DOL Assumes the Worst When It Comes to Quick-Service Restaurant Franchisees

DOL Assumes the Worst When It Comes to Quick-Service Restaurant Franchisees

By Catharine Morisset, Attorney at Law

These days, all employers face challenges from regulators over wage and hour rules, but the regulatory climate may be toughest of all for the restaurant industry. For quick service restaurants, the U.S. Department of Labor’s Wage and Hour Division (WHD) has gone so far as to argue that the franchising structure itself promotes wage-hour violations.

In a recent interview with Bloomberg BNA, David Weil, the top WHD administrator stated that “The business structure that can create incentives for noncompliance in the eating and drinking industry, particularly in the branded eating and drinking industry, is the structure of franchise relationships.”

Weil has a history of urging the DOL to come down hard on fast food franchisees, and his recent comments suggest that his past recommendations will become an enforcement strategy. DOL believes that the prevalence of minimum wage workers in this sector justifies its compliance focus. The WHD would also point to its enforcement success: Under the Obama administration, it has investigated close to 4,000 investigations of franchisees of the 20 largest fast food brands. The result:  Over 68,000 FLSA violations and $14 million in back wages for roughly 57,000 employees.

WHD officials believe franchisees have an incentive to cut labor costs because royalty fees are often based on a percentage of the franchisee’s total revenue. WHD downplays other explanations. WHD appears particularly unsympathetic to the plight of small-business owners who, often without a dedicated HR or legal department, must navigate varied local, state and federal wage and hour rules.

The bottom line: Fast food franchisees should be prepared. The DOL and quite possibly the Washington State Department of Labor and Industries will assume the worst in an agency- or employee-prompted investigation. The best defense is a proactive offense. Double check federal, state and local minimum wage laws if you have not recently done so.

Ensure you have accurate and clear time and pay records. Examine if your tracking system for time worked, including overtime, makes sense for your workplace, is correctly followed by employees and is easy to audit. Consider methods that make it easy for employees to verify that their reported time worked is accurate and that they received their breaks.

Sixty percent of fast food workers in a 2014 Hart Research Poll reported that they had been required to perform work off the clock. Make sure that doesn’t happen at your location. Front line managers often need training or refresher training. Here in Washington, all supervisors must grasp the employer’s affirmative obligation to ensure employees receive required rest and meal breaks. Failure to provide meal and rest breaks are both labor and wage violations, and continue to be one of the biggest areas for class action litigation.

QSR under Fire:

  • 4,000 investigations at 20 of the largest fast food brands
  • 68,000 FLSA violations
  • $14 million in back wages due to roughly 57,000 employees

This article is not intended as legal advice. Please consult your employment attorney for guidance on your specific situation. Catharine Morisset is a partner in Fisher Phillips’ Seattle office. Her practice focuses on representing local and national employers in litigation in state and federal courts, on appeal and also before the EEOC and similar state agencies in all aspects of workplace law. You can reach her at or visit for more information.

(Source: Washington Hospitality Magazine, October 2016)

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