Joint Employment Becoming a Problem for Franchisees

If you are the owner of a franchise operation, you have yet another reason to consider working with BenefitMall to handle your payroll processing. A recent rash of court decisions combined with vague federal and state regulations is causing headaches for franchise owners in relation to joint employment rules. Running afoul of the rules could mean violating FSLA standards for worker compensation.
The good news is that the states are finally waking up to the joint employment problem. According to a recent Bloomberg post, three states passed laws clearly defining joint employment in 2015, followed by six states the following year and eight states in 2017. Five states introduced bills this year but failed to pass them prior to the close of their respective legislative sessions.
In those states with a clear legal definition of joint employment, the problem for franchisees is not as pronounced. For franchisees in the rest of the country, not having a clear definition of joint employment is creating a number headaches.

Corporate Parents Pulling Back

Among the headaches franchisees are having to deal with are corporate parents pulling back on the support they provide. Some companies are no longer providing payroll software or support out of fear that being involved in a franchisees payroll could constitute joint employment. Others are pulling back on training, operating manuals, and other kinds of support services they previously offered freely.
Corporate parents are very sensitive to the joint employment problem because it hits the bottom line. If a franchise operation and its corporate parent are found as joint employers of the franchisee's workforce, both organizations would be responsible for compensating workers under the FSLA. This could quickly become a big headache for corporate parents with multiple franchisees in a given state.

Definition of Joint Employment

The U.S. Department of Labor defines joint employment as a scenario in which an employee is "employed by two (or more) employers such that the employers are responsible, both individually and jointly, to the employee for compliance with the statute."
If this definition doesn't help you much, you're not alone. The DOL goes on to offer a number of litmus tests employers can use to determine if a joint employment scenario exists. For example, an arrangement in which two or more employers share a single worker's services could be construed as joint employment. Another possible scenario is one in which multiple employers share control of an employee indirectly because one of the employers is directly controlled by the other. This is the scenario that frightens franchise owners and their corporate parents.

Time to Outsource Your Payroll?

The joint employment problem is just one of many that plague small business owners. There are so many different federal and state laws that it can be nigh on impossible to consistently handle payroll without running afoul of the law. Adding to the challenge is the fact that payroll processing is terribly time-consuming and cost inefficient.
BenefitMall can make payroll processing and legal compliance easier with a customized solution that meets the needs of your business. We provide specialized payroll for both the construction and restaurant industries, along with broader solutions for other industries. At any rate, we can offer you as much or as little assistance as you need. From basic online payroll to a full-service solution, BenefitMall has you covered.
If you have any questions about joint employment for your franchise operation, don't hesitate to speak to an experienced accountant or attorney. It's important that you get the joint employment question settled to protect yourself, your corporate parent, and your employees.