A proposed new US labour regulation is one to watch here in Canada, as well. In September 2022, the US National Labor Relations Board published a new rule that would expand a company’s liability for labour rights violations against workers of contractors or franchisees. Under the proposal, a franchisor can be held liable if it exercises indirect control over working conditions, such as scheduling, hiring, firing and supervision.
Labour rights organizations, both in Canada and the US, have argued that broader based bargaining is necessary to ensure workers can engage in meaningful collective bargaining and are protected by labour rights statutes. Expanding joint employer liability could result in a consolidation of all employees under a single bargaining unit, as well as liability for human rights complaints, wrongful dismissals and employment standards compliance.
A similar proposal was considered in Ontario in 2016. The Changing Workplaces Review recommended amending Ontario employment and labour laws to expand franchisor liability and create a certification model for the franchise industry. These proposed changes were ultimately not adopted in Ontario.
A company is responsible as a joint or related employer if there is a degree of integration and control over the franchisee or contractor’s employees. For example, if a company requires the implementation of system-wide policies, tools or technology relating to franchise employees, there is a risk of a joint employer declaration.
There isn’t a single test—the factors considered include common ownership, financial control, contractual arrangements, control over labour relations, common management, interrelationship or interdependence of operations, and representation to the public as a single integrated business.
Right now, a fairly significant degree of integration is required to create liability. However, this could change if our governments and labour boards are influenced by the approach taken south of the border. Legal structures, like subcontracting and franchise arrangements, may not be effective in reducing the costs or operational obligations associated with labour rights and employment laws.
As both a lawyer and HR professional, I think this is an issue not just to watch but to watch closely.
There have been calls for broader based bargaining in the past—but over the past few years, the world of work has changed. Organizations are increasingly being held accountable for how they impact the human rights, workplace safety, labour, hours and pay standards not only for their own workers but for workers throughout their operations and supply chain.
Having more line of sight—and potentially indirect control—gives more assurance that all these workers’ rights are respected. If joint liability requirements change, having that higher degree of oversight could make the organization directly responsible for workers’ pay, bargaining rights and other employment rights.
Accountability matters to your business, of course—and so does knowing and being able to identify the costs and support required to manage workers. To learn more about this evolving issue and how it might affect your organization, give me a call.
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