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The “Seven Deadly Sins” of Franchise Employment Law

An understanding of these “sins” will allow franchisors to spot them as they arise.

By Michaelle Baumert

 

The tendency of many franchisors, particularly new ones, is to jump in and assist their franchisees with their day-to-day human resources issues.  Of course, this tendency carries with it an increased risk of vicarious liability.  More risky than offering too much advice, however, is offering the wrong advice.  Below are the seven most common “sins” related to employment and labor issues that franchisees will face, often prompting them to turn to their franchisor for suggestions.  Franchisors who try to assist but fail to recognize or appreciate the following “sins” may inadvertently create liability for the franchisee, and increasingly for the franchisor as well.

1. Direct Involvement or Instruction on Human Resources Issues.

Several categories of behavior fall under this category, including franchisors requiring franchisees to adopt uniform employee handbooks or basic day-to-day employment policies, allowing franchisees to use the franchisor’s own employee handbook for franchisee employees, requiring franchisees to report on day-to-day employee issues, and offering sample policies and forms that do not comply with the variances of state law.  Franchisors should be involved only in employment or labor issues (including the remainder of the “sins” discussed below) to the extent they are providing suggestions or sample policies that franchisees can adapt to fit their own independent businesses.  The only exception is where, after careful consideration, the issue has been determined to rise to the level of a franchise standard.  In the end, franchisees, as independent business owners, must shoulder the burden of legal compliance.

2. Wage and Hour Errors.  This includes many specific errors, such as:

  • Failing to understand the varied requirements of state laws and their differences from the federal Fair Labor Standards Act;
  • Failing to appropriately apply complicated exemptions from minimum wage and overtime requirements;
  • Miscalculating the “regular rate” for overtime purposes; and,
  • Misconceptions about what is or is not “compensable time.”

Class action wage and hour lawsuits are a major risk for employers across the country, including those in the franchise industry.  Increasingly, such claims are being filed against groups of franchisees and the franchisor as well.  The recent appointment of David Weil to head the U.S. Dept. of Labor’s Wage and Hour Division has many in the franchise industry concerned about an increased focus on attempting to hold franchisors liable for franchisee wage and hour mistakes.  It is extremely important that franchisees understand and comply with their wage and hour obligations.  Franchisors must understand that there is no one-size-fits-all approach when it comes to many wage and hour issues, and must take great care before making any suggestions about franchisee compliance.   (Why concerned about Weil? Needs a little description)

3. Failing to Recognize Requests for “Accommodation” Covered by the Americans With Disabilities Act.  Employers often fail to recognize that once an employee tells a supervisor that he or she cannot perform a task, or needs a workplace change (including time off) because of a physical or mental condition, this likely triggers the employer’s legal obligation to engage in the “interactive process” under the ADA.  Even employees who have been employed for only a short time will be covered.  Finally, employers commonly fail to recognize that since the ADA Amendments Act of 2008, most physical and mental conditions are covered as “disabilities.”  Franchisees must be prepared to recognize potential triggers of ADA obligations and respond appropriately.

4. Failing to Recognize and Properly Administer Requests for Leave Covered by the Family and Medical Leave Act or Required by Other Laws.  Common FMLA compliance issues include failing to understand that employees don’t need to specifically reference the FMLA in making a covered request for leave, incorrectly navigating the complicated waters of “intermittent leave,” and failing to coordinate FMLA leave with Worker’s Compensation, ADA and or other available leave.  Franchisors are likely unaware of the impact state law may have on family and medical leave, including additional requirements for employers or the application of leave provisions to broader categories of employees.  Franchisees and franchisors must also remember that state law may require the employer to grant requests for leave for jury duty, election worker leave, voting leave, sick leave, leave related to domestic abuse and military leave.  Franchisors are often unaware of the significant differences in state law on these issues, and may not have all the information necessary to evaluate requests for leave.

5. Interfering with Employees Engaging in “Protected Activity” Under the National Labor Relations Act.  The NLRA applies to most private-sector employers and their employees − whether unionized or not.  Employees have certain rights to share information, sign petitions and seek to improve their working conditions which, to many employers’ dismay, can include complaining about their supervisor and employer.  In recent years, the National Labor Relations Board has been active in invalidating the policies of unionized and nonunionized employers as violations of the NLRA that infringe upon employees’ rights to engage in “protected concerted activity.”  The NLRB has been particularly active regarding social media policies, invalidating many seemingly-innocuous provisions as infringing on NLRA rights.  Franchisors should tread very carefully in recommending or suggesting any social media policy, and must understand the broad scope of the NLRA.  Franchisees must recognize that the NLRA likely applies to their workers, whether unionized or not.

6. Failing to Accurately Document Employee Performance.  Employers commonly fail to appropriately document employee performance problems before they result in termination.  Worse, they will paper the files of under-performing employees with yearly performance evaluations that say the individual “meets expectations” or even exceeds them.  No employee should be surprised that he or she is being terminated, except in rare circumstances.  Franchisors are rarely equipped with sufficient information to evaluate whether accurate documentation of the performance of franchisee employees has occurred prior to termination, and should never be directly involved in such decisions.  Terminations are a franchisee’s decision to make, and the franchisee must adequately document employee performance.

7. Workplace Harassment Issues.  Supervisors and managers can easily cause legal liability by generally being too “friendly” with subordinates.  Common management errors include:

  • Looking for sexual partners in the workplace;
  • Trying to be “one of the guys” by telling inappropriate or offensive jokes;
  • Being too “friendly” with subordinates on social media; and,
  • Failing to bring complaints of harassment to the attention of management because it came from a “friend” who asked them not to tell.

The most common franchisor error in this category is attempting to get directly involved in workplace investigations or instructing franchisees on what they should do in response to a particular situation.  Claims of workplace harassment or discrimination of one nature or another are a near inevitability.  At most, a franchisor may offer recommendations or suggestions, but ultimately these issues must be handled by the franchisee who is the employer.  Franchisees must recognize the importance and risk posed by such activity and respond quickly and appropriately.

An understanding of these “sins” will allow franchisors to spot them as they arise, and to in turn recommend that franchisees secure the advice of their own legal counsel to handle them appropriately on their own.

Michaelle Baumert is a partner with the law firm Husch Blackwell LLP where she advises companies, including franchisees and franchisors, on labor and employment law matters. Find her at fransocial.franchise.org.

 

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