Joint Employment, Temporary Employees & Franchises
Picture calamity at a local fast food restaurant: A worker suffers a serious injury in a motor vehicle accident while delivering food; a group of workers claim of inadequate payment of hourly wages; a disabled worker alleges discrimination and failure to accommodate. Can these workers reach past the limited resources of the restaurant owner to the franchisor corporation? A growing movement is making this appear more and more possible.
Joint employment has traditionally been defined as occurring when two employers share control and supervision of workers. This type of scenario was often limited to certain industries or unique situations, such as truck leasing cases or where one manager oversees several store locations that are each organized as separate companies. An entity that is considered a joint employer can be liable for complying with federal and state law as it relates to the employees of the joint venture. This includes payment for injuries sustained on the job, claims of discrimination, wage and hour law compliance, etc.
In the past, each federal or state agency maintained its own definition of joint employment, and as such, its own test for when this was present. While different, most of these tests sought to discern the intention of the parties involved and measured the amount of direct control over the employees by the entities. Recently, however, this has been changing.
In Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (August 27, 2015), the National Labor Relations Board reconsidered its standard of joint employment, and greatly expanded its definition “to better effectuate the purposes of the Act in the current economic landscape.” It used the new definition to impose employer liability on a recycling company for temporary workers provided by a subcontractor. The NLRB’s new expanded test allowed for the finding of a joint employment relationship where there was only indirect control, such as the ability to change working conditions by providing direction to the subcontractor, or even fully unexercisedcontrol, if there was potential for such control to be exercised. Its specific test includes an evaluation of (1) whether a common law employment relationship exists; and (2) whether the potential joint employer “possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful bargaining.”
The NLRB has gone even further in this effort, and is in process of pursuing an investigation into unfair labor practices allegations against McDonald’s Corporation, asserting that it is a joint employer of workers at franchised restaurants. Under this scenario, the alleged joint employer has even less control than in Browning-Ferris, as it does not have a presence at any of the franchise locations.
Pennsylvania has unsuccessfully attempted a similar expansion of its test under the Workers’ Compensation Act in Saladworks, LLC v. Workers’ Compensation Appeal Board (Gaudioso), 124 A.3d 790 (Pa.Cmwlth. 2015). In this case, the Commonwealth’s Uninsured Employer Guarantee Fund attempted to reach past a franchisee employer to join and assert liability against a franchisor under the Statutory Employer section of the Workers’ Compensation Act. Crucial in this case were the details of the Franchise Agreement, which established the different duties of the franchisor and franchisee. The Commonwealth Court used this to determine that was a sufficient separation between the two parties and reversed the award of liability against the franchisor. While the case was appealed and accepted for review by the Supreme Court, this was just reversed in an order dated December 16, 2016. As such, the underlying opinion remains good law at present, despite the continued attempts to expand the reach of this liability.
In order to protect against liability being asserted for joint employment, it is important that the details of your business operations and franchise agreement be reviewed in detail. As was the case in Saladworks, the details of the Franchise Agreement are extremely important in this process. It is recommended that any such agreement be reviewed in light of this case to ensure it adequately protects each party. Please feel free to contact us if we can assist in this process.
