The views and opinions expressed in this article are those of the author and should not be construed as legal advice. Consult with a licensed attorney for specific legal advice tailored to your unique circumstances.
Businesses face more and more lawsuits each year. Due to joint employer liability rules, both franchisors (Zors) and franchisees (Zees) increasingly find themselves in court. Franchises providing services to children (like daycares) or those reliant on physical touch (like spas or health services) face particular scrutiny due to strict laws surrounding criminal background checks, insurance, professional licenses and employment verification.
Joint employer liability is a legal doctrine that holds two or more employers jointly responsible for the actions of one of the employers. This means Zees bear the responsibility of executing hiring and ongoing status check requirements, but Zors are also liable for any mistakes.
To ensure hiring compliance, Zors need more than verbal assurances from Zees.
Joint Employer Liability: What’s the Situation?
In 2020, the US Department of Labor (DOL) released a Joint Employer Rule under the Fair Labor Standards Act (FLSA). The rule clarified the definition of joint employer status and established a four-part test to determine whether two or more parties are joint employers. However, the US National Labor Relations Board (NLRB) plans to return to a broader, murkier definition of joint employer. This reversal could lead to increased legal liability for franchisors, lost jobs and lower revenues. Zors involved in children’s services, massage, waxing, hair, aesthetics, fitness and home and health services face particular legal vulnerability due to complex hiring compliance requirements for these business types.
How Do Zees and Zors Manage Risk?
While hiring regulation adherence is imperative, it’s also cumbersome, especially when Zees have many other business responsibilities. Too many operators have dropped the ball and damaged their brand’s reputation by failing to conduct proper background verification on employees.
Automated employee checks help businesses of all sizes protect themselves from risk by providing employers with more detailed, accurate and timely information about potential employees. Zees can execute required inquiries and assessments without human-dependent supervision. Zors gain visibility into the status of employee checks without direct involvement or access to someone’s personally identifiable information (PII).
Automation generates many business benefits, including:
Increased accuracy — Using technology removes the risk of human error, which is especially critical as the regulatory landscape changes. Humans may not know to look for new or changed requirements, but a hiring solution will have the most updated information.
Increased efficiency — Technology conducts checks quickly for a shorter turnaround and can provide a wider range of information. Managers can execute the checks while they accomplish other value-driving tasks.
Reduced costs — The time saved makes automated checks more cost-efficient than manual ones.
Reduced liability — With automated processes, Zees are less likely to make hiring mistakes that lead to violations.
Peace of mind — Automation increases communication and transparency between Zees and Zors and ensures checks are conducted correctly and at the right time.
Navigating joint liability requires awareness and mitigation efforts from both Zees and Zors. With automated checks, franchises can prioritize compliance without sacrificing other business priorities. Zees and Zors save time and money while protecting their customers and business, safeguarding their brand value and ensuring long-term success.