The Roles of Franchisors/Franchisees in Preventing Sexual Harassment

The Roles of

Franchisors and franchisees must understand their roles in avoiding the sexual harassment firestorm.

Training is the important first step.

By Rob Basso

The fallout from the Harvey Weinstein scandals as well as the #MeToo movement have had far-reaching repercussions beyond Hollywood and into everyday business operations, including within franchises across the United States.

While the workplace sexual harassment controversy highlights a significant and long-existing problem, the end-result for women and workers is positive. Shining a light on unreported instances of sexual harassment, which should never have occurred, also demonstrates the exposure and risk faced by unprepared businesses, including franchisees. Questions also arise as to the role and responsibility of franchisors and what to do regarding recent changes to laws and rules relating to the move away from co-employment for operators.

For many, discussion of sexual harassment has been taboo in a business environment. As we know, the issue was not given the required gravitas in the past because owners and managers may have only sporadically offered sexual harassment prevention training sessions from an outside consulting or HR firm. Such sessions – an imperative first step – have proven effective in raising awareness, overall sensitivity among employees and a culture of inclusion within a company.

Today, sexual harassment is a top item of concern based on the national news – and rightly so – as this is a subject of great concern for franchisors and franchisees, especially in the wake of the scandals with Massage Envy franchises across the country. More than 180 women have accused massage therapists employed by the franchise of groping, inappropriate touching and sexual assault.

‘Careful Tightrope’

With the growing publicity and ripple effect of high-profile men being exposed for their reprehensible behavior, the potential threat to businesses and brands is at an all-time high. Accusations and one negative media story alone can cause catastrophic damage to a local franchise and potentially to the entire network across the country and even internationally.

“Today, franchisors must take more of an advisory and educational role when it comes to HR polices and procedures,” says Harold Kestenbaum, a nationally respected franchise attorney and author. “While franchisees may want or need more support from an HR perspective, it’s a careful tightrope to walk between supporting and actively getting involved in franchise operations. This active involvement would be considered a co-employment situation and create unwanted exposure and liability.”

Advises labor and employment attorney Glenn Franklin, “It is imperative that owners, franchisees and managers are educated on best practices and know the law. They must meet all requirements and proactively offer training for managers to reduce potential cases of sexual harassment. This is critical for both protecting their investment as well as the brand that they are part of.” Franklin’s Garden City, N.Y.-based firm, Franklin, Gringer & Cohen, holds seminars for employers, including on sexual harassment.

Federal laws and rules have recently changed which further insulate the franchisor from being held responsible for employment law-related matters, unless the franchisor is involved with the labor and employment law operations of the franchisee. The change in the law clearly states that the individuals are employed by the independent franchise owner, not the master franchisor. The franchisee alone, not the franchisor, is responsible for employment matters at the owner’s location.

Under the Obama administration, co-employment issues and the related debate were well covered in the press. Now with the Trump administration, the rules of the game have changed. Joint-employment rules are now much more confined and less onerous for the franchisors. According to Kestenbaum, “Typically, franchisors should not be advising franchisees on hiring practices, wages, etc. Providing guidelines is permissible, but dictating what franchisees should be doing is not recommended, nor is it typically done.”

Due to these law changes, many franchisors are backing off and not providing HR support, training, materials such as employee manuals and recommendations. These actions – or non-actions – make it very clear that franchisors are not involved in the day-to-day operations of independently owned franchises. Restaurant franchisors remain involved in food handling and safety. They also watch and enforce procedures and safety policies to ensure that OSHA and other state regulations are followed.

Nonetheless, while franchisors are taking a hands-off approach, franchisees must do all that is necessary to plan, train and create a business culture and environment that does not tolerate sexual harassment. These efforts require owners and managers to identify effective training programs, offer them regularly and also educate employees about rules and ramifications regarding inappropriate behaviors.

Best Line of Defense

What must a franchise owner do to protect the business and him- or herself in a proactive manner?

Training is the first and still best line of defense, followed up by annual refresher courses and continuing education that covers changes in the laws, changing norms, employee manual updates, procedures and reporting policies. This is where a good outside HR and payroll provider can The Roles of 2aid franchisees because these professionals are dedicated to keeping up-to-date with all law changes and guidelines and offer services and support sessions on behalf of their clients. When new guidance is issued, employees and managers should immediately be made aware and updated as to the new procedures, policies and guidance. All new managers should be provided training before they begin working.

Franklin also recommends that managers and staff members not be in training together since process and procedures are different for both, although both should be trained. Training can be offered in several ways depending on the size of the company, number of new employees being on-boarded and locations. Options include training via online courses, videos and with trained professionals in-person. 

“All franchises must have procedures and policies in place,” Franklin advises. “Having a process for logging and managing a complaint in a step-by-step documented process is critical.”

Labor and employment lawyers and HR consultants across the nation are reporting a strong uptick in companies contacting them to change their company handbooks to be in compliance with sexual harassment and anti-discrimination laws, as well as to update procedures in documenting and processing complaints.  

Policies in the handbook should clearly lay out all procedures for filing a report with human resources, and how the reports will be handled and investigated. Communicating effectively and in writing is critical. Owners, managers and attorneys should be involved during the entire process. When procedures are not followed, the exposure increases.

The one step that all franchisors should undertake is to require franchisees to carry employment practices liability insurance (EPLI), and be named as an additional insured to cover the franchisor in the event they are named in a suit. This type of policy was not in vogue years ago. The game has changed today; now it is required by most franchising companies.

“Franchisees may think they are covered under a franchisor’s insurance but most likely they are not; the franchisor’s position is that workers are employed by the franchisee,” says Greg Knepper, president of Plainview, N.Y.-based Integrated Coverage Group. “Franchisees should confirm if EPLI coverage exists for their individual franchise, and if not, they should procure their own policy.”

EPL insurance covers legal defense costs and court-related fees from claims made from current, past and prospective employees against the company, another employee or the company’s officers, leadership, board members, directors, etc. However, the insurance does not cover punitive damages. This is an important point because if an incident does occur, the franchisee/owner is responsible. These are funds that must be paid when a legitimate case is lost and settlements that result in large damages could potentially put a franchisee or a multi-unit owner out of business.

Should any incident or subsequent complaint about sexual harassment occur, it is imperative to have extensive documentation. This documentation is protection for the company and vital for legal defense. While franchisors may not be directly involved in operations, likely they – along with owners, an accused harasser, managers, area developers and more – could be named in legal action.

As we watch the news, we will see positive changes in the workplace across the nation. However, with heightened awareness and empowerment, more victims will continue to come forward. It is clear that franchise owners must quickly and appropriately adapt their approaches. With significant exposure to damage to their businesses and the brands in which they have invested, the key is to prevent sexual harassment though training, procedures, written manuals, leadership and a commitment to a culture of respect.

Rob Basso is founder and CEO of Associated Human Capital Management, a provider of HR-related services, payroll and benefits consulting services that allow companies and HR managers to effectively manage core HR and human capital management operations. 

 

 

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