By Jessica McGrath, In-house Council for CRDN and BIzzie

1. NLRB/Joint
Employer
Ruling
-­‐
What
Franchisors
&
Franchisees
Need
to
Know
Best
PracAces

3. Browning-­‐Ferris
Implica3ons
• Percep3on:
Doomsday
– Two
likely
scenarios
(over
or
under
involvement)
– Same
Result:
Franchise
model
undermined
• Reality:
Uncertainty
of
law
&
lack
of
ac3on

4. Framework
for
Best
Prac3ces
• Review
lessons
learned
from
Browning
Ferris
and
related
authority
on
avoiding
joint
employment
liability
(what
we
CAN’T
do)
and
lessons
on
protec3ng
our
brand
(what
we
CAN
and
SHOULD
do)

5. Lessons
on
Avoiding
Joint
Employment
Liability
• Lesson
1:
We
can’t
INDIRECTLY
(through
franchisees
or
other
intermediaries)
control
essen3al
terms
and
condi3ons
of
employment
• Lesson
2:
We
can’t
RESERVE
THE
RIGHT
to
control
essen3al
terms
and
condi3ons
of
employment
• Lesson
3:
Must
be
careful
not
to
control
a
BROADENED
list
of
“essen3al”
terms
and
condi3ons
of
employment

6. Lessons
on
Protec3ng
Our
Brand
• Lesson:
We
CAN
control
franchisee’s
employees
with
respect
to
employment
maWers
to
the
extent
such
control
is
related
to
protec3ng
the
quality
of
our
products/services
and
brand

7. Best
Prac3ces
• Franchisors
should
balance
insula3ng
themselves
from
liability
and
maintaining
the
brand
• Each
franchise
brand
is
different
and
should
conduct
a
risk
analysis
• Disclaimer
• Notes

8. Franchise
Agreement
Defini3on
of
Opera3ons
Manual
• Don’t:
– Define
the
Opera3ons
Manual
too
broadly
• Do:
– Define
Opera3ons
Manual
to
include
a
SINGLE
document
(paper
or
electronic)
– Specifically
exclude
any
employment
related
informa3on
from
defini3on
– Consider
renaming:
Brand
Standards
Manual

9. Franchise
Agreement
Franchisor
and
Franchisee
Obliga3ons
• Don’t:
– Obligate
franchisor
to
train,
assist,
advise,
or
approve
franchisee’s
employees,
or
provide
employment
forms
• Do:
– Expressly
provide
that
franchisor
does
not
itself
or
through
its
system
standards
dictate
or
control
employment
maWers
– Expressly
state
all
employment
obliga3ons
(list
them)
and
decisions
are
sole
responsibility
of
franchisee
• Excep3on

10. Franchise
Agreement
Independent
Contractor
Rela3onship
• Don’t:
– Provide
overly
broad
defini3on
of
the
rela3onship
• Do:
– Specifically
state
no
employer
or
joint
employer
rela3onship
exists
between
franchisor
and
franchisee
or
franchisor
and
franchisee’s
employees
– Specifically
state
Franchisor
does
not
have
direct
or
indirect
control
of
–
or
the
right
or
authority
to
control
–
the
franchisee’s
day-­‐to-­‐day
opera3ons
or
employment
related
decisions

11. Franchise
Agreement
Obey
All
Laws
• Don’t:
– Provide
overly
broad
obliga3on
of
franchisee
to
obey
all
federal,
state,
and
local
laws
rules,
and
regula3ons
• Do:
– Include
specific
references
to
federal
and
state
labor
and
employment
related
laws
(Fair
Labor
Standards
Act,
Family
and
Medical
Leave
Act,
Affordable
Care
Act,
OccupaGonal
Safety
and
Health
Act,
Title
VII
of
the
Civil
Right
Act,
Age
DiscriminaGon
in
Employment
Act,
of
Employment
Act
Employee
ReGrement
Income
Security
Act)
– Specify
the
franchisee
(and
only
the
franchisee)
has
the
obliga3on
to
comply
with
such
laws

12. Franchise
Agreement
Indemnifica3on
and
Insurance
• Don’t:
– Provide
overly
broad
indemnifica3on
provisions
or
insurance
requirements
• Do:
– Specify
indemnity
for
labor
and
employment
law
viola3ons
includes
acts
and
omissions
of
both
the
franchisee
and
franchisee’s
employees
– Consider
EPLI
and
term
extension
repor3ng
period
insurance/tail
insurance
– Require
AI
status
and
updates
on
policies
and
create
insurance
compliance
program

13. Opera3ons
Manual
• Don’t:
– Include
any
provisions
that
are
not
cri3cal
to
maintain
the
system
standards
or
mandatory
– Include
provisions
rela3ng
to
the
day
to
day
opera3ons
of
the
franchisee
including
employment
maWers
• Do:
– Mark
non-­‐mandatory
provisions
as
suggested
or
recommended
– Clearly
provide
that
the
system
standards
DO
NOT
include
employee
policies
or
procedures

14. Prac3ce
What
You
Draa
• Don’t:
– Rely
on
your
documents
– Allow
opera3ons
or
field
reps
to
train
franchisee’s
employees
,
dictate
their
day
to
day,
or
provide
employment
sugges3ons,
guidelines,
etc.
• Do:
– Discuss
and
implement
the
changes
you
are
making
with
your
opera3ons/field
people

15. Outsourcing
to
Third
Par3es
• Consider
using
outside
resources
to
assist
with
employment
related
prac3ces:
– Audit/inspec3on
firms
– Professional
Employer
Organiza3ons/HR
consultant
– Recruitment
resources
– Insurance
Review

16. General
Sugges3ons
• Require
franchisees
to
include
employer
disclaimer
in
their
employment
materials
• Require
no3ce
to
public
and
franchisee’s
employees
that
franchisee
is
independently
owned
and
operated
• Consider
cer3ficate
of
acknowledgment
that
franchisee
is
sole
employer
• Do
not
coach
franchisees
on
how
to
address
union
organizing
efforts
(do
nothing)

17. Conclusion