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Ontario franchises wary of potential joint employer clause amid labour-law review

Labour groups contend that the joint employer clause would prevent large organizations from using intermediaries to shed responsibility.

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The Ontario Changing Workplaces Review has spurred much concern from businesses worried that the province will add regulations that will harm their companies in a bid to protect vulnerable workers. But for the province's franchisors and franchisees, the idea that they might be deemed "joint employers" has sparked the greatest outrage.

Labour groups contend that the joint employer clause would prevent large organizations from using intermediaries such as franchises, temporary worker agencies and contractors to shed responsibility for their work force.

The "arm's-length" relationship that has traditionally been used to protect franchisors in the case of labour law infractions by their franchisees is questionable, says Deena Ladd, co-ordinator of the Workers' Action Centre, a Toronto-based labour rights group. She says both should be considered joint employers of a franchisees' work force.

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Ms. Ladd argues franchisees are often told by franchisors how to organize their franchise, what prices to charge, how their staff should look and how they should advertise and present products. So why not exert some control to ensure workers' rights aren't trampled on? "The franchisor has all the control, but none of the responsibility," she says.

If joint employer is adopted, she says, both franchisee and franchisor would be responsible for ensuring employment standards are met, and providing a workplace that is "free of harassment and injuries, where people get paid for their work."

They'd also have to ensure the implementation of potential updates proposed in the Changing Workplaces Review aimed at eliminating practices such as just-in-time scheduling to ensure additional hours go to part-time workers who want them (rather than deliberately keeping everyone part-time and without benefits). Another potential change being considered is eliminating differential pay rates for people doing the same job.

Firmly on the other side of the fence, the Canadian Franchise Association (CFA) contends the change would harm franchisees, who are drawn to the franchise system because it offers them a chance to run a business on their own based on a proven business concept.

"The beauty of franchising is that, if I'm an entrepreneur and I want to run my own business I can use a proven business model and follow the road map that has been set out for me, but I remain an independent business person," says John Ferracuti, chief operating officer of the franchise operation Bin There Dump That, a provider of dumpsters for renos and clean-ups. "If you make the franchisor joint employer with the franchisee, it changes that relationship significantly."

Every good franchise agreement already stipulates that the franchisee must run his or her business in compliance with any provincial or federal laws, Mr. Ferracuti says. But if the joint employer clause is adopted, franchisors worry they might be held jointly liable for dispute resolution between franchisees and their employees, as well as claims for wrongful dismissal, human rights violations and wage and overtime class actions.

"I feel strongly that this type of legislation would force the franchisor to have a much more controlling and heavy-handed role," Mr. Ferracutti says. "I'd have to get involved with some pretty grassroots aspects of the franchisee's business, from scheduling to human relations."

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Staffing a business, he argues, is a delicate dance that takes into account both the employee pool in the area, and the business requirements. And a franchisor with many outlets, sometimes broadly geographically separated, simply can't be up to speed on market conditions for every one of his franchises.

"Individual franchisees are much more in touch with the needs of employees in their own community than I am," Mr. Ferracuti says. "We do train our franchisees in how to hire and how to schedule, but we give them guidelines. They take those and staff their business according to what works best for them."

Mr. Ferracuti says policing all of his locations to ensure they meet every employment standard would also require added staff and added expense, all of which would have to be passed on to the franchisee. "Not to mention that, philosophically, most franchisees don't want the franchisor looking over their shoulders."

Ryan Eickmeier, vice-president of government relations and public policy for the Canadian Franchise Association, contends that a change in joint employer status could "have a dramatic chilling effect on future investment in the province," by discouraging franchisors from opening operations there.

The franchise industry is a significant driver of the Ontario economy, he says. Ontario is home to 65 per cent of Canada's franchise outlets and 56 per cent of the country's franchise headquarters. And the industry employs "hundreds of thousands of people." And yet, Mr. Eickmeier says, "Ontario is the only jurisdiction in Canada – and in North America – that is actively looking at this."

Although the franchise industry supports the mandate of the Changing Workplaces Review to protect workers while supporting businesses in today's economy, Mr. Eickmeier says, deeming franchisors and franchisees joint employers won't help achieve either goal. "We don't think it protects workers and we think it will be detrimental to the economy."

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The Ontario Ministry of Labour says the review's final report is expected to be released in mid- to late-May.

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