US labour agency hopes Subway compliance deal is first of many

August 9, 2016

Employees are protected by law and by their local rights and best practices to receive certain working conditions for a reasonable payment. This is because large companies are expected to ensure that their workers, and those of their third parties, are protected, receive a fair working environment, work according to local best practices, and are paid appropriately. The extent to which a franchiser should assume joint employer liability for workplace violations at a franchisee has always been subject to debate. However, it is hoped that a new compliance agreement could lead to a resolution.

The United States Labor Department (DOL) has concluded a voluntary agreement with the Subway restaurant chain that will see it work with the company to improve its wage-and-hour compliance at its 27,000 franchisees. Among other things, the DOL’s Wage and Hour Division (WHD) will share enforcement data and examine how Subway franchisees can avoid overtime violations by making use of scheduling and payroll technology.

Key to the success of this agreement was Subway being able to persuade the DOL that it should not face added risk of joint employer liability under the United States Fair Labor Standards Act (FLSA). Meanwhile, the DOL insisted on retaining enforcement authority over Subway’s franchisees, according to Bloomberg BNA.

But while Subway has been able to secure DOL assurance that its agreement will not be the cause of added joint employment risk, the deal language itself has not provided any clarity on the topic of joint employer liability.

Meanwhile, the DOL has been unable to reach similar agreements with other businesses as it has to-date been unwilling to protect franchisers from liability under other pieces of legislation, such as the United States National Labor Relations Act.

Although the language in the Subway deal may be vague, the DOL issued a statement saying “nothing in this agreement increases or decreases the likelihood that Subway could be held as a joint employer in an investigation into FLSA violations by a franchisee conducted by the Wage and Hour Division”.

It is in the best interests of all organisations to ensure that a strong compliance culture trickles down to individual retailers, distributors and franchisees. This can be achieved by the parent firm showing that it actively embraces compliance and condemns unethical behaviour. Furthermore, corporations can also guide and assist vendors by administering effective training and providing the necessary materials as part of the onboarding process.

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