So, you’ve acquired a franchise and achieved your dream of owning a business. Congratulations … with a qualifier.
In most instances, you’ll also become an employer. In fact, Statista predicts that in 2018 over eight million people were employed by franchise businesses.
A great many of your experiences with your employees will be favorable. You’ll appreciate their contributions to your franchise, witness their professional growth and, presumably, have the opportunity to reward many of them with promotions, raises and/or bonuses.
But there are pitfalls to owners like you under franchise employment law, and you should be on the lookout to avoid them. Among the five most common:
- Americans With Disabilities Act accommodations: Franchisees sometimes fail to recognize that once an employee tells a supervisor that they can’t perform a task or needs a workplace change because of a mental or physical challenge, this likely triggers the employer’s legal obligation to engage in the “interactive process” under the ADA. Because most such mental or physical conditions are considered “disabilities” under the law, you should be prepared to recognize ADA obligations and respond appropriately.
- Workplace harassment issues: Franchise owners and their managers can cause legal liability by becoming too “friendly” with workers. Problems are likely to arise here if someone is looking for a romantic partner in the workplace or trying to be one of the fellows or gals by repeating offensive or inappropriate jokes. Another risk? If a manager declines to bring a complaint of harassment to the attention of ownership because it came from a “friend” who requested they remain silent.
- Employee performance documentation: It’s easy — and common — for franchisees to note “meets expectations” or “exceeds expectations” for all workers during their yearly performance evaluations. A problem can occur, however, if there’s an occasion to fire an employee and there’s no record of a poor job. Be sure to be honest in your annual assessments. Terminations are a franchise owner’s decision and to avoid potential problems you must adequately document worker performance — good or in need of improvement.
- Wage and hour errors: Take care in applying for exemptions from minimum wage and overtime requirements, calculating (or miscalculating) “regular rates” for overtime purposes and mistaking what is or is not “compensable time.” Why? Class-action wage lawsuits are becoming a significant risk for employers everywhere — including those who own and operate franchises.
- National Labor Relations Act interference: Under the NLRA, private-sector employees including franchise workers have certain rights to sign petitions, share information and seek to improve their working conditions. They can even complain about their supervisors and employer! Tread carefully here. Franchise owners must acknowledge that the NLRA likely applies to their employees — whether unionized or not.
There are, of course, other employment issues of which a franchisor should be familiar. Human resources issues are rife with other potential risks. One example? Failing to recognize and properly administer requests for leave covered by the Family and Medical Leave Act (FMLA).
No one suggests that these and other legal issues should take precedence over your interest in owning and operating a successful franchise. That said, it would be wise to have a working knowledge of these common pitfalls plus a trusted legal advisor to consult if any has the potential to become a problem!
A special note to California franchisors on Assembly Bill 5.
Owners of franchises in California will want to keep a close eye on Assembly Bill 5 (AB-5) which was signed into law on September 18, 2019 by Governor Gavin Newsome and takes effect January 1, 2020.
The law focuses on distinguishing employees from independent contractors. The International Franchise Association advises that “franchisors and franchisees should remain in regular contact with legal counsel and their franchise system regarding the effects of the new law.”
In their article, How Do You Spell Trouble? California AB5, Forbes magazine also describes the new law’s potential risks to franchisees.
A word on employment law regarding Allegra Marketing Print Mail franchises.
While the Allegra Network cannot take responsibility for any employment issues at your Center, training in best practices in hiring and managing workers is included as part of your new owner orientation. We are committed to helping you succeed in every way possible.