisees’ employees. Field personnel should be advised to direct franchisees to third-party human resource service providers of the franchisees’ choice for assistance and to offer training and support to franchisees and management personnel but not directly to staff employees.

Please let us know if you have any questions regarding these matters.

Barry Kurtz is the Chair of our Franchise & Distribution Practice Group.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Jun142017

Franchise Law: Burden of Joint Employer Just Got a Little Lighter

Franchise LawyerChair, Franchise & Distribution Practice Group

 

by Barry Kurtz

818-907-3006

 

 

Direct control, indirect control…these are the employment litigation phrases that had franchisors cowering in duck-and-cover positions over the last few years. But the Department of Labor just issued a statement to breathe new life into the franchise industry.

The dangerous era of joint employer litigation isn’t completely over yet. Franchisors should still take protective measures as they can. Still, there’s a glimmer of hope in the trenches:

Last week the DOL announced a retreat of sorts by withdrawing its interpretation of the Fair Labor Standards Act (FLSA). This January 2016 interpretation was the one that defined an employer as an entity or individual who has “indirect control” over an employee. In the franchise context, it meant courts were looking at whether or not an employee was economically dependent on the franchisor to determine whether that franchisor could be deemed liable for claims as a joint employer. (See our Franchise & Distribution Newsletters for more on Joint Employer Litigation.)

The NLRB was the first agency to take a broad stance on the issue of joint employment, most notably in 2015 in the Browning-Ferris Industries decision. In that case, the NLRB decided entities may be joint employers if:

(1) They are both employers within the meaning of the common law; and

(2) They share or codetermine those matters governing the essential terms and conditions of employment. In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will – among other factors  consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so. 

DOL’s rescinding of guidance on this issue doesn’t necessarily change the law, it simply reflects the current government’s friendlier attitudes towards business.

So franchisors, take a deep breath and relax a little. But not too much, as the war on joint employer liability still wages on.

Barry Kurtz is a State Bar of California Certified Specialist in Franchise & Distribution Law.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

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