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Five Tips for Franchisees in the Joint-Employer Era

So you’ve mortgaged your house. You’ve taken out a bank loan (or two). You’ve signed the lease. And you’ve fitted out your space. Now, you’re ready to see the success of your hard work as you launch your new small business, backed by the power of a national franchise organization.

You start with five employees – a small business if there ever was one. Then, you receive a notice about a grievance or ruling from your attorney and, suddenly, you’re told that in the eyes of the law, you don’t have 5 employees….you have 5,000.

How is that possible? What does it mean? And how can you survive as a small business owner if the government is intent on treating your local retail startup like a large multinational enterprise instead?

The Dawn of the Joint-Employer Era

With recent court rulings such as Rodriguez v. Dynamesh, Inc. declaring a company with 17 direct employees to be subject to the provisions of the Age Discrimination in Employment Act (ADEA) because its temp workers bring the company’s total headcount over 20 persons, and the National Labor Relations Board (NLRB) declaring McDonald’s USA to be a joint-employer with a local franchisee accused of racism in hiring, this is indeed a complicated and confusing time to be a franchisee (or a franchisor).

Here are five things to keep in mind as you navigate the waters of this new environment:

1. Stay in touch with your franchisor.

Many of the burdens associated with the joint-employer concept create greater risks for franchisors more than for franchisees. The risk to franchisors is that an overwhelming flood of lawsuits and labor rulings will overwhelm their business. Since damage to the franchisor ultimately hurts the franchisee, you can help avoid this by being in regular contact with your franchisor team and following their instructions and guidelines with care.

2. The best way to avoid problems is to avoid problems.

If you want to avoid running afoul of labor actions or lawsuits, the first step now is the same step it was before – document your HR practices, follow your processes precisely, keep consistent documentation and, first and foremost, stay in close contact with your front-line managers. Remember, if you the best way to avoid lawsuits from disgruntled employees is not to have your employees feel disgruntled.

3. Don’t allow for brand confusion.

Yes, your franchise is a member of the MegaGlobal Franchise Network, but at the end of the day your prospective and current employees will be working for TheLocalSmallBusiness LLC. Be absolutely clear — in everything — that you are the employer, and not your franchisor. That means effective communication from job advertising all the way through internal HR documents and processes.

4. Take responsibility for your team.

Many new franchisees are also first-time employers. As a result, franchisors often have to step in and help deal with management challenges for new franchisees. Now, that will be harder to do without creating legal risks. The solution is simple: Take responsibility for your team. Follow the franchise system HR best practices to a “T”, commit to investing in employee training and development, and focus on your operation every day.

5. Prepare for growth now.

If you’re keeping your team under the 10-employee or 20-employee or 50-employee threshold to avoid triggering certain laws and requirements, make sure you’re ready to make the leap at any time. Treat your workforce as something that will grow, and plan to finance that growth, including incurring new costs associated with regulatory compliance, not to mention best practices for growing companies.

Bottom Line: The better you manage your workforce proactively and professionally, the less risk you incur in this new era of constant change. Be smart and stay ahead of the curve!

Selected Sources:

Temps supplied by agency might count in ADEA’s 20-employee threshold
http://www.employmentlawdaily.com/index.php/news/temps-supplied-by-agency-might-count-in-adea-20-employee-threshold/

Franchise Employees Sue McDonalds USA, LCC
http://laconiclawblog.com/index.php/2015/02/20/franchise-employees-sue-mcdonalds-usa-llc/

Courts And NLRB Disagree On ‘Joint Employer’ Ruling
http://dailycaller.com/2015/01/10/courts-and-nlrb-disagree-on-joint-employer-ruling/

Don’t panic over ‘joint employer’ news
http://www.franchisetimes.com/October-2014/Dont-panic-over-joint-employer-news/

Worry But Don’t Hyperventilate (Yet): What the “NLRB Action” Means for Franchisors
http://plavekoch.com/worry-but-dont-hyperventilate-yet-what-the-nlrb-action-means-for-franchisors-action-items/

Image Credit: mastermaq (Flickr @ Creative Commons)

This entry was posted on by HR Resolutions.