The Image Group
Christopher Kellett of Carmody MacDonald P.C. Joins the AAFD’s LegaLineSM Franchisee Network

Department of Labor Withdraws Joint Employer Doctrine…a Mixed Blessing for Franchisees?

By Published On: June 29th, 2017

On Wednesday, June 7th, The Department of Labor made the expected announcement that the Trump administration is withdrawing the Obama era joint employer doctrine.

This action is a mixed blessing for franchisees. On the one hand, the threat of joint employer classification has clearly negatively impacted many franchisees, including triggering the withdrawal of vital HR support by many “threatened” franchisors. On the other hand, the joint employer doctrine has given franchisees ammunition to achieve greater autonomy and certainty of “business ownership” of their franchises businesses. The doctrine had also given franchisee associations the opportunity to provide useful services to both franchisors and franchisee constituents.

The AAFD has long urged franchisees to leverage the threat that their franchisor may be deemed the joint employer of a franchisee’s employees to achieve contractual assurances of equity ownership of the franchised business. The joint employer controversy was a hot topic at the AAFD’s recent Franchisee Leadership Summit and a through provoking session present by Robert Zarco and Erin Conaway.

A franchise agreement and culture that clearly defines a franchisee as an independent business owner has never been threatened—only franchise systems that have crossed a line of control over franchise operations were impacted.

Now that the DOL has backed down from the joint employer doctrine, franchisors can give a sigh of (partial) relief as it is much less likely that the Department of Labor will challenge all but the most egregiously controlling franchisors. But for franchise systems where complaints abound from franchisees who claim their independent business judgements are eviscerated by excessive franchisor control, the loss of the DOL doctrine may diminish the legal options of franchisees to obtain remedies.

Share this article

Written by : Robert L. Purvin

Robert Purvin is the Chairman and CEO of the American Association of Franchisees and Dealers, a national non-profit trade association that is dedicated to supporting and protecting the rights of franchise owners. The AAFD's mission is to define, identify and promote Total Quality Franchising practices, and the AAFD supports is mission by: Promoting strong and effective independent franchisee associations as affiliated chapters of the AAFD. The development of the AAFD's Fair Franchising Standards, the most comprehenisve body of negotiated principles of recommended franchise practices in existence. The advocacy of fair and balanced franchise agreements and relationships that respect the legitimate business interests of both franchisors and franchisees for the good of the franchise relationship. The education of franchisees and prospective franchisees by the development and publication of the AAFD Fair Franchising Standards and the promotion of the AAFD Franchisee Bill of Rights.