Judge Rules Against Joint Employer Responsibility in Minimum Wage Case

A California judge ruled that only Massage Envy franchisees – not the corporate franchisor – are responsible for wage violations, in contrast to recent National Labor Relations Board decisions.

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By Kate Taylor

Opinions expressed by Entrepreneur contributors are their own.

The franchise joint employer battle continues, now spreading to the massage franchise sector.

Last week, a California judge ruled that Massage Envy is not the employer of massage therapists in franchised locations. As a result, only franchisees, not the franchisor, could be held responsible for alleged wage violations.

"These rulings reinforce IFA's [International Franchise Association] view that recent moves by the NLRB [National Labor Relation's Board] general counsel to broaden the definition of joint employer and make new law run counter to the long-held understanding of the franchise business model and established law," Robert Cresanti, the IFA executive vice president of government relations & public policy, said in a statement. "Should brand companies and local franchise owners, be considered joint employers, it will substantially impact growth and job creation in what promises to be the fastest growing business sector in the US economy."

The decision falls in line with an August 2014 California Supreme Court decision that Domino's could not be held liable as a franchisor in a former employee's sexual harassment case. However, it seemingly opposes the NLRB's decision to hold both McDonald's franchisees and the corporate franchisor accountable in complaints against the chain.

Related: The International Franchise Board Tries to Dig Up Details on Labor Board's 'Joint Employer' Decision

The NLRB first made its controversial decision to deem McDonald's a joint employer in employees' complaints in July 2014. The labor board doubled down on its definition of joint employer in December, issuing complaints against McDonald's franchisees and McDonald's corporate as joint employers in 86 alleged labor violations.

As seen by these apparently opposing decisions, the responsibilities of franchisors are currently being hashed out on a case-by-case basis. In both the Domino's and Massage Envy cases, the decisions left room for franchisors to be held responsible for misconduct at franchised locations if it could be proved that the franchisors were somehow involved in employment practices.

"[We do not] mean to imply that franchisors, including those of immense size, can never be held accountable for sexual harassment at a franchised location," notes the decision in the Domino's sexual harassment case.

On the other hand, the NLRB has refrained from providing further commentary or explanation for their McDonald's joint employer decisions, despite franchise industry requests to do so. As a result, it is difficult to discern what franchises could be affected by the decision, which could be specific to McDonald's or completely change the franchise model across the industry.

Related: Franchise Industry Not Without Hurdles in 2015

Kate Taylor

Reporter

Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor. 

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