How to Reduce Joint Employer Liability: Legal Tips for Franchisors

Franchising is an established way of expanding a business without having to bear the full costs and hassles of maintaining multiple establishments. While it is a very profitable method of expansion, especially for small and medium sized businesses, there are certain issues that do pop up, especially regarding the question of who is responsible when something goes wrong. As a franchisor, you should be careful regarding the vicarious liability issues that are often associated with being joint employers and avoid them altogether by combining general business sense and legal proofing.

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Go for a Consultation with Franchising Experts First

When you go to a professional franchising consultancy, you immediately make sure that you start off on the right foot. Specialists such as Larkin Hoffman will take you through the basics of how to start franchising on the very first consultation, but from there on, they can handle any and all of the following steps necessary to complete the whole procedure as well, which includes drafting the FOD, Franchise agreements, ancillary contracts, filing trademarks, forming the franchise body and handling the necessary registrations with the state. In fact, they even have a specific guidance procedure that teaches franchisors regarding how to avoid vicarious liabilities in the future. Mostly, hiring a reputed franchising consultancy could very well be the only step you will need to take for avoiding missteps.

Employee Handbooks Are a Bad Idea

If something goes wrong at one of your franchisee establishments regarding employee management or conduct, that employee handbook will not work in your favor in court, as it will serve to establish your business as partially/fully responsible for the incident. Suggest your franchisees hire third-party legal and labor counsel instead for deciding on the rules and regulations of the establishments.

Stay Away from the Employment Procedures Practiced by Each Franchisee Owner

In both legal terms and in practice, it is essential to make the fact clear that each franchise owner is an independent entity in terms of employee management, so that none of the employer’s decisions regarding employee handling can legally affect you, if it goes south. Some of the common aspects of employment in a franchise establishment that a franchisor should never interfere in include recruitment, payment, employee agreement formations, work conditions establishment, work schedule establishment, disciplinary measures, dismissals and reassignments.

Stay Neutral and Unreactive to All Employment Decisions

Irrespective of the situation, no decision taken by the franchisee regarding the employees should provoke a reaction from your company, as this makes it easy to establish vicarious liability in case of a lawsuit. Even if an aggrieved employee comes to the franchisor, he/she should not be entertained with any steps from your side towards the franchise owner. Make it clear to the employee that you are not their employer, but the franchise owner is. In extreme and/or emergency situations entailing violence or sexual assault, the authorities will need to be informed immediately though.

The general idea is that you should only be concerned with the business aspect and the trade agreements between your brand and your franchisees. They are independent contractors and operators, so only hold them responsible for maintaining the terms and conditions of the agreement. There will still be legal loopholes for people to exploit at times, but franchise attorneys are generally aware enough these days to close them in the agreements themselves and warn you against the common mistakes.

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Jovany Maxwell