Franchise Joint Employer Rule: Fast Food Worker
Published June 9, 2023

How Franchisors Can Provide Employment Resources Without Being a Joint-Employer

Republished with permission of CareerPlug, a Silver Partner of the FBR Summit 2023. 

Franchises provide their franchisees with a playbook of best practices that can help their business flourish. But one thing that is often missing from that playbook is the chapter on hiring the right people.

Franchisees must make their own employment decisions like controlling their hiring/firing decisions, managing employee documentation, and compiling an employee benefits package.

However, the franchisor often has insight into industry recruiting trends, pitfalls, and effective hiring practices and can offer a lot of value to their franchisees when it comes to hiring and retention. So how can franchisors pass these insights on to their franchisees while staying out of employment decisions?

Let’s go over what it means to be a joint employer, why franchisors avoid it, and how they can do so while still providing valuable hiring resources to their network.

Joint employment legislation

Generally, in the United States, a joint employer relationship exists when two or more entities share control over the terms and conditions of employment. However, the joint employer issue is complex and ever-evolving. It has long been the subject of legal debates and has various interpretations.

McDonald’s is one large franchise organization that has often been in the spotlight (and the courtroom) over the joint employment issue.

In 2019, McDonald’s workers issued complaints that they faced retaliation after participating in protests for higher wages and better working conditions. Their claim was significant since they alleged that both franchise owners and McDonald’s as a corporate entity both were responsible for these violations.

The National Labor Relations Board (NLRB) conducted an investigation and concluded that McDonald’s should be considered a joint employer, but this was only a recommendation, not a final ruling. The case was settled before a legal decision was issued with McDonald’s agreeing to pay $170,000 to resolve the claims and committing to clarifying its franchisees’ rights and obligations regarding labor law compliance.

This is not the first (nor probably the last) time McDonald’s made the news for joint employment issues. And they are just one in a long line of other franchise networks that have faced backlash over the issue. To make matters even more complicated, legislation for joint employment varies from state to state. 

The franchisor-franchisee employment relationship

Clearly, it’s important for franchise owners to be very clear when defining the roles and responsibilities of the franchisor and franchisee. At the beginning of a franchise relationship, franchisors spell out the conditions of franchising in the Franchise Disclosure Document (FDD). These conditions affect most areas of the franchisee’s business, but one area that can lack clarity is with regard to hiring and employment decisions.

There are good reasons why franchisors typically avoid directly providing hiring guidelines to franchisees. Let’s say a business owner faces allegations of discriminatory hiring practices. If a franchisor stays uninvolved in the franchisees hiring practices, they can avoid being held accountable for this wrongdoing.

However, franchisors have a tremendous amount of insight and value to provide franchisees on hiring and recruitment – Franchisors can avoid joint-employer implications and still deliver value by offering optional resources to franchisees. 

Offering optional hiring guidelines without becoming a joint employer

Franchisors are now exploring options on how to stay compliant with joint-employment regulations, while still ensuring their franchisees are set up for success. Offering a careers page portal, for example, is one solution franchisors can provide without assuming liability for franchisees actions. 

In 2015, Freshii, a fast-casual restaurant chain, faced unfair labor claims made by an employee against a Chicago franchisee. However, the NLRB concluded that the franchisor Freshii was not considered a co-employer under any NLRB standard. While Freshii offered its franchisees a careers page portal for job openings on their website, they did not mandate any recruitment policies or procedures. In short: the NLRB found that franchisees were responsible for their own hiring decisions, and not Freshii.

This is good news for franchisors who want to provide all of the benefits that branded careers pages offer their franchisees, without the potential liability of being considered a co-employer.

Franchisors can also avoid joint employer “gray areas” by partnering with a third party to provide the hiring resources they can’t. For example, by offering an applicant tracking system (ATS) like CareerPlug, franchisors can support their networks with applicant sourcing, hiring best practices, and a streamlined hiring process. Franchisors can also use the ATS to monitor their networks important hiring metrics.

By making it clear in franchisee agreements that franchisors will not dictate or control matters of employment, franchisors can offer optional human resources tools and best practices. Franchisors who take this approach can provide value and optional structure to franchisees without infringing on the employment practices of the individual business.

Recommendations for franchisors

CareerPlug specializes in working with franchisors in various industries. Here are some of our best tips for helping franchisees with hiring while navigating joint employment issues.

Franchisors should:

  • Clearly define the relationship between them and their franchisees regarding employment policies (with the help of a franchise attorney and legal counsel).
  • Provide best practice insights, but avoid mandating rules related to job descriptionssteps in hiring process, etc.
  • The franchise brand is the most valuable asset to a franchisee – attracting customers and job seekers alike. Franchisors who provide a careers page that shows off the company culture and employer brand set their franchisees up to attract quality candidates. The franchisee maintains the direct relationship with the partner (a job posting platform or applicant tracking system) while the franchisor website acts as conduit, hosting the careers page and aggregating all franchisee postings. Since all active job positions from all franchisees are in one place, job seekers can apply through the brand directly to any franchisee.
  • Offer the optional benefit of an applicant tracking system like that makes hiring easier for franchisees while preserving independent ownership, management, and configuration by the franchisees.

Recommendations for franchisees

Franchisees should:

  • Educate themselves on avoiding discriminatory hiring/firing and comply with all employment laws and regulations.
  • Establish and manage their own accounts with CareerPlug, but leverage resources that ensure a consistent brand experience and provide best practices when possible.
  • Adhere to recruiting and hiring practices that they believe will best benefit their business and focus on creating a great candidate experience.

Next steps

Co-employment regulation is always a hot topic in the franchise industry as it’s ever-evolving.

Savvy franchisors should seek to provide proven hiring processes that franchisees can choose to adopt. We know that most franchisees did not get their start in recruitment, and a little help from the franchisor can go a long way in ensuring that franchisees are equipped to hire effectively.

Evaluate where your franchisees struggle with their employment processes and consider how you can provide resources and expertise as a franchisor. When your franchisees hire great people, grow their businesses, and increase their revenues, everyone wins.

Please note: The information in this blog post is intended to provide useful information on the topic covered, but none of the information should be construed as legal advice or a legal opinion. Due to the evolving nature of this topic and potential differences in regional regulations, it is crucial for franchisors and franchisees to seek legal advice specific to their jurisdiction to fully understand their rights, obligations, and any potential joint employer considerations.

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About the Author: CareerPlug

Since 2007, CareerPlug has worked with over 16,000 growing companies to empower them to hire the right people and build winning teams. You don’t have to be an HR Pro to use our software – it’s easy-to-use and built with busy owners, operators, and hiring managers in mind.
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