Joint employer status involves a finding—under either common law or a statutory test—that two companies are ‘common employers’ or ‘related employers’ of the staff of one of them. In practical terms, it means one corporate entity can be held liable for the employment-related responsibilities of another, including wages, overtime, vacation pay, benefits, termination notice and payroll taxes. Common employers are jointly exposed to employee claims of wrongful dismissal, harassment and human rights violations. The issue of related employer status often arises in union disputes and collective bargaining negotiations.
Ultimately, joint employer status is a question of inquiry by the courts—or the applicable labour relations board—into the nature of the relationship between two corporate entities, focusing on whether or not they operate as an integrated unit and on the degree of control or direction one entity has over the other’s day-to-day operations, particularly as relates to the employees.
Q: How does joint employer status apply to franchising in Canada?
The notion of joint employer status is supported by unions and employee advocates who maintain franchisors and franchisees have such a close relationship, the franchisor should be deemed to be the joint employer of each franchisee’s employees.
By legal definition, franchising involves the franchisor exercising ‘significant control’ over or offering ‘significant assistance’ in the franchisee’s method of operating the franchise, including building design, locations, marketing and training.
The risk of being found to be a joint employer will likely increase the more involved the franchisor is, either directly or indirectly, in controlling the franchisee’s relationship with its employees.