People outside franchising don't understand that the franchisor is not the "boss" of the franchisees.
The franchisor, who does have considerable power because of the Franchise Agreement, cannot just tell their franchisees how to run their business.
In particular, the franchisor cannot simply require that the franchisees implement a sexual harrassment program that the franchisor favors.
Even US Sentators somtimes fails to understand.
You're a franchisor. You don't want to be a Joint Employer of your franchisees' employees. Your franchise agreement goes into detail on how your franchisees and their employees are not on your payroll. And you do not have any employer responsibility.
Well that was easy. Your law firm has made it clear in your contract. You are in no danger.
Not so fast.
Some people in federal and state government think otherwise. And they don't seem to be reading your franchise agreement the way you want them to.
So what can a franchisor do?
Stop doing things that make you an employer. Even the nice things your franchisees like.
Here are a couple of true stories about kind franchisors helping out their franchise owners.
One -Train Your Franchise Business Consultants
There once was a long time franchise owner whose only daughter was getting married. This franchisee was Greek, very religious and his daughter was having a destination wedding in Greece. The whole family was going and all the relatives from around the globe were attending.
The franchise owner had a problem. He was going to Greece for two weeks and his family members who worked in their franchises were going too.
He told his Franchise Business Consultant that he was concerned about being short-handed while he was away and asked him to watch over his busineses in his absence.
The franchise business consultant knew the family well and had watched his franchisee's daughter grow up in the business.
Franchise Business Consultant agreed to oversee the businesses.
The Franchise Business Consultant checked in with the managers daily on the phone or in person. He even used his weekend time-off to ensure things were being managed correctly. Reviewed their schedules to ensure crew labor was under control. Made certain the daily deposits made it to the bank. Reviewed the incoming mail. Took care of supplier payments. And gave direction to the managers and employees as needed.
He solved his franchise owner's temporary management problem.
The wedding went off without a hitch the franchises were managed by the Franchise Business Consultant.
Two - Stop "Helping" with HR
Franchisor had very conscientous Vice President of Human Resources along with a great Director of Operations. Franchise owners were asking for help.
They wanted employee handbooks for their businesses and employees. Franchisees knew that the franchisor had very good HR systems for its company owned units and thought why not use what the franchisor was using.
The franchisor's employee handbook had been developed by pros, regularly updated and had been in use for some time. No reason to reinvent the wheel.
So the Vice President of Human Resources slapped a little disclaimer on the franchisor's document saying that the franchisees should get the template reviewed by the franchisees' respective employment attorneys before using it. And that the franchisees' would hold the franchisor harmless if something went wrong.
Franchise owners were very happy they didn't have to go through the time and expense of developing their own employee handbook and their problem was solved by the conscientious Vice President of Human Resources and great Director of Operations.
Franchising is full of people who care deeply about franchise owners and would do most anything they could to help out in a pinch.
What could possibly go wrong for the franchisor in either of these situations?
Seems harmless enough and the franchisor was just helping out franchise owners, right?Stop
SALT LAKE CITY -- The U.S. Department of Labor has filed a lawsuit against Universal Contracting LLC, CSG Workforce Partners LLC, Decorative Enterprises LLC, Mountain Builders Inc., Cory Atkinson, Tracy Burnham and Ryan Pace after an investigation by its Wage and Hour Division disclosed evidence of willful violations of the Fair Labor Standards Act's overtime and record-keeping provisions.
The department's lawsuit seeks to recover unpaid overtime compensation and liquidated damages for more than 800 current and former laborers. It also requests the court to permanently enjoin the defendants from committing future violations of the FLSA.
Employment agencies Universal Contracting and CSG Workforce Partners provided laborers to contractors--Decorative Enterprises and Mountain Builders--and charged the laborers and contractors a fee for their employment placement services. Wage and Hour Division investigators found that the companies misclassified workers as something other than employees, claiming there was no employee-employer relationship, and denied the employees overtime compensation, as required by the FLSA.
"Universal Contracting, CSG Workforce Partners and their clients are intentionally skirting the law by willfully and wrongfully claiming that their workers are not employees because they are members or owners in a limited liability company," said Cynthia Watson, Wage and Hour Division southwest regional administrator. "As demonstrated by this lawsuit, the department is vigorously pursuing corrective action in those situations where misclassified workers are actually employees, to ensure that they are paid required wages and to level the playing field for employers who play by the rules."
The department's suit was filed in the Central District of Utah, Salt Lake City, following investigations by the Wage and Hour Division's Salt Lake City Office that found the defendants violated the FLSA by failing to maintain a record of hours worked by employees and failed to pay the employees the federally mandated overtime compensation, as required by the FLSA.
The violations committed by Universal Contracting and CSG Workforce Partners are considered willful because the companies had been notified previously by the Wage Hour Division that the workers are employees. As such, they are entitled to the wages and employment protections guaranteed by the FLSA. Universal Contracting and CSG Workforce Partners willfully and purposefully pursued an operational method that makes it difficult to determine the hours its laborers worked and the corresponding compensation received for those hours.
The department's lawsuit seeks to hold Universal Contracting and CSG Workforce Partner's clients, Mountain Builders and Decorative Enterprises, severally liable for the violations. Mountain Builders and Decorative Enterprises are in a joint employment relationship with Universal Contracting and CSG Workforce Partners. The department has also filed a motion for preliminary injunction seeking an order directing Universal Contracting and CSG Workforce Partners to immediately comply with the FLSA's overtime and recordkeeping provisions.
The misclassification of employees as something other than employees, such as independent contractors, presents a serious problem for affected employees, employers and to the economy. Misclassified employees are often denied access to critical benefits and protections, such as family and medical leave, overtime, minimum wage and unemployment insurance, to which they are entitled. Employee misclassification also generates substantial losses to the Treasury and the Social Security and Medicare funds, as well as to state unemployment insurance and workers' compensation funds.
The Wage and Hour Division's Salt Lake City Office and the Denver branch of the Office of the Solicitor, through an agency memorandum of understanding with the Utah Labor Commission, have been working on employee misclassification issues, including issues regarding this case, with the Commission, the Utah Division of Occupational and Professional Licensing and the Utah Industrial Accidents Division. Under the terms of a similar information-sharing memorandum of understanding, this is the type of case that the Labor Department may refer to the Internal Revenue Service.
Memorandums of understanding with state government agencies arose as part of the department's Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. More information is available on the department's misclassification Web page at http://www.dol.gov/misclassification.
The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Additionally, employers must maintain accurate time and payroll records. Employers who violate the law are, as a general rule, liable to employees for their back wages and an equal amount in liquidated damages. Back wages and liquidated damages are paid directly to the affected employees.
For more information about federal wage laws, call the Wage and Hour Division's toll-free helpline at 866-4US-WAGE (487-9243) or its Salt Lake City office at 801-524-5706. Information also is available at http://www.dol.gov/whd.
