Franchises Must Avoid Joint Employer Liability


Today, franchises must take all the steps necessary to avoid joint employer issues. This issue originates with the National Labor Relations Board and is affecting multiples of franchises, including McDonald’s and other restaurant franchise brands.

Avoiding Joint Employer Issues

What is a Joint Employer Liability?

A joint employer liability can happen when one company may end up supervising what at first glance could appear to be another company’s employees. If a company has direct and immediate control over another company’s employees, it will be considered a joint employer.

An example of this is when an airline may use an outsourcing company to provide baggage handlers at airports or when a franchisor of fast food restaurants may train its franchisees cooks.

One instance of a fast food chain running into this issue with its franchisees is McDonalds. The National Labor Relations Board determined that McDonalds was a joint employer with franchisees and both McDonalds and its franchisees have been suffering ever since.

Lexology, the legal blog, explained why this happened with McDonalds in a post and their explanation can help you choose a franchise that won’t have the same problem McDonalds is having.

As you go over the requirements for any franchise you are considering, look at the amount of control the franchisor has over its franchisees. You will want to look at the hiring, managing and firing decisions. Requiring a uniform is not the same as having control over daily decisions about employees and there are legal decisions supporting that difference.

Anything beyond that brand protection can be a sign of trouble. Make sure to take the time to discuss it with the franchisor.

What Isn’t A Joint Employer Liability?

Freshii, which is a Canadian fast casual restaurant franchise, was determined not to be a joint employer by The National Labor Relations Board, so the Freshii franchisees didn’t get dragged into a general anti-Freshii morass and each franchisee has been responsible for his or her own behavior toward workers.

Freshii didn’t participate in any aspect of hiring for franchisees. When people applied for jobs through the Freshii website, the corporate office just sent all the applications along without any screening.

When it cam to scheduling workers, Freshii also had no participation. Having a scheduling algorithm built into the franchisor’s business management software can be very helpful. However, it can also create problems.

The Freshii manual had suggestions for hiring, training, supervision and more, but franchisees don’t have to follow the suggestions. The franchisees also don’t have to get permission to change workers’ wages or any other aspects of their relationships with their workers.

Freshii also never made any recommendations about unions or unionization.

How Franchises Can Avoid Joint Employer Liability

  • Make sure the franchise is not deemed a joint employer when purchasing it.
  • When you own a franchise, you want to make sure that you clearly post and celebrate the fact that your franchise is locally owned. A sign saying, “Independently Owned and Operated” is something that belongs on your wall.
  • Something else to remember is not to use job application forms that imply that the franchisor is hiring your team members. Use your franchise name, not the name of the corporation, on evaluation forms and hiring contracts as well.
  • You will also want to make sure that your workers understand that they are part of your team, not part of the corporate office’s team. Be careful with comments stating that corporate is requiring you to let someone go, those kinds of remarks can come back to haunt you.
  • Franchises must ensure that employee manuals and other documents clearly state that you and not the corporate office are in charge of hiring and firing staff members.
  • Another thing franchises will want to avoid using software that can interfere in any way with employee matters. One example of this is software that uses an algorithm to make schedule changes in real time. Any corporate software that monitors employees can also cause problems in the future.
  • Finally, don’t allow franchisor representatives to conduct employee evaluations or otherwise to behave like your workers’ boss.

When purchasing a franchise, remember that every business investment involves some risk. Being aware of possible issues and planning ahead to avoid them is the best way to reduce the risk.


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