Franchises and small contractors are often small, cash-starved enterprises, making it difficult for disgruntled employees to recover their losses in wage disputes. This fact led to an Obama era labor department effort to hold franchising corporations liable in these cases.
A bit of the history…
In 2016, the Obama administration issued what were called joint employer criteria. Under those criteria, a large enterprise like Dominoes could be held liable in wage claim disputes between employees and individual franchise owners – even if the larger entity did not supervise, hire or fire.
Additionally, the 2016 rule stated that a corporation could be considered a joint employer and therefore vulnerable in wage disputes even if they did not exercise control over the franchisee. The larger entity could be considered a joint employer simply because the smaller entity was dependent on, the larger corporation financially.
All of this may be about to change.
The Trump Administration is proposing to limit employment law claims against big companies for the sins of its smaller franchisees.
Specifically, this new proposal seeks to more tightly restrict when employees can file claims against a franchise’s parent company for employment law violations.
Under the new proposal, establishing joint employment will be possible:
- If the upstream company exercises the power to hire and fire employees
- If it supervises them and controls their schedules
- If it sets their pay
- And if it keeps up their employment records.
If a company doesn’t engage in most or all of these activities, it is unlikely that it would be deemed a joint employer.
The International Franchise Association and other business groups are applauding the new proposal. Critics claim the new rule simply provides a road map for companies to avoid liability.
This latest move is part of a larger debate also taking place on the National Labor Relations Board about the extent to which corporations should be held accountable for the actions of franchisees and contractors.
If you’re an employer and have questions about labor and employment law, consider calling on the attorneys at Kainen, Escalera & McHale in Connecticut. We do one thing and one thing only – we are an employer defense law firm – in fact, we are one of the largest employer defense law firms in the region. What’s more, each of our attorneys have over 20 years of experience in employment law and labor law matters and can provide your business with comprehensive legal counsel ranging from assistance with necessary preventive measures to trial advocacy. Please contact us if we can help you.
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