The Future of Fast Food Governance

Abstract

As labor organizing of fast food workers has placed the wage floor for low-wage workers front and center in the national debate about income inequality, public agencies have sought new ways to regulate fast food franchise stores by holding franchisors responsible as joint employers. In other industries in which subcontracting arrangements are common this strategy has proven successful, yet historically it has stalled in industries where franchising is the dominant organizational form. What accounts for this difference?

This Essay argues that one explanation is the unwarranted judicial deference to the franchise relationship as an arms-length transaction rather than one characterized by ongoing dependency. As documented in a recent lawsuit following a multi-year investigation of Domino’s and its franchisees by the New York Attorney General, fast food franchisors can obscure their supervisory control over franchise store employees within contractual specifications in the franchise agreement. Courts often reject these contractual specifications as evidence of dependence, even as the franchisor’s supervision over all aspects of store operation except wage rates can cause franchisees to violate wage and hour law to reduce store expenses. This correlation between franchisee dependency and illegal payroll practices suggests that to protect the wage floor for fast food store employees, it will be important to build rich factual records for courts to understand the dependency woven into franchise agreements and to regulate franchisors through franchise law to encourage legal compliance in franchise stores regardless of their joint employer status.

Keywords: Labor and Employment Law, Wage and Hour Law, Franchise Law, Joint Employer Doctrine, Fast Food