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Who Pays the Legal Bill, 'Zor or 'Zee?


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Whitney Fore, Gray Plant Mooty

Just in case you don’t have enough things to worry about, attorney Whitney Fore of Gray Plant Mooty adds one more: Who pays the legal bill in cases where franchisees and franchisors land on the same side of a lawsuit.

“Why this matters is, there’s a lot of money at stake: Who’s going to pay for what and when is going to be a growing issue among franchisors and franchisees,” says Fore, who handles these and many other matters from Gray Plant’s Washington, D.C., office.

It’s a newer issue, just one more byproduct since courts and the National Labor Relations Board have begun to classify franchisors as joint employers along with their franchisees, and hold the former also liable for labor violations at franchisee-owned stores.

“Franchisors and franchisees are finding themselves on the same side of the V more often than ever before, and a lot of it has to do with the joint employer rule, and a growing misunderstanding of how the franchise model works,” Fore said.

Fore can rattle off many details about how the indemnification issue is playing out state by state, and that’s part of the problem—each state may have its own “jurisdictional wrinkles,” as she puts it. Her best advice: “Get counsel involved early and often,” she says, especially when contracts are first written. And as soon as litigation is filed, contact your attorney right away and say, “Hey, we know we’re going to need to pay attorneys’ fees. How do we figure out who pays?”

There, doesn’t that make you feel all better?

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