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Franchises breathe a sigh of relief

Under the previous presidential administration, franchisors faced increasing pressure through “joint employer” classifications with their franchisees. Sharing employer status with individual and smaller business owners opened them up for more lawsuits over workplace discrimination or injuries.

Following a three-sentence announcement by the Department of Labor on June 7, franchisors are now breathing a sigh of relief. Conversely, franchise employees and customers who sue franchise businesses likely will see a significant reduction in the money or damages they pursue could see significant reductions in money and other damages.

Labor announced a withdrawal from the U.S. Department of Labor’s 2015 and 2016 informal guidelines that cover joint employment and independent contractors. The department has reversed attempts by the prior administration to attach a greater liability to franchisors or contractors.

It was welcome news to businesses in the restaurant industry that account for a vast number of franchises.

With certain exceptions, franchises are largely owned and operated by small, local businesses. Most do not enjoy the largesse of their franchisors whose “deep pockets” often make them the default target for lawsuits.

Franchise companies advise franchisees on discrimination, harassment and other policies. That is mostly where their involvement ends. Largely, they shy away from getting involved in issues that occur at individual locations.

The Labor Department clarified that the responsibilities to employers under the Fair Labor Standards and the Migrant and Seasonal Agricultural Worker Protection Acts will not change. The department will continue full and fair enforcement of all laws within its jurisdiction.

 

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