Guidelines on franchise owners, workers

Published Jun 10, 2017

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Washington - The expansion of American franchise operations has long

fueled job growth, with employment in the businesses increasing 3.4 percent

since 2012, compared to two percent elsewhere. From the model's success sprung

a debate, which intensified during the Obama administration: Just who is

responsible for all these workers?

Labour Secretary Alexander Acosta gave the business

community a clear signal this week, rescinding Obama-era guidelines that

suggested corporations be held more accountable for franchise workers who don

their uniforms.

For decades, franchisers relied on the opposite that

franchisees, who essentially operate as small businesses owners, are solely

liable for the people they hire. The non-binding Obama-era guidance that inched

away from that convention has now vanished from the Labor Department's website,

providing some relief to pro-business circles and irking some worker's rights

groups.

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The removal of the guidance doesn't change the law. But it

signals a stark reversal from the previous administration's efforts to

"expand the application of the laws it enforced to the maximum extent

possible," said Alexander Passantino, a Washington employment lawyer.

"A lawyer - or a court - can no longer point to the

interpretations and say, 'This is what the DOL believes,'" he wrote in an

email.

The Labor Department also emphasized in a statement

Wednesday that employees who feel they are being treated unfairly can still

seek legal recourse.

"Removal of the administrator interpretations does not

change the legal responsibilities of employers under the Fair Labor Standards

Act and the Migrant and Seasonal Agricultural Worker Protection Act, as

reflected in the department's long-standing regulations and case law," the

statement read.

"The department will continue to fully and fairly

enforce all laws within its jurisdiction.” In the United States, workings are

increasingly entering into employment relationships with one than one party.

Hotel, restaurant and gym franchises employ roughly 7.6 million people.

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In 2015, the National Labour Relations Board, an independent

body charged with protecting workers' rights in the private sector, asserted

that companies with " indirect " control over employees, or two firms

that "codetermine" terms of employment, qualify under federal law as

"joint employers." Lawyers took that to mean that both franchiser and

franchisee, who both maintain some level of control over employee practices,

were responsible for making sure workers made a legal wage and received

appropriate overtime pay.

That opened the door for litigation. Last year, a group of

McDonald's employees in California

who said they were owed overtime pay sued the corporation - rather than just

the individual franchise owner - and walked away with a $3.75 million

settlement.

Business leaders slammed this outcome. They argued that

opening up corporations to blame for an individual franchise owner's behaviour

would create more uncertainty, raise the price for entrepreneurs trying to get

into the business, and ultimately quash employment opportunities.

The American Action Forum, a right-leaning think tank,

estimated that upholding the NLRB standard would result in a franchise slowdown

that could slash 1.7 million jobs from the private sector. David Weil, an Obama

appointee who led the Labour Department's wage and hour division, said the

Obama-era guidelines didn't change existing statutes, and should not impact job

growth.

"It doesn't change anything in regards to joint

employment," he said. "It was guidance to help employers, and taking

it away makes things more opaque."

Heidi Ganahl, founder of Camp Bow Wow, a web camera-equipped

daycare for dogs, said the Labour Department's thinking tore down the wall

between franchisor and franchisee.

"We had 40 people at corporate, and we had 4,000 people

working at franchises," said Ganahl, who sold the daycare business in 2014

but still serves as an adviser. "All of a sudden we had 4 000 employees to

manage."

The company responded to the potential change in regulatory

culture by turning to investors with deeper pockets - who could run several

locations at once - rather than taking a chance on a small business owner, she

said.

Ganahl added that individual franchise owners had an

interest in maintaining good working conditions."You just don't do well in

business," she said, "if you don't treat them well."

WASHINGTON POST 

 

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