Monday, June 17, 2019

A New "Intermediary" Theory of Joint Employment in the Realm of the Franchisor-Franchisee Relationship

            In a renowned 2015 Pennsylvania case, a Philadelphia franchisee of the fast-food chain “Salad Works” had failed (illegally) to insure, and its employee, having sustained an accident, was unable to secure workers' compensation benefits.  He sought, as a result, to cast the franchisor as his "statutory" employer.  While the Pennsylvania Appeal Board accepted that argument, and imposed such liability, the Commonwealth Court (the appellate court which takes state agency appeals) reversed.   

            The court declared, with some irony, that Salad Works, as franchisor, “is not in the restaurant business or the business of selling salads.” Salad Works, LLC v. WCAB (Gaudioso & UEGF), 124 A.3d 790 (Pa. Commw. 2015).

            I was intrigued by the dispute (not to mention the court's ironic, and perhaps unsatisfactory, declaration), especially in light of Dean Weil's characterization -- in his illuminating 2014 book -- of franchising as often reflecting a type of "fissuring of the workplace" that leaves highly leveraged those at the bottom of the employment hierarchy.  The injured worker in the Gaudioso case seemed to be such a person.  See generally David Weil, The Fissured Workplace: Why Work Became So Bad for So Many and What Can be Done to Improve It (Harvard 2014) (Chapter 6).   

            In a new article, the author, like the injured worker's lawyer in Gaudioso, is interested in a legal argument that would cast what she calls “the all-powerful brands – the franchisors” as employers – in her case with responsibilities under the Fair Labor Standards and National Labor Relations Acts.  She asserts, in this regard, that “franchisor brands, not their franchisees, set industry-wide standards and, thus, have the ability to offset rising wage inequality and improve working conditions.” Kati L. Griffith, An Empirical Study of Fast-Food Franchising Contracts: Towards a New “Intermediary” Theory of Joint Employment, 94 Washington Law Review 171 (March 2019).  See also

            The author, a professor at Cornell Law School, has studied forty-four contracts between fast-food franchisors and their franchisees. She asserts that her “contractual analysis reveals a new theory of joint employment via franchisor influence over franchisees’ managers. Unlike prior foci on franchisor-franchise relations, and franchisor-crew member relations, [I bring] a new party to light: franchisees’ supervisorial managers.”

            She concludes, “In sum, the theory developed from this rare dataset postulates why some Goliaths of fast food may indeed be ‘employers’ with legal obligations to the workers in their franchised restaurants….”

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