Franchise businesses have become a cornerstone of the modern entrepreneurial landscape, offering individuals the opportunity to own and operate their own businesses with the support of an established brand. However, amidst the many advantages and opportunities, there are potential legal challenges.
One such critical concern is the joint employer doctrine; another is vicarious liability. There are differences between the two.
Vicarious liability is a legal doctrine that holds the principal or employer responsible for the actions of its agents or employee. Franchisors are potentially susceptible to claims of vicarious liability for torts committed by their franchisees.
Joint employer means multiple companies may be responsible for the welfare of workers. In the context of franchise businesses, this means that both the franchisor and the franchisee could potentially be held liable for employment-related obligations to the franchisee’s workers.
A franchisor found to be a joint employer will likely also be vicariously liable to a third party for the torts, for example the negligence, of its franchisee and the franchisee’s workers. This is because courts use the same type of control test in vicarious liability cases as in joint employer inquiries.
The U.S. National Labor Relations Board (NLRB) recently issued a rule on determining the standard for joint employer status. On November 16, 2023, the NLRB announced that it extended the effective date of that rule to February 26, 2024, to facilitate resolution of legal challenges with respect to the rule.
The lawyers at U | L | M are educated about the rule and its potential effects on franchisors, franchisees, and other employers.
Contact us for more information.
The potential implications of joint employer liability for franchise businesses are profound. As franchisors adapt to the evolving legal landscape, prioritizing compliance and proactive measures by seeking legal guidance is wise.