What is the Joint Employer Liability In Franchising?

The concept of joint employer liability in franchising has been a topic of legal and regulatory discussion for several years. Joint employer liability refers to a situation in which multiple entities can be held responsible for certain legal obligations, such as labor and employment laws, with respect to the same group of employees.

The issue of joint employer liability in franchising primarily revolves around the relationship between franchisors (the parent company that grants franchise rights) and franchisees (independent business owners who operate under the franchisor’s brand and system). The key question is whether a franchisor can be considered a joint employer with its franchisees for the purposes of legal responsibilities, particularly in areas such as wage and hour compliance, workplace safety, and employment discrimination.

The interpretation of joint employer liability has undergone changes and debates, influenced by court cases, regulatory actions, and legal decisions. The key developments include:

1. National Labor Relations Board (NLRB) Rulings

The NLRB issued a significant decision in 2015 (Browning-Ferris Industries) that expanded the definition of joint employer. It held that a company could be considered a joint employer if it exercised indirect control or had the potential to exercise control over another company’s employees. This raised concerns in the franchising industry about the potential for franchisors to be held jointly liable for franchisee labor violations.

2. Subsequent Revisions and Uncertainty

The NLRB’s 2015 ruling was revisited and revised under the Trump administration in 2017 (Hy-Brand Industrial Contractors), which reinstated a stricter joint employer standard requiring direct and immediate control. However, this revision was rescinded due to ethical concerns, leading to ongoing uncertainty about the applicable standard.

3. Legal Cases and Precedents

Various legal cases at the state and federal levels have debated the extent of a franchisor’s control over franchisee employees and whether such control qualifies for joint employer liability. Courts have examined factors such as operational control, hiring and firing authority, and supervision to determine joint employer status.

4. Regulatory Changes and Legislative Efforts

Different states have introduced legislation or pursued regulatory changes to address the joint employer liability issue, often seeking to provide clarity for franchisors and franchisees. At the federal level, there have been legislative efforts to define joint employer standards and provide more certainty for businesses.

5. Continued Debate and Advocacy

The debate over joint employer liability in franchising continues, with stakeholders expressing differing viewpoints. Franchisors generally argue for a clear and limited definition of joint employer status, while labor advocates often emphasize the potential for abuse and worker protection.

It’s important to note that the state of joint employer liability can vary based on jurisdiction and may have evolved since the publishing of this article.

For more information on how to franchise your business and how to manage Joint Employer Liability, contact Franchise Marketing Systems (FMS Franchise):

www.FMSFranchise.com