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USA: Franchise workers to struggle to file lawsuits against parent company over labour abuse under new law

Author: Noam Scheiber, New York Times (USA), Published on: 14 January 2020

"Labor Dept. Rule to Curb Lawsuits by Franchise Workers", 12 Jan 2020

Workers could have more difficulty suing large companies for wrongdoing by contractors or franchisees under a rule announced on Sunday by the Labor Department.

Under the rule...employees of a...franchise...may struggle to win a legal claim against the parent company if a franchisee violates minimum-wage and overtime laws.

After the rule takes effect, it could limit the ability of millions of workers to recover wages they are owed.

The contractors and franchisees that directly employ workers often have limited resources to pay legal penalties and settlements, making the large upstream companies with whom these employers have a relationship a more practical target.

Advocates for workers have critisized the rule, arguing that it provides a road map of sorts for employers seeking to avoid liability for harmful practices.

Under the new rule...a company...could be held liable for violations committed by a franchisee...on four factors: whether it hires and fires employees of the franchisee; whether it supervises the employees and controls their schedules; whether it determines their pay; and whether it manages their employment records.

A company would typically have to meet some or all of these criteria to be considered a joint employer.

The labor board is expected to finalize its own rule in the coming weeks.

Read the full post here

Related companies: McDonald's