Shedding Light on Joint Employer Relationships
More and more, large franchisors are relying on outsourcing providers like Paychex to help insulate them from situations where they could be held liable under Joint Employer relationships, such as when a franchisee neglects to pay their employees overtime.
However, being in a joint employer relationship can create confusion when it comes to who is responsible for what—from HR protocol, to overtime pay and worker's comp, to operations, supervision, and liability.
Let's take a look at how franchises can wade through the murky water surrounding joint employer relationships.
First of all, what exactly constitutes a joint employer relationship? According to the Department of Labor, a joint relationship exists when an employee has two (or more) technically separate but related or associated employers—horizontal joint employment —or when one employer provides labor to another employer and the workers are economically dependent on both of those employers, or vertical joint employment. Other agencies have slightly different definitions you may want to research.
In the case of franchises, if a franchisor directly provides hiring guidelines to a franchisee, the franchisor could be considered a joint employer.
Once it's been established that a joint relationship does exist, it's important to determine responsibilities in order to guarantee that workers' rights are protected under the Fair Labor Standards Act, or FLSA, the Migrant and Seasonal Agricultural Worker Protection Act, or MSPS, as well as the Family Leave and Medical Act, also known as FLMA.
It's also important to determine which company is the primary employer, because in most cases, the primary employer carries most of the responsibilities when it comes to benefits.
Of course, there are tons of exceptions for employers to be aware of, like housing and transportation requirements, but it's important to note that when joint employer relationships do exist, whether horizontal or vertical, both employers are responsible for compliance beyond these exceptions.
And each could benefit from working with a payroll and HR administrator like Paychex.