Franchise 101: 68 Steps to Reduce Risk of Joint Employer Liability

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June 2016

David Gurnick in The Franchise Law Journal

Regarding trademark disputes: “…it may seem to lawyers and courts that there is not a readily accessible legal lexicon to describe the sounds and appearances of words and phrases. However, this is a misconception.”

Click to read: Technical Terms for Comparative Trademark Analysis

Reducing the Risks of Joint Employer Liability

With the risk of franchisors being jointly liable for obligations to franchisee employees, and franchisees exposed to unionization of employees if their franchisor is a joint employer, we present this list of 68 steps every franchisor and franchisee can, and should consider to reduce the risk of joint co-employer liability.

These steps also build relations with customers, communities, employees and suppliers and can help improve and expand successful franchised businesses and systems.

  1. Franchisor’s entity name can be different than franchise brand.
  2. Franchisee’s entity name can be different than franchise brand.
  3. Business card on counter can state franchisee’s name and “independent franchise owner.”
  4. Plaque in customer area can identify franchisee as independent franchise owner (with owner’s photo).
  5. Local ownership and identity of independent franchise owner(s) can be promoted in the community.
  6. Franchisor can participate in national and regional associations, making sure to promote pride of independent ownership of franchise outlets.
  7. Franchisee owner can be active in local chambers of commerce and trade associations, making sure to communicate pride of independent ownership.
  8. Store-level customer receipts can state franchisee’s entity name and “each location independently owned and operated.”
  9. Store can use stationery that identifies independent franchise owner.
  10. Store level brochures can identify independent franchise owner.
  11. Franchise owner(s) can be present at store(s) daily or periodically, up front, with “owner” name tag, greeting customers.
  12. Store can display certificates of training, awards and honors identifying independent franchise owner.
  13. Each franchisee can be a corporation or limited liability company, not an individual.
  14. Local store advertising can state that location is independently owned and operated.
  15. Local advertising can include franchisee’s name and photo.
  16. Media events and community public relations can discuss and show photos of all the local independent franchise owners.
  17. Franchisor’s website can emphasize independent ownership, e.g., picturing the independent owner and providing a biography, with the link for each location.
  18. Franchisor’s social media can explain independent ownership.
  19. Franchisor’s social media can feature a rotating biography of each independent owner.
  20. Franchisee can educate its employees in new hire orientation as to nature of franchise relationship.
  21. Franchisee can educate its employees that they work for the franchisee.
  22. Back-of-store interior signs can remind employees they work for the franchisee.
  23. Business bank accounts and checks can bear franchisee’s name, not franchisor’s name or logo.
  24. Variations can be encouraged in store layout/design letting each franchise location look a little different while adhering to brand requirements.
  25. Franchisor can avoid instructing or directing franchisee’s employees, but communicate to franchise owner.
  26. Employment application can state franchisee’s name and note that applicant is applying to franchisee for employment.
  27. Franchisee can make its own hiring decisions.
  28. Franchisee can set its own employee compensation policies.
  29. Franchisee can make its own discipline and termination decisions.
  30. Franchisor can instruct field personnel to avoid advising franchisees on any employment matters.
  31. Franchise agreement can state parties’ mutual intent that franchisee makes all decisions on firing, firing, compensation and disciplining franchisee’s employees.
  32. Franchise agreement can state parties’ mutual intent to be independent contractors.
  33. National and regional advertising and website can state “each location is independently owned and operated.”
  34. Franchisor can remove from Operating Manual those controls or requirements that are not essential to protection and uniformity of the brand.
  35. Franchisor can provide training programs only for franchisee’s supervisorial and managerial employees and require franchisee to train its staff.
  36. Franchisees can be free to purchase supplies from any source as to which standardization is not essential.
  37. Alternative supplier options can be provided to franchisees for supplies that are essential to brand.
  38. Franchisees can remind suppliers their customer is the franchisee, not the franchisor.
  39. Utility accounts can be in franchisee’s name.
  40. Premises can be leased by the franchisee.
  41. Franchisee can do its own scheduling of employee working hours.
  42. Franchisee can set its own hours of operation.
  43. Franchisor can remove from franchise agreement all controls or requirements that are not essential to protection and uniformity of brand.
  44. Franchisee can have choices of several alternative uniform styles and dress codes.
  45. Franchisee can have some variation in goods and services offered per local preferences while still adhering to brand requirements.
  46. Franchisee can set own prices while still adhering to brand requirements per applicable law.
  47. Franchisee can consult its own legal counsel on questions about treatment of employees.
  48. Franchisees can have their own employment manuals and not use franchisor’s.
  49. Franchisor can obtain EPLI insurance.
  50. Franchisor can require franchisees to obtain EPLI insurance.
  51. Franchise Agreement can require franchisees to indemnify franchisor for wage and hour and other labor and employment claims by its employees.
  52. Encourage franchisees to be active in community, support community events, speak to city council and legislative bodies, always noting independent owner status.
  53. Franchisor can provide franchisees pre-written news columns about the franchise, that franchisees can get published in local community newspapers.
  54. Product packaging can note independent ownership, and identify independent franchise owner(s).
  55. Franchisees can have their workers sign a disclaimer acknowledging which person/entity they work for.
  56. Franchisee’s name can be stated when a live person answers franchisee’s phone.
  57. Franchisee’s recorded phone message can state franchisee’s name.
  58. National and regional brand advertising can note each location is (or many locations are) independently owned and operated.
  59. Regional cooperatives in advertising, can state each location is independently owned and operated.
  60. Beyond disclaimers, weave fact of independent, local ownership into message, content and theme of brand advertising.
  61. On website’s list of franchise locations, list owner’s name with each location.
  62. Franchisees should file fictitious business name statement per state and local law.
  63. Franchisee’s independent name should appear on both paycheck and separate stub the employee retains.
  64. Franchisor should not obtain or maintain records or files of franchisee employees.
  65. Franchisor can avoid operating at or from the same location as a franchisee.
  66. Franchisees can pay their liability, workers compensation and other insurance policy premiums on time and not let insurance lapse.
  67. Franchisees can employ one or more assistants or helpers.
  68. At annual franchise convention, remind franchisees of independent ownership.


This communication published by Lewitt Hackman is intended as general information and may not be relied upon as legal advice, which can only be given by a lawyer based upon all the relevant facts and circumstances of a particular situation. Copyright Lewitt Hackman 2016. All Rights Reserved.




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