Joint Employment Concerns with Franchisor-Developed COVID-19 Safety Policies

As businesses return to in-person work, employers and employees are keenly aware that the workplace has changed. Employment and workplace-related challenges are issues that have touched nearly every American in some way. One of the most common changes employers and employees are experiencing is the development, implementation, and compliance with enhanced COVID-19 safety protocols and procedures. Developing and implementing safety procedures is a way in which businesses are attempting to keep their customers safe, protect themselves from litigation risk, and demonstrate social responsibility and care for the consuming public.

In the franchise context, developing system-wide safety policies, requiring franchisees to implement them at their independently-owned franchise, and requiring employee compliance with such policies invokes an issue often at the forefront of franchisor’s minds – joint employment considerations.

To maintain the independent contractor status that is a hallmark of the franchise relationship, franchisors are constantly balancing the amount of control they exercise over their franchisees and their business operations, including employment-related decisions. One of the key facts that the NLRB and various state courts have considered in joint-employment litigation is the franchisor’s involvement with and oversight of franchisees’ employees. Thus, franchisors are generally discouraged from getting involved in its franchisees’ hiring and firing decisions, training and discipline of franchisees’ staff, and other employee-level controls.

However, COVID-19 has moved safety policies to the forefront of consumers’ minds. Keeping consumers safe is as important as the product or service a franchise system provides. Thus, franchisors are developing system-wide safety policies and requiring all franchisees and franchisees’ employees to comply. In many cases, franchisors’ safety policies have become part of their brand messaging.

This level of oversight into franchisee business operations may open the door for increased joint-employment litigation. Generally, it is a risk franchisors have chosen to take in order to keep their employees and customers safe, and to be able to present a unified message to the public regarding the brand’s commitment to safety. While it is unlikely that the NLRB or state court would fault a franchisor for taking steps to protect public safety in the midst of COVID-19, franchisors should proceed cautiously in this context. Where possible, safety policies should be uniform and communicated to franchisees through training, which, in turn, can be implemented and enforced by franchisees directly with their staff. Franchisors should revisit public health and safety clauses in their franchise agreements and enforce any required franchisee reporting regarding policy compliance. Increasing the number of operations visits by franchisor’s staff (when they can be safely conducted), and more stringent protocols for managing non-compliant franchisees and franchisees’ employees should be carefully considered, as well.

For more information on employment and litigation issues for re-opening businesses, please view our webinar, recorded Sept. 20. 2020, “Managing Risk in the Wake of COVID-19: Employment and Litigation Considerations.”

This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.