Franchisors Shouldn’t Micromanage Franchisees’ Compliance Training

Andrew Puzder has withdrawn from
consideration to become the next Secretary of Labor. He is CEO of CKE
Restaurants, which owns Hardee’s and Carl’s Jr. restaurant brands.

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Legal experts say
franchisors have more control over franchisees’ compliance than was suggested
by the debate over Puzder’s qualifications for labor secretary. But franchisors
shouldn’t micromanage franchisees’ compliance efforts or else they risk being
viewed by courts as joint employers liable in lawsuits brought by franchisee

The wage and hour compliance record at CKE restaurants overall actually was
pretty good, said CKE spokesman George Thompson.

“Bloomberg BNA found that, even including CKE franchisees—approximately
3,000 domestic restaurants—there were 56 WHD [Wage and Hour Division]
investigations, the second fewest among the 20 restaurant chains
surveyed. Of those 56 cases, 23 had no violations and 33 had no violations
for back wages. There were zero willful violator investigations,” he

CKE’s spokesman said that the Democrats’ attacks on Puzder have been debunked. But the distinction between corporate-owned
stores and franchisee compliance reflects a challenge for franchisors: How can
they ensure franchisees don’t violate the law without exercising so much
control over them during training that they become joint employers?

To avoid such awkward
moments, a franchisor might choose instead to provide franchisees with
pamphlets talking about best practices, noted Randy Coffey, an attorney with
Fisher Phillips in Kansas City, Mo. In-person training can work too, but the
more it comes across as a directive about how to conduct investigations when
there is a claim of sexual harassment or a wage and hour violation, for
example, the more risk there is of being seen as a joint employer by the

Mark Kisicki, an attorney with Ogletree Deakins in Phoenix, said that
franchisors’ training of franchisees on legal compliance should be OK as long
as it doesn’t veer into business training. “I don’t think legal training
is a significant risk,” particularly when it is on a Web-based platform,
he said. That way it is “unambiguous as to exactly what was said.”

Requiring that franchisees adopt specific compliance policies is problematic,
while making a sample handbook available but not required is a gray area, he

Kisicki recommended focusing training on wage and hour issues, as these
obligations differ from state to state. 

Regardless of your
company’s size, you still must be compliant with employment law. Simple things
such as handbooks and policies seem to be staple pieces for a workplace to
provide, but for some it’s hard to say who’s responsible for creating and enforcing
them. The Human Resources department can make or break how well your business
functions. For any of your HR concerns, Converge HR Solutions is a great
resource. Our team of experts offers many different services, including HR
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our website for more information Contact us directly at or 610-296-8550.

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