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Franchisees – Things to Watch Out for in 2018

Increased ICE Enforcement

As many of you have probably read about already, on January 10, 2018, Immigration and Customs Enforcement (“ICE”) performed raids at over 100 7-Eleven convenience stores checking on the immigration status of those stores’ employees.  After the raids, Acting ICE Director Thomas Homan cautioned employers that “today’s actions send a strong message to U.S. businesses that hire and employ an illegal work force - ICE will enforce the law, and if you are found to be breaking the law, you will be held accountable.” He continued - “businesses that hire illegal workers are a pull factor for illegal immigration and we are working hard to remove this magnet. ICE will continue its efforts to protect jobs for American workers by eliminating unfair competitive advantages for companies that exploit illegal immigration.”

If you are a franchisee that relies on minimum wage labor, make sure you obtain proof of legal immigration status and have a copy of the I-9 in all employees’ files.  Importantly, a violation of Federal regulation/statute is a default pursuant to most franchise agreements.  Therefore, not only are you as the franchisee going to be dealing with fines and legal action with respect to your employment of undocumented workers, you may also be dealing with the loss of your business.

In short, any savings you might be realizing by hiring undocumented workers is not worth the risk, especially in this environment.

Browning-Ferris Overruled by NLRB - Franchisors Will Reassert Control Over Branding

In late December 2017, the National Labor Relations Board (“NLRB”) overruled the Browning-Ferris decision of two years ago regarding joint employer.  You may remember that the Browning-Ferris decision caused franchisors concern, because over-asserting control over the brand, in relation to employment standards, policy standards, etc… might lead to liability on the franchisor for the acts of the franchisee. Thus, franchisors seemingly had to choose between tight brand control, with potential liability for the acts of the franchisee, or loose brand control, but no risk of liability for the acts of the franchisee.

In December’s Hy-Brand ruling, the NLRB restored the traditional joint employer standard, requiring proof that the alleged joint employer actually “exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control) and that “the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.’”

As a result, franchisees will likely see franchisors reasserting control over the brand – meaning more inspections, more policies and more training.  In addition, for new franchisees you will also likely see more control of the brand/business set forth in the franchise agreement.

If you have questions about franchise law, please contact James B. Shrimp at (610) 275-0700 or jshrimp@highswartz.com

Our attorneys in Bucks County and Montgomery County are here to assist you.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

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