Monday, October 17, 2011

Franchisor Not “Employer” of Franchisee’s Employee Under Minimum Wage Law

This posting was written by Pete Reap, Editor of CCH Business Franchise Guide.

A franchisor of pancake restaurants was not the “employer” of a waitress that was hired by one of its franchisees to work in its franchised restaurant for purposes of the Missouri Minimum Wage Law (MMWL), a Missouri appellate court has decided. Thus, the franchisor was entitled to summary judgment on the waitress’ claim alleging noncompliance with the MMWL. A ruling by a Missouri state trial court was affirmed.

The waitress filed suit seeking damages for the delay during which certain tipped employees were not paid the appropriate minimum wage as a result of reliance upon erroneous pronouncements made by the Missouri Department of Labor and Industrial Relations.

Elements of Employment Relationship

The evidence established that the franchisor had no ability to hire or fire the waitress during the period in question, the court determined. This included the waitress’ admission that a manger of the franchisee did the hiring and firing of employees at the restaurant.

Undisputed evidence also supported the conclusion that the franchisor did not supervise or control the waitress’ work or conditions of employment. In an attempt to refute that evidence, the waitress pointed to the fact that the franchisor took control of the restaurant after the franchisee defaulted and the franchise agreement was terminated. However, the franchisor’s ability to terminate the franchise agreement had no bearing on the ability of the franchisor to supervise and control the waitress’ employment.

The franchisor acted solely as a payroll service provider to the franchisee and it did not determine the waitress’ rate of pay, the court found. The only documents relating to the waitress that the franchisor retained were those related to payroll services. The franchisor did not maintain personal documents, prior employment information, benefit information, personnel files, leave and attendance records, or performance reviews.

Finally, the evidence showed that the premises were controlled by the franchisee and the equipment used at the restaurant belonged to the franchisee.

The decision, Conrad v. Waffle House, Inc., appears at CCH Business Franchise Guide ¶14,695.

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