There are many legal issues the franchising community is facing in 2018, and while joint employer continues to be the top concern for many franchisors and franchisees, attacks on non-solicitation clauses and the growing trend of private equity in franchising are also worth monitoring.
Issue 1: JOINT EMPLOYER
Joint employment issues remain the hottest legal issues facing franchising. Here are the areas to watch on the joint employment front in 2018:
Congress: On Nov. 7, 2017, the U.S. House of Representatives passed H.R. 3441, the "Save Local Business Act," which seeks to narrow the definition of "joint employer" for purposes of the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). Under the bill, "a person may be considered a joint employer [for purposes of the FLSA and NLRA] in relation to an employee only if such person directly, actually, and immediately, and not in a limited and routine manner, exercises significant control over essential terms and conditions of employment, such as hiring employees, discharging employees, determining individual employee rates of pay and benefits, day-to-day supervision of employees, assigning individual work schedules, positions, and tasks, or administering employee discipline." As of the writing of this article, the bill is pending in the Senate.
D.C. Circuit: On March 9, 2017, the U.S Court of Appeals for the District of Columbia Circuit held oral argument in the appeal of NLRB v. Browning-Ferris (D.C. Cir. Cases #16-1028, 16-1063, and 16-1064)--the decision by the National Labor Relations Board (NLRB) which changed the joint-employer standard under the NLRA --by holding that entities could be liable if they had "indirect," or even unexercised "potential," control over day-to-day employment matters of another party's employees. On April 6, 2018, the D.C. Circuit issued an order holding the case in abeyance pending disposition by the NLRB of Hy-Brand Industrial Contractors, Ltd., 365 N.L.R.B. No. 156 (2017)
Federal and State Courts: Lawsuits continue across the United States alleging that the franchisor is the joint employer of the franchisee's employees under federal statutes, state statutes, common law and other theories. See, for example, Harris v. Midas, No. CV 17-95, 2017 WL 5177668 (W.D. Pa. Nov. 8, 2017) (Title VII and state law joint employer claim); Parrott v. Marriott Intl, Inc., No. 17-10359, 2017 WL 3891805 (E.D. Mich. Sept. 6, 2017) (FLSA joint employer claim)...