Monday, December 24, 2012

Additional Franchisor Liability From Franchisee Employees

Over the past several years franchisees have been claiming that they have employee based claims against the franchisor. This has been especially prevalent in the janitorial and other service based franchises. Now we are getting cases where employees of franchisees are making claims that they are employees of the franchisor in certain cases.
Generally franchisors have been able to say that they are a separate entity from the franchisee and therefore cannot be liable to employees of the franchisee. But recently in New York, employees of Domino's Pizza franchisees were able to amend their complaint against the franchisee employers to also include Domino's, the franchisor, for violations of the Fair Labor Standards Act and the New York Labor Law. This case is Cano v. DPNY, Inc.
While this case is still pending and the franchisor may not be held liable in the end, it is concerning that the court did not dismiss the amended complaint, as expected. Some of the reasons the court gave for not dismissing the amended complaint are based on the following actions by Domino's:
1) Domino's promulgated compensation policies and implemented them through the Domino's PULSE system which included tracked hours, wages and payroll records. These were submitted to the franchisor for review.
2) Domino's created management and operation policies and practices that were implemented at the restaurants by providing materials for use in training store managers and employees, provided posters and directions for employee's tasks and monitored that performance through required computer hardware and software.
3) Domino's developed and implemented hiring policies.
This is just one more reason for a franchisor to have their franchise attorney review their policies, including their operations manuals, to ensure that they are limiting their exposure to liability.