2016 Could be the Year of Clarity for the Joint Employment Law

This year should shed some light on the Joint Employer Law.

SPONSOREDUpdated 7:19PM • 03/27/16

After 18 months of storm and fury, 2016 should be the year that some clarity sets in regarding the joint employer issue. That will likely be the case regarding the multiple lawsuits against McDonald’s that names it as jointly responsible with its franchisees for alleged labor violations.

There have been many cases in 2015 that favored the franchisors of brands such as Massage Envy, Jimmy John’s and Freshii. However, a year later, the National Labor Relations Board developed its standard for defining the joint-employer status through the Browning-Ferris decision in August 2015. This could be the year that we see some action from the McDonald’s case.

Amy Cheng, partner of Cheng Cohen, mentioned that that the joint employer issue is an imperative one due to the fact that “if franchisors are deemed joint employers of franchisee’s employees, the entire franchise paradigm changes. Franchisees will no longer truly be independent businesses. Franchisors will essentially have all of the liabilities associated with being deemed an “employer” for the whole system.”

Could this be a roadblock for the franchising industry or just a warning to be careful?

“I think it is just a wakeup call, we have not been proactive about educating people outside the industry, or within the industry,” said Cheng.

In essence, franchisors would be on the hook for the liabilities and costs associated with being a “employer”. If this occurs, it would become difficult to become a franchisor because of these new costs.

“Why would franchisors absorb the cost of being the employer for all of its franchisees’ employees, yet only get a small percentage of the revenue? The financial model no longer makes sense,” Cheng said.