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The Labor Dish Mama said there'd be days like this

Franchisor Liability For Franchisee Employees: Damn Weasels

Weasel words, not epithets for employees with legal claims, are the problem. “…[C]ourts have been nearly uniform in holding that a franchisor should not be deemed to be an ‘employer’ … when plaintiff works for an independently owned franchise.”  McFarland v. Breads Of The World, 2011 WL 801815 (S.D. Ohio 2011) (granting franchisor Panera’s motion for summary judgment in Title VII case) (emphasis added). 

With qualifiers like this, what’s a franchisor to do?  Perhaps, like weasels (the animals), the best approach is to follow the prey cleverly into their own burrow. Let’s try chasing down those tunnels for guidance.

McFarland acknowledged that Panera was safe because it did not write or enforce employment policies for its franchisees: “Select courts have found a franchisor to be an employer … only after determining that the franchisor required the franchisee to adopt specific employment policies.” (citations omitted).  Indeed, Meyers v Garfield & Johnson Enterprises, 679 F. Supp. 2d 598 (E.D. Pa. 2010) confirms that advice.  There, Jackson Hewitt’s motion to dismiss was denied because it did too much, including imposing its own code of conduct for all franchisee employees. 

What else should franchisors avoid?   In Courtland v. GCEP-Surprise, LLC, 2013 WL 3894981 (D. Ariz. 2013), Buffalo Wild Wings International (“BWWI”) won summary judgment because “[i]mportantly, no training was provided regarding the hire retention, discipline, compensation, training or recordkeeping for employees…BWWI ‘does not dictate any policies, procedures, or behavior of [its] franchisees’ in relation to employment matters.”  In contrast, in Orozco v. Plackis, 2013 WL 3306844 (W.D. Tex. 2013) (affirming jury verdict in FLSA case against franchisor), entrepreneur-chef Craig Plackis waded into too much including employment-related training:

Plackis testified it was his role and responsibility to train his franchisees…, including ways to minimize labor costs. [O]ne way in which he did this was to examine the work schedules for his franchise locations. [H]e sat down with [one franchisee] and advised her on cutting employees and hours worked.

Despite a “nearly uniform rule,” franchisors face risk in struggling to maintain quality-control and market reputation without crossing into being an “employer.”  This may be a greater challenge for emerging operations but even established franchisors can get hit as a recent $1.3 million dollar settlement involving a national franchisor evidences. Further complicating matters is that different jurisdictions and different statutes apply different tests of  liability. 

What else should a judicious franchisor avoid in order to escape being the employer of strangers?

  • DO NOT control the hiring, firing, promotions, or demotions of franchisee employees;
  • DO NOT control the pay rates and classifications of franchisee employees;
  • DO NOT set, control or modify the employment conditions of the franchisee employees (e.g., scheduling, meal and rest breaks, timekeeping procedures, etc.);
  • DO NOT micromanage, train, or directly supervise the franchisee employees;
  • DO NOT set the employment policies for franchisees; and
  • DO NOT run the payroll and benefits or maintain the employment records of franchisee employees.
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