Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/945258
46 LEXPERT MAGAZINE | MARCH/APRIL 2018 | FRANCHISE WAGES | items, tightening cost controls, training employees in a broader range of tasks to avoid call-ins, and changing store hours to have more closures at unprofitable times. Automation also works. "I would expect franchisors will turn to technology to help reduce their franchisees' dependence on employees altogether," Shaw says. "Mc- Donalds, for example, has already installed kiosk ordering screens at their locations." But the need for investment in technol- ogy can breed friction. "ere can be a ten- sion between franchisors that need to make systemic changes to keep their market requests emanate from a dialogue or meet- ing of franchisees, competition laws could come into play." Some franchisors, Shaw believes, may reduce royalty rates by way of helping fran- chisees cope with their new labour costs. For his part, Dick suggests that franchise systems consider rationalizing menus and offerings to cut back on lower-margin share and stay competitive and franchisees who may be resisting that," Dolman says. "For example, when franchisors look to get their brands out by means of online apps or other types of online presence, they may be taking away franchisees' bread and butter." e upshot is that "encroachment" has become topical in the industry, with historical issues of ter- ritorial encroachment giving way to encroach- ment that occurs when franchisors resort to alternative distribution. "e more consum- ers buy online, the less they're going to buy at the store," Dolman says. "And that means encroachment may become the next legal battlefield." It's a battlefield that is shaping up quick- ly: according to the National Retail Federa- tion, US sales on Cyber Monday eclipsed those on Black Friday for the first time. To stay competitive with the retail environ- ment, franchisors are trending to "omni- presence" with physical stores, online stores and platforms for mobile devices. "It's all about improving the brand experience for customers who want the option of shop- ping on multiple platforms, perhaps even at the same time," Dolman says. "In this new 'omni-channel' retail world, physical stores, websites and apps function better when they're all integrated." is new world has an impact on the franchise relationship, then, because fran- chisees are no longer the only ones dealing with their customers. "When it comes to sales, franchisees may be competing with the franchisor's website and their custom- ers' mobile devices," Dolman says. "Who gets credit for these e-commerce sales? e franchisee or the franchisor?" Encroachment issues can also arise in re- gards to alternative distribution channels. "To stay competitive in an environment of retail convergence, franchisors can't just rely on franchisees selling product from their stores," Dolman says. "We're increasingly seeing products that traditionally were only sold by franchisees now available in non- franchised stores, in department stores, grocery stores, pharmacies, convenience stores and kiosks." Finally, encroachment can also occur when competing franchisors merge or ALLAN DICK > SOTOS LLP "The way in which franchise systems should be addressing minimum wage and other changes to workplace law has been a major concern over the last several months." JOINT EMPLOYER REMNANTS Issues around a franchisor's employment obligations may still arise as they relate to human rights in the workplace While franchisors have taken considerable comfort from the Ontario government's recent decision not to include provisions deeming franchisors to be joint employers in its recent employment law reforms, the issue may still be a nagging one in the context of liability for human-rights violations. "The emergence of #MeToo and the growth of the human-rights movement generally could still creep up in the broader rubric of vicarious liability," says Helen Fotinos, a franchise partner at McCarthy Tétrault LLP. "It may well be an issue to flag." According to Jennifer Dolman, a partner at Osler, Hoskin & Harcourt LLP, franchisors are often named in human-rights complaints brought by employees who may not have a clear understanding of who is their employer. "These claims are often dismissed," she says. But not always. "The British Columbia Human Rights Tribunal has recently held that a franchisor who was not directly involved in a complaint may nonetheless attract liability under the province's Human Rights Code," Dolman notes. In its October 2017 decision in Reid v. Snap Fitness Cloverdale, the Tribunal concluded that liability for discrimination can exist even absent an employment relationship where a franchisor has the ability to interfere with or influence that relationship. The Tribunal noted that the Code prohibits a "person" and not just an "employer" from discriminating. Fatal to the franchisor's application to have the complaint against it dismissed was its decision to produce only two pages of the franchise agreement, which exceeded 45 pages in length. That left the Tribunal with insufficient evidence to determine the extent of the franchisor's influence and control in the face of the complainant's evidence. "Had the franchise agreement been produced and had it clearly spelled out the relationships between the franchisor, the franchisee and the franchisee's employees, the result may have been different," write Dominic Mochrie and Paul Kotschorek in a client bulletin from Osler.