The minimum wage has been a hot topic for quite some time, with workers’ rights advocates calling for raises in the minimum wage, and business owners complaining that the proposed increases will make it difficult to succeed in their businesses

This prickly subject, along with employee classification, correctly paying overtime, and other salary issues, exposes employers to a big risk. And when that employer is a franchisee, not only is that individual or company exposed to risk—but the franchisor is also exposed! When alleged wage and hour violations become the subject of class action lawsuits, often the franchisor as well as the franchisee are named as the defendants. 

What You Need to Know

Wage and hour violations can have serious repercussions for an employer, including legal action. Class action lawsuits can lead to multi-million dollar settlements, fines, and penalties—and those fines may be levied against the business owners and officers, as well as against the business itself.

It can be challenging for an employer to determine whether an employee is correctly classified as exempt or nonexempt from the Fair Labor Standards Act requirements regarding overtime and minimum wage. But in the event of a Department of Labor audit, the burden is on the employer to establish employees’ exempt status.    

What You Can Do

• Make sure your franchisees are aware of the minimum wage requirement at the federal level, as well as at the level of the city and state in which they operate. When franchisees are informed and follow regulations, that protects them from potential lawsuits—and protects the franchisor as well. 
• Suggest that your franchisees audit their pay practices, to ensure not only that they understand minimum wage and overtime requirements, but also that they are adhering to the Fair Labor Standards Act.
• Be cautious in making suggestions to your franchisees regarding their practices in complying with wage and hour regulations.

For more than 25 years, Beall Financial and Insurance Services, Inc., has been helping corporations and individuals protect their most important assets. The agency’s client base covers a spectrum of businesses that require specialized insurance packages and knowledge. With California offices in Newport Beach and Redlands, Beall Financial and Insurance Services serves clients nationwide.