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Commercial Litigation | Monday, august 11, 2014 | 11

Franchisors
• Avoid control over supervision of the

franchisee employees (a.k.a. “Do not micro-
manage your franchisees!”);
« Continued from page 4
• Avoid running payroll and benefits for,
indemnification and insurance provisions, or maintaining employment records of, fran-
franchisors may find it prudent to adjust their chisee employees; and
franchise-wide quality control standards and • Avoid participating in or setting policies
current personnel practices relating to hiring, controlling training programs.
wages, promotion, discipline, training, and This is not an exhaustive list, and consult-
employment conditions in order to tip the
ing with counsel before making any changes
scales in their favor. For example, although to your franchise policies is the best option.
franchisors can set uniform hiring practices That said, taking these and similar steps will
and procedures (e.g., running background better protect franchisors from joint employer
checks on all applicants), they should con- liability when employee lawsuits do arise.
sider avoiding making specific hiring recom-
mendations, instead leaving such decisions •••••••••••••••••••••••••••••
to the franchisees. Similarly, franchisors may
develop standardized forms and reporting 1. 287 F.r.D. 251 (S.D.N.Y. 2012).
2. See id. A typical joint employer analysis involves
mechanisms for franchisees to use when a review of an entity’s relationship to the employees
through both the FLSA’s test for joint employment as
submitting financial and personnel reports,
well as the individual circuit’s test, which include, among
others, the “operational/functional control” test, as well
as the “economic control” test. These considerations are generally very case- and fact-specific, but there are some
common considerations (i.e., whether one employer
Despite some excep-
acts in the direct interest of the other; or whether the
two employers effectively interchange employees).
tions, “courts have been 3. See In re DPNY, No. 12-10935 (Bankr. S.D.N.Y. Dec.
nearly uniform in holding 4, 2013).
4. See, e.g., Orozco v. Plackis, 952 F. Supp. 2d 819 (w.D.
Tex. 2013) (finding employer liability where the franchi-
that a franchisor should sor was directly involved in employment-related train-
ing, as well as in directly managing the work schedules
not be deemed to be an and hours of the franchisee’s employees).
5. McFarland v. Breads of the World, No. 1:09-cv-929,
‘employer’ ... when plaintiff 2011 wL 801815, at *9-10 (S.D. Ohio Feb. 1, 2011) (refus-
ing to hold a franchisor jointly liable because it did not
works for an independently “play any role in [franchisee’s] payroll ... or ... accounts
payable,” and because the franchise agreement express-
owned franchise.”
ly stated the franchisee was “solely responsible for all employment decisions.”).
6. 2010 wL 5184841 (S.D. Miss. Dec. 12, 2010).
7. 2013 wL 3894981 (D. Ariz. July 29, 2013).
but they should steer clear of dictating how 8. Reese, 2010 wL 5184841, at *5 (citing Lee v. Coaho-
franchisees evaluate their personnel. The fol- ma Cnty., Miss., 937 F.2d 220, 226 (5th Cir. 1991)).
lowing is a list of additional actions franchi- 9. Courtland, 2010 wL 5184841, at *3 (discussing Singh v. 7-Eleven, No. C-05-04534, 2007 wL 715488, at *3-6 (N.D.
Voted
sors may wish to avoid to further distance Cal. March 8, 2007), and collecting other cases).
themselves from direct management and 10. Id.
THE BEST:
operational control over franchise employees:
11. Id. at *8 (internal quotation marks omitted).
Economic Damages Firm
• Avoid exercising control over the hiring, 12. Second Amended Complaint, Sanchez v. Mc-
firing, promotions, or demotions of franchisee Donald’s Rests. of Cal., No. BC499888 (Cal. Super. Ct. March 13, 2014); Complaint, Hughes v. McDonald’s, No. Matrimonial Financial Expert
employees;
rG14717085, 2014 wL 956479 (Cal. Super. Ct. March 12,
2014); Complaint, Ochoa v. McDonald’s, No. rG14717102, “We Peel the Onion...” TM
• Avoid exercising control over pay rates 2014 wL 962086 (Cal. Super. Ct. March 12, 2014); Com-
and classifications (e.g., exempt, nonexempt) plaint, Salazar v. McDonald’s, No. rG14717081, 2014 wL
of franchisee employees;
962046 (Cal. Super. Ct. March 12, 2014).
13. Complaint, Beard v. McDonald’s, No. 1:14CV01664,
• Avoid control over setting or modify- 2014 wL 986829 (e.D.N.Y. March 13, 2014).
Accounting Malpractice Defense
ing employment conditions of franchisee 14. Complaint, Pullen v. McDonald’s, No. 5:14Cv11081,
employees (including scheduling, meal and 2014 wL 978792 (e.D. Mich. March 13, 2014); Complaint, White-Collar Criminal Defense
rest breaks, timekeeping, etc.);
Wilson v. McDonald’s, No. 2:14CV11082, 2014 wL 978785
(e.D. Mich. March 13, 2014).
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