48 LEXPERT MAGAZINE
|
APRIL 2016
In 2015, the National Labor
Relations Board suggested in
Browning-Ferris Industries of
California that joint-employer
status could arise when a party
had the contractual right to
control terms and conditions
of employment. e previous
test required the actual exercise
of such control. Under the new
test, franchisors could be liable as
joint employers of their franchi-
sees' staff if the franchise agree-
ment was draed to include or
imply control over employment, regardless
of whether the franchisor in fact exercised
such control. Franchisors found to be joint
employers could be held responsible for
each of their franchisees' union obligations
and hiring and firing relationships.
Considering it is not binding in Canada,
Browning-Ferris has caused quite a stir in
franchising circles here. "e idea behind
franchising is to grow with partners who
are independent contractors and invest
their own capital," Teasdale says. "Mak-
ing the franchisor a joint employer annuls
that concept because it means the franchi-
sor becomes invested in the business of the
individual franchisee."
e prospect of joint employment in the
industry is most acute in Ontario, where
the government is considering changes to
the Employment Standards Act and Labour
Relations Act. "If joint employment arrives
anywhere in this country, it will be a game-
changer," Shaw says.
Weinberg goes so far as to call the threat
an "existential" one. "e unions are push-
ing very hard to say franchisors should be
joint employers, on the theory that fran-
chising itself is some kind of sham created
just to defeat unionization," he says. "But
it's not and if these changes come, people
aren't going to be franchising anymore."
At its core, the conundrum arises from
the fact that the heart and soul of franchis-
ing success is brand consistency and uni-
formity of customer experience. "Because
franchisors are allowing franchisees to
share their marks and their brands, they are
also sharing their reputation, and therefore
they need to make sure they have certain
controls in their agreements," Dolman says.
But decisions on whether a joint employ-
ment relationship exists have historically
turned on the control issue as well. "If fran-
chisors start exercising too much control
over the nitty-gritty of employment prac-
tices, particularly hiring and firing, they
could be creating a risk that they'll be char-
acterized as joint employers," Dolman says.
| FRANCHISING LAW |
the release is given by a franchisee with the
advice of counsel in settlement of a dispute
for existing and fully known breaches of
the legislation.
"Generally speaking, the jurisprudence
has created a moving target for franchi-
sors," says Helen Fotinos of McCarthy Té-
trault LLP in Toronto.
In fact, it was only as recently as Janu-
ary – a decade and a half aer the legisla-
tion was enacted – that the Ontario Court
of Appeal, in a case involving Pet Valu,
clarified that franchisors' statutory duty
of good faith and disclosure did not go be-
yond the performance and enhancement of
the franchise agreement, and that the duty
of disclosure and the duty of fair dealing
are separate duties.
ere are also no cases on the emerging
issues arising from master franchise dis-
putes, which tend to arise in the context
of foreign franchisors. "I'm handling four
of these disputes right now, and I couldn't
find a single cited case where the issue was
discussed," Dolman says.
All of which is not to say that there has
been a total absence of progress on the cer-
tainty spectrum. "In a general sense, we are
finally getting a significant body of case law
that provides franchisors and franchisees
with some guidance," says Ned Levitt of
Dickinson Wright LLP in Toronto.
Still, just in case the uncertainty aris-
ing from domestic legislation and case law
isn't enough of a headache for the franchise
business, developments in the US have
raised the spectre of a serious new blow to
the industry.
JENNIFER DOLMAN,
OSLER, HOSKIN
& HARCOURT LLP
"There are discussions
about whether the
franchise model is still
worth pursuing because
of the increasing burden
of regulation and the
growing complexity of
disclosure. There's a lot
of rethinking going on."
PHOTO:
SHUTTERSTOCK
