October 12, 2016

Fast-food franchisers often use the same metaphor when they consider training franchisees on wage-and-hour laws, saying they’re stuck between a rock and a hard place.

Sharing compliance tools like payroll and scheduling software puts franchisers at risk of joint employer liability. That means they could be on the hook to handle union negotiations and workers’ lawsuits that otherwise would be the franchisee’s responsibility. But doing nothing could hurt the brand identity, as the Labor Department consistently finds franchisees shortchanging workers on minimum-wage and overtime pay.

Balancing those concerns, plus the DOL’s major regulatory change to overtime law taking effect in December, has the fast-food industry asking questions about the future of wage-and-hour compliance policy.

“I think that you’re going to find more and more there are going to be instances [of joint employment findings] both through DOL enforcement and private litigation as well where the argument is going to be mounted that the franchiser exercises so much intimate control over how the franchisee operates that they are in fact joint employers,” said Michael Hancock, who until 2015 was the Wage and Hour Division’s assistant administrator for policy.

“The franchiser is so heavily engaged in the operation of their branded franchisee—their extensive training on how to fry hamburgers or how much cheese goes onto a pizza,” Hancock told Bloomberg BNA. “So why shouldn’t they be equally engaged on labor practices?”

The full Bloomberg BNA article can be viewed here.