Minimum Wage

NLRB Decision Shakes Up Liability for Franchise Restaurants

August 25, 2014 | Parks, Chesin & Walbert

“McJobs” may soon come with a side of leverage for workers who find themselves the victims of labor law violations. In a surprising move, the general counsel for the National Labor Relations Board (NLRB) last month permitted regional directors to name McDonald’s Corp. as a joint employer along with its franchisees in several pending actions. This marks a major shift to the traditional liability issues in the franchise world, where franchisees are essentially independent contractors who pay royalties to use the systems and products of the parent company, but are solely liable for any labor law violations against their W-2 employees. While this move doesn’t carry the binding power of a ruling, the potential changes it brings caught plenty of attention from the franchise world.

Under this new model, the parent company could share in the responsibility for unlawful labor practices by their franchisees. Lawyers on the corporate sides argue that such responsibility for oversight of what could be tens of thousands of franchisees would be impractical if not impossible. Workers’ and labor groups, on the other hand, point out that the parent companies already exercise a great deal of influence and control in micromanaging almost every other aspect of the businesses, from stock to procedures to store design to intellectual property and advertising. Such strict control of day-to-day operations, they say, voids any industry arguments that ensuring franchisees adhere to labor standards would require extraordinary efforts.

The move by the NLRB goes beyond McDonald’s, fast food, or even restaurants in general and could affect all kinds of retail stores and service providers who operate on the the franchise system. Adding a layer of responsibility to the franchisor-franchisee relationship would come at some financial cost to the corporate home offices, even as the franchise establishment market continues to grow. Naturally, there’s been a collective freak-out by industries and companies around the country. The recurring speculative concern is that a corporate parent ensuring basic labor laws are followed at their franchises will somehow have a negative effect on job creation.

Salary Issues: The Professional Exemption under the FLSA

January 6, 2013 | Parks, Chesin & Walbert

Although minimum wage and overtime pay regulations apply to most employees in the United States, there remain certain employees that are exempt from both. Section 13(a)(1) of the Fair Labor Standards Act (FLSA) notes exemptions for professional, executive, administrative, and outside sales employees. Certain computer employees are also exempt under this section, as well as under Section 13(a)(17).

Guide to Exemptions Under the FLSA

January 4, 2012 | Parks, Chesin & Walbert

The Fair Labor Standards Act (“FLSA”) is one of the key protections for American workers. It sets a price‑floor by means of the minimum wage, and it reduces the hours that Americans are required to work by requiring overtime pay for hours above forty per week. However, when the law was drafted in the 1930s, Congress realized that certain jobs either required extremely long hours or were traditionally compensated in unique ways. For example, sailors generally are on-call or working 24 hours a day when they are at sea, and Congress decided that requiring overtime pay for these employees would threaten an important part of the American economy. For different reasons, Congress exempted “outside” salespeople from the FLSA because such employees spend a lot of time travelling and they are generally paid on a commission basis. According to Congress, it didn’t make sense to require that these employees be paid overtime. Alongside these examples, the drafters of the FLSA included various other exemptions that made sense from an economic standpoint.

“Employees” and “Independent Contractors” Under the FLSA

December 24, 2011 | Parks, Chesin & Walbert

The FLSA is a broadly remedial statute that was designed with the dual goals of raising wages for the economically vulnerable while at the same time increasing employment. To accomplish these goals, the FLSA renders illegal any employment contract involving wages that are lower than the minimum wage or for wages that do not include overtime payments for hours worked above forty per week. As a result, some employers are tempted to work around the FLSA by maintaining that their workers are actually “independent contractors.” While it is true that the FLSA does not apply to bona fide independent contractors, most employers who attempt the “independent contractor” strategy do so at their own peril. This is so because the concept of “employment” under the FLSA is astonishingly broad, and a worker could be an “employee” under the FLSA who would be considered an “independent contractor” under the common law or other federal statutes.