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“Franchisors: Take Note of New Joint Employment Guidance”

Franchise Law Insider By David A. Beyer, David B. Kern, and Christopher L. Nickels

The Department of Labor (“DOL”) has weighed in on the joint employer issue, releasing an Administrator’s Interpretation (“AI”) setting forth the DOL’s position as it relates to joint employment under the Fair Labor Standards Act (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act.

The joint employment concept under the FLSA is not new and the AI does not explicitly target franchising relationships, but it is important for franchisors to continue to review their relationships with franchisee’s employees in light of this latest foray (see our previous blog posts).

The DOL asserts that the AI is intended for a wide range of industries and is not focused on franchise relationships, stating:

The form of business organization, such as franchise, does not necessarily indicate whether joint employment is present. Indeed, the existence of a franchise relationship in and of itself, does not create joint employment.

Joint employment exposes a company to expansive liability. With wage and hour class actions on the rise, it would not be surprising if plaintiffs’ lawyers rely on this AI to name both the franchisee and franchisor as defendants in these types of lawsuits.

This new guidance is consistent with the aggressive joint employer positions taken by the NLRB and other branches of the DOL including OSHA. Ultimately, a determination of joint employment will be made on the specific factual situation. The DOL’s goal is to push the boundaries of joint employment and to hold companies that benefit from work performed by another entity’s employees equally responsible for employment and labor law violations.

While the overall goal of protecting abused employees and ensuring labor laws are not circumvented by indirect employment arrangements may certainly be laudable, the standards and analysis utilized are more likely to ensnare innocent businesses.

For a more detailed analysis, please see our client alert.

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