FranchiseWire: What Franchisors and Franchisees Should Know About Joint Employer Liability

An article from Woven founder/CEO Matt Goebel recently appeared in FranchiseWire:

“The views and opinions expressed in this article are those of the author, Matt Goebel, and should not be construed as legal advice. It is recommended that readers consult with a licensed attorney for specific legal advice tailored to their unique circumstances.

Carefully Hiring, Managing and Monitoring Employees is Essential to Minimize Franchise Litigation Risk

We live and work in an increasingly litigious world. To protect themselves, franchisors (Zors) providing services involving children (like daycare centers) or those reliant on physical touch (like wellness organizations) need more than the word of their franchisee operators (Zees) that they comply with regulations like criminal background checks, insurance, professional license and employment verification. While required by law, these regulations vary from state to state.

Yet here we are, seeing increased lawsuits about employment issues pulling more and more Zors (and Zees) into the litigation fray — and at significant cost. While Zees must comply with hiring and ongoing status check requirements, Zors are also liable for mistakes, especially with the legal lines of responsibilities blurring between joint employers.

Zors need a more effective way to ensure compliance and checks happen when they’re supposed to. It should not be so difficult to operate any business and avoid attracting unwanted lawsuits, especially those associated with following the proper procedures with employee checks.

The Growing Relevance of Joint Employer Liability

With the rise of litigation risk for Zees and Zors, joint employer liability’s relevance has increased. The concept refers to multiple entities that share legal responsibility for working conditions or employee actions. In franchising, Zees and Zors can be held liable for any employment law violations within the franchise.

Several years ago, an expanded joint employer standard increased litigation against Zors by 93%, cost $33.3 billion in revenue, and slashed 376,000 jobs. In 2020, the Department of Labor (DOL) released a Joint Employer Rule under the Fair Labor Standards Act designed to set expectations for Zors and Zees via a four-part test enabling the DOL to clarify:

• Joint employer status.
• Employer liability.
• Roles and responsibilities of Zors and Zees in a business relationship.

Both parties must clearly understand their roles and responsibilities associated with hiring, managing and…”

Read the FULL ARTICLE on FranchiseWire.

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Matt Goebel is a multi-unit franchisee and the founder and CEO of Woven, an all-in-one workplace management tool for multi-unit franchising founded to keep franchise operators focused on growing their businesses. Today, the Woven platform delivers accountability, consistency, and productivity to all of its customers.