Wednesday, August 17, 2016

DOL wage/hour agreement with Subway raises legitimate joint-employer concerns

The Department of Labor recently unveiled an agreement with Subway through which the fast-food giant has agreed to assist its franchisees in their wage-and-hour compliance.

the agreement builds upon the division’s ongoing work to provide technical assistance and training to Subway’s franchisees. It also provides an avenue for information-sharing where we will provide data about our concluded investigations with Subway, and they will share their own data with us, generating creative problem solving and sparking new ideas to promote compliance. When circumstances warrant, the franchisor will remind franchisees of the Wage and Hour Division’s authority to investigate their establishments and to examine records. It also specifies that Subway may exercise its business judgment in dealing with a franchisee’s status within the brand, based upon any history of Fair Labor Standards Act violations.
Sounds great, right? The DOL calls this a “recipe for success” — the DOL boosts franchisees’ compliance with labor laws and Subway protects the integrity of its brand identity. Yet, this recipe is certain to leave a bad taste in employers’ mouths.

Only a year ago, the NLRB, in Browing-Ferris, greatly expanded the definition of “joint employer” under the National Labor Relations Act. Gone is the NLRB’s decades-old test, by which must exercise actual control over the employees of another to be deemed a joint employer, replaced by a liberalized standard that allows for indirect or potential control over the terms and conditions of the employment of another’s employees.

Does not technical assistance, training, and wage/hour compliance monitoring of a franchisees employees by a franchisor qualify as sufficient indirect or potential control (if not direct control itself)?

Equally troubling, as the International Franchise Association points out, is the fact that the agreement between Subway and the DOL contains no assurances that the government will not use Subway’s wage/hour monitoring to establish a joint-employer relationship with its franchisees.
Legitimate concerns now exist as to which franchisor actions cross the line and could serve as evidence of a joint employment relationship in future litigation or a government enforcement action. Without assurances that their compliance efforts will not be used against them by another government agency, or plaintiff attorneys, franchisors are caught in an inevitable catch-22.
I try very hard not to be a conspiracy theorist. Yet, if it looks like a set-up, and smells like a set-up, then, well, you get the rest. Did the DOL reach its Subway agreement as a means to help the NLRB back-door its liberalized joint-employer standard? Quite possibly. After all, two arms of the DOL, OSHA and the Wage and Hour Division are looking at implementing the same joint-employer rules as the NLRB. How much easier does this all become for the feds if employers unwittingly agree?

Botton line? When the government offers to help your business with its compliance, proceed with extreme caution. There is no such thing as a free sub.

[Hat tip: Employment Law 360]