Tag Archives: franchisor/franchisee relationship

Good News for Franchisors – DOL’s Joint Employer Guidance Has Been Withdrawn

In January of 2016, the Department of Labor issued informal guidance materials (Administrator’s Interpretation No. 2016-1) relating to joint employment. In these materials, the DOL advocated for a broad standard for finding a joint employment relationship.

While the franchisor/franchisee relationship was not directly mentioned in these materials, the accompanying question and answer sheet indicated that a franchisor and its franchisee could be deemed the joint employer of a franchisee’s workers depending on the situation. This guidance was concerning to franchisors because it meant that, if found to be a joint employer of its franchisee’s employees, the franchisor could be liable for any minimum wage or overtime violations by its franchisees.

As of June 7, 2017, franchisors can breathe a collective sigh of relief. On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced that the Department of Labor (DOL) is withdrawing Administrator’s Interpretation No. 2016-1. The DOL’s press release announcing the change is available here.

Warning

While the DOL has withdrawn Administrator’s Interpretation No. 2016-1, the NLRB’s attempts to expand the joint-employment standard may continue. In 2015, the NLRB (in Browning-Ferris Industries of California, Inc.) restated the standard for finding joint employment by holding that indirect control or the reserved right to control, even if unexercised, may be sufficient to find a joint-employer relationship. This case is currently on appeal to the D.C. Circuit Court of Appeals and it remains to be seen how the NLRB will view the joint employer issue in the future.