Franchisors as Joint Employers: Is There Too Much Play in the Joints?

Transcription

1 Franchisors as Joint Employers: Is There Too Much Play in the Joints? The American Bar Association Petroleum Marketing Attorneys Meeting David S. Fortney, Esq. Fortney & Scott, LLC 1750 K St., NW, Ste. 325, Washington, DC Tele: April 15, 2016 Tonya Hunter, Esq. tjhunter@marathonpetroleum.com Marathon Petroleum Company LP 539 South Main Street Findlay, Ohio Tele:

2 Important Legal Notice These materials are not intended to provide legal advice. Employers and federal contractors should consult either with their in-house counsel or, as directed, with an experienced employment law attorney for legal advice about whether, based on their specific facts and circumstances, their company complies with the applicable federal and state laws. 1

3 INTRODUCTION 2

4 Overview Expanded application of the joint employer doctrine Franchisors face potentially expanded liability for franchisee s violations of workplace laws Joint employment determines when two employers can be jointly liable for the legal violations of labor and employment laws by each of the individual employers Contrast with definition of Franchise and resulting allocation and limitation of liabilities 3

5 Key Federal Agencies DOL Wage and Hour Division (WHD) Office of Federal Contract Compliance Programs (OFCCP) Occupational Safety and Health Administration (OSHA) National Labor Relations Board (NLRB) Equal Employment Opportunity Commission (EEOC) 4

6 DOL WAGE AND HOUR ADMINISTRATOR S INTERPRETATION ON JOINT EMPLOYMENT 5

7 The New Administrator s Interpretation On January 20, 2016, WHD Administrator, David Weil, issued an Administrator s Interpretation (AI) Announced new standards for DOL determining joint employment under the Fair Labor Standards Act (FLSA) and the Migrant Seasonal Agricultural Worker Protection Act (MPSA) Employment increasingly involves situations where more than one business is involved in the work being performed AI is neither a regulation nor black letter law 6

8 The AI (cont.) Two new categories of joint employment tests Horizontal Joint Employment Evaluate relationships between or among two or more employers to determine whether they are sufficiently associated or related with respect to the employee such that they jointly employ the employee Vertical Joint Employment Focus on employee s relationship with the employer and another intermediary FLSA and MPSA broadly define employ, employee, and employer 7

9 NLRB S BROWNING-FERRIS RULING & IMPACT ON FRANCHISING 8

10 Browning-Ferris Ruling NLRB adopted a new standard for assessing joint employer status under the National Labor Relations Act Change in joint employment standard Previous standard: required that a joint employer possess and exercise the authority to control employees terms conditions of employment New standard: the NLRB may find that two or more statutory employers are joint employers of the same statutory employees if they share or codetermine those matters governing the essential terms and conditions of employment 9

11 Impact of Browning-Ferris on Franchise Relationships Increasing concerns about the potential impact of the Browning-Ferris ruling in establishing liability for franchisees Application - McDonalds NLRB cases On December 19, 2014, NLRB General Counsel, Richard Griffin Jr. issued several complaints alleging that McDonald s Corp. is the joint employer of its franchisees employees A final decision from the trial in the NLRB s McDonalds cases is not expected for many months Expect years of additional litigation and appeals 10

12 Reconciling the NLRB s McDonalds Claims with Franchise Liabilities Franchise liabilities generally PMPA Federal and State laws Areas where the new standard may apply: Training, hiring, screening employees Mystery shop of retail outlets Non-compliance of retail outlets 11

13 THE EEOC & JOINT EMPLOYMENT 12

14 Two Tests for Employer under The ADA and Title VII Integrated Employer Test Asks whether two superficially separate entities should be treated as one entity Joint Employer Test Presumes that the alleged employers are separate entities; and Evaluates whether the degree of control is sufficient to treat both as employers based on numerous factors Future EEOC guidance is likely 13

15 DOL APPLIES THE EXPANDED JOINT EMPLOYER TEST TO IMPOSE BROADER LEGAL LIABILITIES 14

16 Occupational Safety and Health Administration (OSHA) Joint employer tests were rarely used because the agency used the OSH Act s multi-employer tests Employers who exercise control over the terms and conditions of employment of another employer s employees in a joint employment context may already face potential liability Recent draft memo prepared by OSHA s attorneys in the DOL s Office of the Solicitor suggests that joint employer liability extends to franchisors and franchisees 15

17 Office of Federal Contract Compliance Programs (OFCCP) Single Entity Test Primary Inquiry: whether the ownership, management and operations of the separate entities are sufficiently interrelated to be considered a single entity (multifactor test) OFCCP is applying the vertical joint employer test to impose liability on federal contractors for the hiring decisions by staffing firms that supply temporary employees 16

18 How Franchises Fare Under the New Joint Employer Tests Where does your business model fall on the continuum of active involvement in the essential terms and conditions of employment? What risks are worth taking? What areas within your organizations should be considered? 17

19 SHARING ECONOMY ( GIG ECONOMY) 18

20 Worker Classification Issues Ongoing debate about whether the current laws sufficiently address the issues related to worker classification in the GIG economy On March 5, 2016, DOL announced it is conducting a survey to gain more information about the GIG economy Focused on contingent and alternative employment, to determine the number of workers engaged in the GIG economy, their satisfaction and measure earning, health insurance coverage and retirement plans 19

21 Union Interests Favor legislation and policies that allow Application of joint employer tests pursuant to Browning-Ferris to define workers as employees rather than independent contractors This result permits the workers (currently classified as independent contractors) to be organized and represented because unions only can represent employees U.S. Chamber of Commerce files suit challenges Seattle ordinance authorizing ride sharing drivers to be organized 20

22 Take Aways What Steps to Take Recognize that franchise liability limitations are being challenged under the labor and employment laws keep up to date! Do standard franchise practices pose risks for joint employment liabilities? Mystery shops Central recruiting Employee hiring, screening, training, sales goals, etc. Standard uniforms 21

23 Take Aways (cont.) Operational Considerations How to handle non-compliance with jobbers/dealers Indemnity clauses Insurance from Jobbers Alternative business relationships Refiners and Jobbers Jobbers and Dealers Consignments Lessor-Lessee dealers 22

24 Questions? Thank you! 23