Within the franchise world, there has been a lot of buzz about joint employment. Being held accountable as an employer creates exposure to wage, discrimination, and other employee claims.
The legal determination of who is an employer can be swishy. The US Department of Labor has put out for comment new regulations that would clear the issue up, to some extent. Under the purposed regulations set forth a 4 prong test. Under the test an employer:
- hires or fires the employee;
- supervises and controls the employee’s work schedules or conditions of employment;
- determines the employee’s rate and method of payment; and
- maintains the employee’s employment records.
As part of the purposed regulations, the US Department of Labor posted hypotheticals under the test. Can you determinate if an employer relationship is present?
(1) Example (National Restaurant Franchise)
An individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment affiliated with the same nationwide franchise. These establishments are locally owned and managed by different franchisees that do not coordinate in any way with respect to the employee. Are they joint employers of the cook? [i]
(2) Example (Same Owner, Multiple Restaurants)
An individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment owned by the same person. Each week, the restaurants coordinate and set the cook’s schedule of hours at each location, and the cook works interchangeably at both restaurants. The restaurants decided together to pay the cook the same hourly rate. Are they joint employers of the cook? [ii]
(3) Example (Janitorial Services)
An office park company hires a janitorial services company to clean the office park building after-hours. According to a contractual agreement with the office park and the janitorial company, the office park agrees to pay the janitorial company a fixed fee for these services and reserves the right to supervise the janitorial employees in their performance of those cleaning services. However, office park personnel do not set the janitorial employees’ pay rates or individual schedules and do not in fact supervise the workers’ performance of their work in any way. Is the office park a joint employer of the janitorial employees? [iii]
(5) Example (Hotel Industry Franchise)
Franchisor A is a
global organization representing a hospitality brand with several thousand
hotels under franchise agreements. Franchisee B owns one of these hotels and is
a licensee of A’s brand. In addition, A provides B with a sample employment
application, a sample employee handbook, and other forms and documents for use
in operating the franchise. The licensing agreement is an industry-standard
document explaining that B is solely responsible for all day-to-day operations,
including hiring and firing of employees, setting the rate and method of pay,
maintaining records, and supervising and controlling conditions of employment.
Is A a joint employer of B’s employees? [iv]
[i] Application [the answer]: Under these facts, the restaurant establishments are not joint employers of the cook because they are not associated in any meaningful way with respect to the cook’s employment. The similarity of the cook’s work at each restaurant, and the fact that both restaurants are part of the same nationwide franchise, are not relevant to the joint employer analysis, because those facts have no bearing on the question whether the restaurants are acting directly or indirectly in each other’s interest in relation to the cook.
[ii] Application [the answer]: Under these facts, the restaurant establishments are joint employers of the cook because they share common ownership, coordinate the cook’s schedule of hours at the restaurants, and jointly decide the cook’s terms and conditions of employment, such as the pay rate. Because the restaurants are sufficiently associated with respect to the cook’s employment, they must aggregate the cook’s hours worked across the two restaurants for purposes of complying with the act.
[iii] Application [the answer]: Under these facts, the office park is not a joint employer of the janitorial employees because it does not hire or fire the employees, determine their rate or method of payment, or exercise control over their conditions of employment. The office park’s reserved contractual right to control the employee’s conditions of employment does not demonstrate that it is a joint employer.
[iv] Application : Under these facts, A is not a joint employer of B’s employees. A does not exercise direct or indirect control over B’s employees. Providing samples, forms, and documents does not amount to direct or indirect control over B’s employees that would establish joint liability.