Understanding the Joint Employer Designation and Its Implications for Franchises

by John Burke

2 min read

The legal concept of a joint employer is gaining traction in Canadian law and entails many consequences for both employers and employees. Of particular interest for small businesses are the implications for franchisors and franchisees.

Definition of “Joint Employer”

The concept of a joint employer – or its corollary, the joint employee – is not defined in a single Canadian law. It is a common-law concept that has been largely imported into Canadian law from the United States. The concept is evolving rapidly, but the short version is that an employee can have, for certain purposes, two employers for the same job. This is a departure from the usual one-on-one notion of employer/employee relationships. Generally speaking, for a legal employer/employee relationship to exist, there needs to be some form of control by the employer over the employee’s work. The employer will normally dictate the tasks that need to be done, the means of accomplishing them, and the workplace conditions. In return, the employee performs the work and is paid a salary. The notion of joint employment stems from the fact that the employer’s authority is sometimes exercised by two distinct entities. The simplest example is that of a restaurant employee. If the employee works for a local diner, then he clearly has only one employer. However, if he works for a large national fast-food chain, then the situation may be different. The local franchisee is his still the employer, since the franchisee is paying the worker’s salary and setting the conditions in which he works. Under the joint employment doctrine, it could also be argued that the franchisor is the (joint) employer because, in many franchise agreements, there are strict conditions that franchisees must follow in terms of their employees and operations. In that sense, the franchisor may be said to exercise sufficient control over the employee to qualify as his employer.

Consequences for Franchisors and Franchisees

Joint employers become jointly liable towards the employee regarding the application of provincial and federal labor standards, such as minimum wage, overtime pay, and workplace safety. This is a major development, especially for franchisors who were previously somewhat insulated from the risks and costs associated with potential employee grievances. For example, under the joint employment theory, an employee who is filing a workplace discrimination lawsuit could include the franchisor as a defendant. It is likely that the large franchisor has much deeper pockets than the local franchisee. Trade unions also see the concept of joint employers as potentially interesting. If all of the employees of a pan-Canadian fast food chain could form a single union, the bargaining power of that union would be much bigger than that of single-store employees. As the concept is incorporated in the Canadian legal landscape, expect major changes to franchise agreements and to some laws to refine this important legal relationship.

References & Resources

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