United States: 5 Ways To Address The Legal Risks Of Joint Employment

Franchisors must exercise caution in how they support franchisees on the labor front.

In recent years, the franchise world has been upended by an aggressive, anti-franchise, NLRB. 2014 saw the National Labor Relations Board (NLRB) issue a series of rulings that held that franchisors might be the joint employers of their franchisees' employees. A franchise is a trademark license that extends use of a brand while shifting costs of overhead such as labor to an independent contractor.

The idea that the employees of a franchise may also be the employees of the franchisor defeats the purpose and value of the franchise as a trademark license. For decades before these rulings, franchisors included support of employment practices in their franchise systems, the same way they included food safety and operational support.

It makes sense because franchisees need the support and training in all areas of their business, not just some. Joint employer issues were not a problem because franchisors knew and understood that they give the franchisee tools, and it is up to the franchisee to implement them. Chances were that if the franchisee was doing a poor job of employee recruitment and training, then they were probably doing a poor job in other areas; hence, the brand would be damaged.

The previous rule that franchisors could be held liable as a joint employer only if it exerted actual control of the franchisee's employees served the industry well, and it allowed the franchisor to share its extensive resources on employee management with franchisees.

Now, however, franchisors are not sure what to do. I hope that the new Administration will return to the previous standard so that franchisors can return to helping their franchisee be successful in the employment management side of their business—the way it should be. However, until then, franchisors must exercise caution in how it supports its franchisees on the labor front.

Here are five ways a franchisor may address and minimize the legal risks of joint employment liability (with some commentary included):

1. A franchisor should not be involved in the franchisee's decision-making process

Because these areas are the focus of joint employer legal risk, a franchisor must distant itself from a franchisee's important and necessary employment decisions, such as hiring, firing, and disciplining employees; as well as establishing wage levels and work conditions. This is pretty much the same as the pre-radical NLRB. Good franchisors have never taken on these roles, and it has been a rule from the beginning of franchising that the franchisee makes the ultimate decisions on its employees.

However, unlike the forgoing, franchisors are now being advised not to provide franchisees with employee applications or other employee forms. I still believe this is a gray area, and I tell franchisors that they can provide forms so long as they are carefully crafted and not franchisee-specific.

Related to this, and another pre-radical NLRB good practice is that the franchisor should not screen or approve a franchisee's hiring decisions, even if it is an important management hire. Workers should clearly know that they have only boss, the franchisee.

2. A franchisor should not be involved in the franchisee's process of training franchise employees

Perhaps one of the most significant casualties of the current NLRB rules is that important aspect of franchise employee training. Franchisee employee-customer presentation is as important to a franchise system as the look and taste of a restaurant's food. The thought that a franchisor cannot create branding around employee behavior is anathema to the idea of consistent delivery of products or services; hence, another reason why we need to old law back.

However, here is the current advice to franchisors: franchisors should isolate themselves from the employee training process as much as possible. Franchisees should be left to choose whether to use franchisor-run training programs for workers below the senior-management level.

Train-the-trainer programs should be utilized so that franchise employees who complete a training program are qualified to teach others all newly learned skills. Franchisors should limit employee training to subjects that may be directly connected to the implementation of franchise and brand standards. Franchisors should not demand that employees complete remedial training. Breach of the franchise agreement should motivate franchisees not to hire unqualified persons or assign the untrained to work ahead of schedule.

3. A franchisor should not supply franchisees with a sample employee handbook

Another important casualty of the current rules is the all-important employee handbook. Again, like food recipes or massage techniques and oil change methods, sample employee handbooks should be an important resource for franchisors to supply to their franchisees. But not in today's environment. Now, here is what franchisors are being told: Instead of supplying franchisees with a sample employee handbook, franchisors should recommend that franchisees retain the services of a suitably qualified labor relations/human resources firm that offers payroll and other administrative functions. While it is acceptable to recommend a specific service provider, a franchisor shouldn't limit a franchisee's options or make it mandatory that a franchisee use a particular service provider. If a franchisor wants to offer centralized payroll, administrative, or accounting services to franchisees, it should offer them as optional programs.

This is an area where I tell my clients they may want to take some risk. First of all, an integrated accounting system, tied into the franchisor's centralized system is critical for accountability and measurement purposes; it has nothing to do with employee practices. Good policies, tied to the protection of the brand, are critical to the system, and so long as you are not making the final decisions on employment for the franchisee, then you should give them the resources to succeed. I often tell my clients that at the end of the day, you have to do what is best for your business—which it ultimately best for their employees. However, in today's wacky political environment, what makes common sense may pose legal risks.

4. A franchisor should not make the use of certain software applications mandatory

Who knew that advanced technology would be the noose that strangled an entire industry. While other industries thrive with the advancement of technological resource, the government is using it as a poisoned dart in franchising. For now, while it is an acceptable practice for franchisors to require franchisees to use specific software applications such as point-of-sale applications to collect and report sales and other performance data in real time, the NLRB has specifically cited labor scheduling technology as evidence of a franchisor's involvement in a franchisee's duties as an employer, even if the use of the labor scheduling features is optional. Again, these are resources, which benefit the franchisee and the brand.

We are now having to tell our clients that if franchisors require franchisees to use particular software which includes other applications to manage their labor force, the additional applications that perform labor functions should be disabled, although the franchisee may be given the option to voluntarily elect to use them.

5. A franchisor should not express brand standards as workplace rules in written materials

Last, and perhaps the most frustrating, operating manuals, training materials, recruiting materials, and other communications may be sources of incriminating evidence in a joint employer case, as they often contain language that expresses operating standards in a tone that makes them sound like mandatory, workplace rules. Again, employees are an important part of any brand, and they should be trained to present a consistent message of the brand identity. Employee standards should be high, and franchisees should see them just as important to the brand as the taste of the food. Franchisees are having their legs cut out from under them by rules, which make no sense in the real world of franchising.

In conclusion, time will tell whether the NLRB continues to reshape the way franchisors are seen in the context of joint employment liability. This writer is hopeful that the new Administration will reverse course and return to a more common sense, pro-business approach. However, for now, a franchisor must carefully interact with a franchisee to avoid any risk of liability for a franchisee's actions related to its employees. Until the new Administration rules otherwise, it is essential that franchisors review and reassess all current policies and procedures related to the business of their franchisees to reduce the risk of joint employment liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.