Earlier this decade, hardly a week passed without some court or agency interpreting the joint employment doctrine more expansively than before. Although the National Labor Relations Board created many of these headlines by attempting to treat McDonald’s as the joint employer of its franchisees’ employees and expanding its joint employment test, many courts and other agencies reached similar interpretations. These broad decisions raised particular concerns for franchisors and other businesses who rely on outside workers to interact with their customers. These entities face a difficult balance between (a) controlling outside workers enough to protect their brands, achieve quality standards, and otherwise protect their interests while also (b) not exercising so much control that they create unexpected legal liability.
Fortunately, several recent decisions have begun scaling back these broad interpretations of joint employment. (For example, as we discussed previously, the NLRB is in the process of implementing a new and more balanced joint employment test). One recent decision shows another court resolving a joint employment question in a way that is evenhanded and rational. In doing so, the court provided important guidance for franchisors and other businesses that use or rely on outside workers.
In this case, a federal court held that Jimmy John’s was not a joint employer of its franchisees’ employees, specifically a group of assistant sales managers. This decision will not bind most other courts or government agencies, but it may help persuade them, and it shows how many courts have viewed these same issues.
Most importantly, the court recognized that an entity will not become a joint employer simply because it takes steps to protect its brand, achieve certain quality standards, and provides guidance (even “extensive guidance”) to the entity that actually employs the workers. The court also recognized that a franchisor or other entity will not become a joint employer merely because it exercises indirect control over outside workers or has the ability to control them. (The NLRB reached this same conclusion in its “tentatively vacated” Hy-Brand decision). Rather, as this federal court emphasized, “influence alone, even if substantial, does not constitute control.”
The court also provided useful examples of what actions a franchisor or other business may take without creating a joint employer relationship. The court did not deem Jimmy John’s to be exercising enough control to become a joint employer, even though Jimmy John’s:
- Occasionally suggested that franchisees discipline certain employees (but did not necessarily cause the franchisees to impose discipline);
- Recommended that certain franchisee managers work at least fifty hours per week (but did not require this or enforce its recommendation);
- Set the schedules for franchisees’ stores (but did not set the schedules for specific employees, even if the store schedules largely dictated the employees’ schedules);
- Provided franchisees with advice about how to pay particular employees, and encouraged franchisees to offer certain bonuses (again, without actively requiring this);
- Retained the right to inspect franchisees’ personnel files of their employees (but did not retain those files itself);
- Issued franchisees guidelines about how to address a broad range of employment decisions, including decisions about hiring and discipline (but did not actually participate in those decisions);
- Potentially required franchisees to provide certain training (but this training existed largely to protect Jimmy John’s brand and control quality);
- Required employees to wear certain types of clothing, and strictly controlled tattoos, facial hair, and jewelry (but, according to the court, these requirements were necessary to protect the Jimmy John’s brand); and
- Occasionally penalized franchisees for the actions of their employees (but did not directly penalize or discipline employees themselves).
The key takeaway is that, according to this court, an entity may issue guidelines, exercise indirect control, and otherwise take steps to protect its brand and quality, without creating a joint employer relationship through those actions alone. This is yet another sign that businesses have flexibility to protect their interests in this area.