Federal Court Rejects Claim Jimmy John's Is a Joint Employer With Its Franchisees

April 10, 2015

A franchisor's "tightly controlled" business plan that imposes "uniform policies" on all franchisee locations in the context of quality control and brand uniformity will not make the franchisor a joint employer for purposes of the Fair Labor Standards Act or the Illinois minimum wage law, a federal judge ruled this week.  A class of employees at multiple Jimmy John's franchise locations had alleged violations of those wage and hour laws and had named the company's CEO as a joint employer due to his "highly detailed and strictly enforced operational policies" for each store.  Uniform policies included detailed instructions regarding management, human resources, job titles and duties, minimum weekly hour requirements for assistant store managers and other employees, staffing requirements, compensation, wage and hour compliance, employee practices, and terms and conditions of employment.  After finding that the company did not have direct control over the hiring and firing of employees, or over the supervision and control of employee work schedules, among other factors, the court concluded, "The company standards established by [the CEO] equate to no more than mandating a strict adherence to his business plan."  The case comes as the NLRB's General Counsel seeks to expand the NLRB's test for joint employers to one of "indirect control," a principle that would apply beyond franchising to include subcontracting and use of staffing agencies among other relationships.  The General Counsel had issued multiple unfair labor practice complaints under that theory against McDonald's, which disputed its classification as a joint employer before an administrative law judge this past week.  The Jimmy John's court separately found franchisee employees did not have a right sue the company or its franchisees over a non-compete agreement in employee contracts because the franchisee operators had neither enforced nor intended to enforce those clauses.