Subway has signed a voluntary agreement with the Department of Labor’s Wage and Hour Division to help franchisees comply with workforce regulations, acknowledging that it has the power as a franchisor to impact labor practices. The move is likely to rouse concerns among other chains that Subway is validating the contention of the National Labor Relations Board that franchisors are in effect joint employers of franchisees' staffs, with control over policies and processes.
Working to restore a blemished record—as of 2014, Subway had more labor violations than any other QSR, according to CNN Money—Subway and WHD have laid out a plan to ensure “a fair day’s pay for a fair day’s work.” In 2015, WHD supplied Subway with training materials to distribute to franchisees. Doubling down, the division will now regularly meet with Subway to share and analyze public data on Fair Labor Standards Act violations and search for technology that would reduce franchise error, such as scheduling platforms and payroll alerts. In return, the sandwich chain will send annual disclosures to the WHD. Subway is also leveraging the partnership to help franchisees understand the new overtime rule that doubles the previous threshold for exemption, allowing workers who earn up to $47,476 to receive overtime, according to Bloomberg BNA.
The heavy involvement in franchisees' labor practices could put Subway more at risk of being considered a joint employer, a co-employer that impacts licensees' working conditions, according to the International Franchise Association. “Legitimate concerns now exist as to which franchisor actions cross the line and could serve as evidence of a joint employment relationship in future litigation or a government enforcement action,” said Elizabeth Taylor, the association’s vice president of government relations and general counsel, in a statement. “Without assurances that their compliance efforts will not be used against them by another government agency, or plaintiff attorneys, franchisors are caught in an inevitable catch-22.” To untangle the risk, Taylor says Congress has to quickly define the joint employer standard.
In 2015, the Browning-Ferris decision broadened the reach of joint employment. In an ongoing action against McDonald’s Corp., the NLRB has made a case that the chain demonstrated control of working conditions because of its corporate-mandated scheduling software.
WHD Administrator David Weil said in a blog that the Subway agreement demonstrates a new level of greater collaboration with businesses. “Our work with Subway breaks new ground in how we can work with the regulated community — not only with employers, but with franchisors, suppliers, retailers and others — to channel their influence to ensure that all employers along a supply chain or otherwise linked in commerce play by the rules,” he says.
According to DOL, more QSRs are in preliminary talks with the department about similar agreements.