On July 27th, Ontario’s Ministry of Labour reported on “related and joint employers,” a hot topic that will be of particular interest to franchisors carrying on business in Ontario.
The background to the Ministry of Labour’s report involves the Ontario government’s announcement in March 2016 to modernize Ontario’s business laws. Modernizing Ontario’s business laws is one aspect of “the government’s economic plan to build Ontario up and deliver on its number-one priority to grow the economy and create jobs.”
For the modernization project, the Ministry of Labour conducted a review of the Employment Standards Act, 2000 (“ESA”) and the Labour Relations Act, 1995 (“LRA”). Its review generated great interest, involving 12 days of public hearings and more than 300 written submissions by labour and employer groups alike.
The result of the Ministry’s consultations and review was recently published on July 27th in a document entitled “Changing Workplaces Review: Special Advisors’ Interim Report”. The purpose of the report is to explain the different views presented, the legislative options under consideration, and to invite comments.
Of particular interest to franchisors carrying on business in Ontario is section 4.2.2, entitled “related and joint employers.” The report explained that “in an increasing range of circumstances, it has become important to determine which of two entities is the employer, whether a number of entities are a related employer, or whether entities are joint employers.”
As we explained in an earlier blog post, “joint employer” issues have the potential to result in an extension of franchisor liability for franchisees failing to comply with employment and labour laws and other laws. This has been a hot topic in the U.S. for some time, involving controversial decisions by the U.S. Labor Relations Board.
In its report, the Ministry of Labour canvassed different views about holding franchisors liable for franchisee operations. On the one hand, it said, “franchisees must comply with the franchise agreement and the requirements of a franchisor, which could affect the manner in which they manage their workforce or operate the business.” On the other hand, the Ministry of Labour also took note of concerns that “any changes could threaten established business models.” By and large, the report noted, it was argued that “franchisors have little if any authority over a franchisee’s employees, and […] the franchisee is the entity that exercises control over terms and conditions of employment and is the real employer in a franchise’s day-to-day operation.”
The Ministry of Labour set out many different options for legislative reform, including maintaining the status quo, “expressly excluding franchise relationships from the LRA” and “establishing clear statutory criteria for a related employer declaration, particularly in a franchise context.”
Although the prospect of legislative reform that would make franchisors liable for the conduct of franchisees is worrisome to some, the interim report states that the Ministry “has not yet come to any conclusions about our recommendations and we have an open mind on all issues.”
To these ends, the Ministry of Labour’s interim report will be subject to comment by Ontario’s new Business Law Advisory Council, which has as its goals to “recommend changes to corporate and commercial laws to strengthen Ontario’s competitive advantage in the global economy, [and] solidify Ontario’s position as a jurisdiction of choice for business […].”