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U.S. Labor Department Proposes Criteria to Determine When Franchisees And Franchisors are Joint Employers

The Department of Labor issued proposed new guidelines for determining when a restaurant franchisor can be held responsible for the labor policies and practices of franchises.

“We know restaurant franchise owners are particularly watchful of the proposed guidelines,” says Carol Casale, CPA/ABV, CVA, Shareholder, Mize Restaurant Group.

“The proposal explains the statutory basis for joint liability, helping to ensure that the Department’s joint employer guidance is fully consistent with the text of the FLSA,” said Keith Sonderling, Acting Administrator for the Department’s Wage and Hour Division. “The proposed changes would provide courts with a clearer method for determining joint employer status, promote greater uniformity among court decisions, and reduce litigation.”

The DOL proposal also includes a four-point test to determine when a franchisor and franchisees are joint employers. Under the new guidance, the franchisor and franchisee would be equally responsible for the illegal employment actions of the franchisee if the franchisor:

  1. Can fire or hire employees;
  2. Supervises and controls the employee’s work schedules or working conditions;
  3. Determines the employee’s pay rates or methods of payment;
  4. Maintains the employee’s employment records.

For more information, visit https://www.dol.gov/newsroom/releases/whd/whd20190401