March 22, 2019
By Paige Smith
Brands wishing to use the momentum of the #MeToo movement to address concerns of workers are hesitant to do so, out of caution over potential joint employer liability.
A Catch-22 is presented when franchisers balance the risks of joint employer liability with a cautious approach to providing workplace harassment guidance to franchisees. Corporations can be held jointly liable for the mistreatment of workers paid by its subcontractors or franchisees if they exercise enough control over the workplace.
Franchisers want to do the right thing but don’t want to be liable for meddling in an independent franchisee’s business, the International Franchise Association said at an Equal Employment Opportunity Commission industry roundtable event in March.
“If a document got out that even just educated” about harassment policies, IFA vice president of government relations and public policy Suzanne Beall said, “it could be construed as indirect or potential control.”
The discussion around joint employer liability is a hotly debated one. House Democrats have called on another government agency, the National Labor Relations Board, to scratch a proposal that would make it harder to prove joint employer liability. The board has said it will move forward with the proposal, which is expected to narrow the current interpretation despite the recent ruling.
The Labor Department too has been working on its own plan covering liability for wage and hour infractions in franchise and staffing arrangements.
Brands can’t have their cake and eat it too with anti-harassment policies, New York University Law School professor Shirley Lin said.
“More resources are needed to fight harassment,” she said. “I think they’re in a tough position to try to hold their franchisee at an arm’s length, while also trying to keep a standard of quality in the workplace.”
Individual parties may disagree on the necessity of joint employer liability, but because it is a large consideration for franchisers, the EEOC should weigh in, management attorneys and academics said.
“They want to do the right thing, they just want the regulator, the government, to tell them what is that right thing,” Michael Lotito, the IFA’s labor counsel and Littler Mendelson shareholder said. “I would certainly ask the EEOC to draw that line for me.”
Because the EEOC lacks lawmaking authority, it could issue guidance on franchiser immunity from liability for harassment that occurs at a franchisee location.
“Their liability should not turn on their joint employer status, but should turn on whether they were directly involved,” Boston University School of Law professor Michael Harper said said. Being “directly involved” could look like a corporate employee visiting a franchised location and directly harassing, or knowing about the harassment in some way.
On the flip side, even if the franchiser is a joint employer, and harassment occurs without the franchiser knowing about it, the franchiser shouldn’t be held liable, Harper said.
Franchisers aren’t explicitly banned from advising, educating, or recommending potential anti-harassment policies to franchisees, it’s just that those actions might implicate them as a joint employer, Seattle University School of Law professor Charlotte Garden said in an email. The franchiser could easily flip the priority to focus on harassment, she said.
“I’d point out that the IFA’s premise seems to be that its members’ most important priority is avoiding joint employer liability, above preventing sexual harassment at franchisees,” she said. “Nobody forces franchises to adopt that set of priorities in that order—they could reverse them, and prioritize preventing sexual harassment above their desire to avoid an incrementally greater risk of joint employer liability.”
Franchisers also might be blowing their worries about joint employer liability out of proportion, Harper said.
“I really feel that these franchisers and the International Franchise Association have been a little paranoid about this because their lawyers have stirred up anxiety to create work,” he said.
Indemnification clauses and an obligation requiring franchisees to follow federal, state, and local anti-discrimination and anti-harassment laws are ways that franchisers can compel franchisees to outlaw sexual harassment, without requiring a specific brand-wide policy, academics and management attorneys said.
Franchisers can also toe the line by educating and suggesting policies, versus dictating and enforcing mandates, Seyfarth Shaw’s Gerald Maatman said.
“Rather than being dictatorial, say ‘Here’s a best practice, do whatever you want,’” Lotito said. It’s about more about giving best practices from an educational standpoint, leaving franchisees to do whatever they think is best for their business, he said.
The key is to leave the final decision to the franchisee, protecting the franchiser from any claims of liability, Harper said.