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OSHA eyes joint employer liability for franchise safety violations

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Federal safety regulators may be following the footsteps of their labor relations counterparts in potentially holding corporate entities jointly responsible for workplace safety violations that occur at the franchise level.

Joint employer status involves situations where two or more business entities share control and supervision of employee activities, which has gained more attention thanks to the National Labor Relations Board's August decision to change the standard to one that considers whether a company exerts control indirectly through an intermediary, rather than simply exerting “direct and immediate control” over employment matters.

Legislation to overturn the NLRB ruling is pending in Congress.

At the same time, an internal U.S. Occupational Safety and Health Administration memo raises the issue of whether a franchisor and franchisee could both be held liable as employers under the Occupational Safety and Health Act.

The memo, was provided to Business Insurance by the Washington-based International Franchise Association, which submitted a Freedom of Information Act request to the agency in August. It directs OSHA inspectors to get information about the overall relationship between the corporate entity and the franchise, corporate control over franchise workers' essential terms and conditions of employment, and corporate control over franchise-level safety and health policies and practices.

Word of the undated memo led the House Committee on Education and the Workforce on Oct. 13 to ask the Department of Labor for information on its efforts to modify its existing multiemployer citation standard to apply joint employer liability.

“Applying the framework to the franchise arena gives OSHA potential to issue citations against the franchisor and not just the franchise if they deem something to be a hazard,” said David Selden, a Phoenix-based partner at The Cavanagh Law Firm.

In an email, OSHA said there is no rule to enforce joint employer liability for workplace safety violations on its regulatory agenda, but its agenda document is dated spring 2015.

Future franchise agreements should specify what safety controls need to exist and who is responsible for safety at the franchise level, but this could backfire because OSHA could take the position that the franchisor is a controlling employer and issue citations against it, Mr. Selden said.

Franchisors also face the risk that workplace violations at separate franchise locations could result in OSHA deeming the franchisor a repeat or willful violator, – willful carries a $70,000 penalty per violation, he said.

This represents a Catch-22 because franchisors have solid safety training and instruction to provide to franchise workers, but may not for fear of being seen as a joint employer, said Elizabeth Taylor, vice president of federal government relations, public policy and counsel for the Washington-based International Franchise Association.

“The biggest concern is franchisors are going to feel compelled because of potential liability to be more involved,” she said. “The converse is that the franchisees don't want the franchisor more involved.”