Understand key issues in labour and employment in franchising.

1. Osler, Hoskin & Harcourt LLP
Jennifer Dolman
Partner
Key Topics in Employment Law
July 2017
Brian Thiessen
Partner

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BRIEF THE BOARD WEBINAR WEDNESDAYS: KEY TOPICS IN EMPLOYMENT LAW
Jennifer Dolman
Partner
Osler, Hoskin & Harcourt LLP
Tel: 416.862.5911
Email: jdolman@osler.com
Brian Thiessen
Partner
Osler, Hoskin & Harcourt LLP
Tel: 403.260.7018 | 604.692.2764
Email: bthiessen@osler.com

3. Labour and Employment Issues in
Franchising

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BRIEF THE BOARD WEBINAR WEDNESDAYS: KEY TOPICS IN EMPLOYMENT LAW
What is a Franchise
• a franchise relationship is distinct from an employment relationship
• a franchise is broadly defined under franchise legislation like Ontario’s
Arthur Wishart Act (Franchise Disclosure), 2000 (the AWA)
• under the AWA, the key elements of a franchise are:
◦ Payment to franchisor in course of operating business or as a condition of
acquiring franchise or commencing operations
◦ Franchisee granted right to sell, offer for sale or distribute goods or
services substantially associated with franchisor’s or franchisor’s
associate’s trade-mark, service mark, trade name, logo or advertising or
other commercial symbol, and
◦ Franchisor exercises significant control over, or offers significant assistance
in, franchisee’s method of operation
• the AWA expressly doesn’t apply to employment relationships

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Joint Employer Status
• in 2015, the Changing Workplaces Review was initiated in Ontario
by the Ministry of Labour to consider issues affecting the workplace
• 2 Special Advisors were tasked with making recommendations to
address the changing nature of the workforce, the workplace, and
the economy, with a focus on Ontario’s Labour Relations Act and
the Employment Standards Act
• public consultations were held in 12 cities across Ontario in 2015
• an Interim Report and Guide were issued in July 2016 containing
approximately 50 issues and over 225 options for further
consultation
• one recommendation was that franchisors be deemed joint
employers with their franchisees of their franchisees’ employees

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Joint Employer Status
• prior to the proposed amendment, the question of whether a
franchisor was a joint employer was decided on a case by case
basis, with varied results, and depended on the franchisor’s control
of its franchise’s day to day operations
• the idea that franchisors could be deemed to be joint employers
was considered a significant threat to the franchise model and
Ontario’s thriving franchise industry
• joint employer status could expose franchisors to employees’ claims
under employment and labour laws, collective agreements,
wrongful dismissal suits, wage and overtime class actions, and
human rights claims

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Joint Employer Status
• direct and indirect impacts of joint employment on a franchisor’s
business could include:
◦ increased liability in respect of their franchisees’ commitments
to their employees, including liability for:
• wages, salaries, overtime, vacation pay and benefits
• termination notice and pay in lieu of notice
• severance pay and employment-related premiums
• payroll taxes
◦ increased costs and operational burden to ensure a franchisor’s
business is compliant with statutory labour and employment
obligations, and internal policies and practices

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Joint Employer Status
◦ changes to the economics and incentives in a franchisor’s
business model as it tries to flow these increased costs and
operational burden through to its franchisees
◦ franchisees, in turn, experiencing a loss of autonomy over the
operation of their independent businesses
◦ increased risk that franchisees’ employees will become
unionized

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Joint Employer Status
• the Special Advisors released their Final Report on May 23, 2017
• fortunately for franchisors and franchisees alike, and the entire
franchise industry, the Final Report specifically rejected the
adoption of a new deemed joint employer status for franchisors
• this was great news for the franchise industry but franchisors
continue to remain at risk of being found to be a joint employer
• this is especially the case because of the publicity surrounding the
joint employer issue
• franchisors should expect to be dragged into disputes between
franchisees and their employees

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Avoiding Joint Employer Status
• to avoid a finding of joint employer status, franchisors should think
carefully about the extent to which they control the day to day operations
of their franchisees
• franchisors must afford franchisees a significant level of independence and
discretion when it comes to employee hiring/firing, scheduling, wages, and
personnel files
• franchisors must strike a careful balance between:
◦ controlling the brand (and ensuring brand recognition and integrity); and
◦ controlling a franchisee’s relationship with its employees
• franchisors should focus on practices that impact the consumer’s
experience with the franchisor’s brand such as product/service quality
standards, uniforms, hours of operation, and authorized suppliers

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Avoiding a Finding of Joint Employer Status
• franchisor should eliminate controls in franchise agreement and
operations manual that aren’t necessary to protect or enhance
franchisor’s brand or system
• franchisors should make sure that the franchisee’s name, and not
the franchisor’s, appears on store level receipts, stationery,
employment application, paystubs, accounts, websites, advertising
and social media
• franchisee should make it clear to its customers that it is an
independently owned and operated business, under a franchise
agreement with the franchisor

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Unionization
• although the Final Report didn’t recommend that franchisors be
deemed joint employers, it did recommend a process that could
create a more direct route to unionization, and allow employees of
multiple franchisees operating the same brand at multiple locations
the opportunity to bargain collectively

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Fair Workplaces, Better Jobs Act, 2017
• the Final Report was accompanied by a statement from the Ontario
Minister of Labour, that the government would announce its
response within a week
• on June 1, 2017, the Ontario government released Bill 148, the Fair
Workplaces, Better Jobs Act, 2017
• second reading was dispensed with
• Bill 148 has been referred to Standing Committee to consider over
the summer
• Bill 148 is intended to implement certain recommendations from
Final Report

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Fair Workplaces, Better Jobs Act, 2017
• fortunately for franchisors, Bill 148 doesn’t propose that multiple
franchisees of same brand operating in same geographic area be
required to bargain together with local employees towards one
collective bargaining unit
• nor does Bill 148 reflect the recommendation in the Final Report
that an “employer bargaining agency” made up of representatives
of the franchisee employers represent the franchisees at the
bargaining table with the union

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• there are proposed changes to the Labour Relations Act, however,
that may increase the number of union drives, and successful
applications for certification
◦ amendments would allow Ontario Labour Relations Board (OLRB) to
change structure of bargaining units within a single employer
• this would make it easier for employees of a single employer operating
multiple businesses to be certified as one business unit
• this could impact multi-unit franchisees and franchisors with multiple
corporate stores in close geographic proximity to each other
◦ it would be open to trade unions in building services, home care and
community services, and temporary help agency industries to apply
for certification without a representation vote
Fair Workplaces, Better Jobs Act, 2017

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Fair Workplaces, Better Jobs Act, 2017
• “building services industry” is broadly defined and includes cleaning
services, food services and security services – segments of economy that
are commonly serviced by franchised brands
◦ the OLRB would have the discretion to certify the union if satisfied
that more than 55% of employees in bargaining unit are members of
trade union
◦ the OLRB would also have discretion to dismiss applications for
certification without a representation vote where it finds upon
application of an “interested person” that there is evidence that
application does “not likely reflect the true wishes” of the employees

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Fair Workplaces, Better Jobs Act, 2017
• where no trade union has been certified as bargaining unit and no
collective agreement in place, a trade union may apply to OLRB for an
order for an employer to provide a list of its employees
◦ if successful, the trade union can use the list in its campaign to establish
bargaining rights
• there are also other proposed changes to the Ontario labour and
employment law regime that will impact not just franchisors and
franchisees but all small businesses, including:
◦ New shift scheduling rules (target effective date January 1, 2019)
◦ Equal pay for equal part-time work provisions: casual, part-time,
temporary and seasonal employees
◦ Increased minimum wage – up to $14 an hour by Jan 1, 2018, and then
$15 an hour by Jan 1, 2019

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