- The U.S. Department of Labor (DOL) narrowed joint employer liability under the Fair Labor Standards Act in a new ruling Sunday.
- Per the ruling, which will take effect on March 16, a restaurant can be held legally accountable for the infractions of its franchisees only if it hires and fires the operator's employees; manages the staff's employment records; supervises and controls employee work schedules or conditions of employment to a substantial degree; determines employees' wages and method of payment.
- The DOL hopes the rule will "promote certainty for employers and employees, reduce litigation, promote greater uniformity among court decisions, and encourage innovation in the economy."
This new definition will no doubt have franchisers breathing a sigh of relief.
Still, this update has yet to be adopted by other federal agencies that regulate labor policies and practices. In 2015, the National Labor Relations Board broadened the interpretation of joint employer status to the point that franchisers considered limiting or halting franchising altogether because of the increased liability. In response, the International Franchise Association released data that showed joint employer lawsuits skyrocketed 93% after the expanded definition, costing individual franchise businesses an average of $42,000.
"While this is an important development, it is one of just three key joint employment rules pending in other agencies," Shannon Meade, VP of public policy for the National Restaurant Association, said in a statement. "Our work to support these pending rules will continue so that we can ensure workers and employers have clarity and certainty and no longer face a climate of politicization and ambiguity."
But other agencies have moved toward distancing franchisers from the faults of their operators of late. In December, the NLRB absolved McDonald's as a joint employer from responsibility for the labor violations by its franchisees, which were brought forward in 2012 by Fight for $15 and other groups. The QSR titan's victory suggests the agency is unlikely to put franchisers on the hook for operator violations in the future.
If the DOL's new definition rolls through the remaining labor agencies, it would shape a safer landscape for franchisers going forward. But restaurants should still be wary of how their new hands-off approach to operator violations could look to prospective talent. Today's workforce is seeking progressive workplaces that champion employee welfare, and even if a restaurant offers competitive benefits and pay, this reduced responsibility could be a stumbling block.