Jani-King's Win 'A Blow' to DOL, Gardere Lawyer Says
The Department of Labor wanted Jani-King of Oklahoma to track its franchise operators' hours as if they were employees, but a court dismissed the suit June 9.
A win for Jani-King of Oklahoma in a lawsuit brought by the U.S. Department of Labor is “a blow to the government’s overall goal to classify franchisees as employees of their franchisors,” declares Carrie Hoffman, one of the attorneys at Gardere law firm who argued for Jani-King.
The ruling June 9 puts the “former administration’s guidance to treat everyone like an employee on its head,” she said. “The client is very happy, obviously. From their standpoint, it was an attack on their whole business model. The risk of this case is you can’t have a franchising business model” if franchise owners are classified as employees of the franchisor.
The Department of Labor had sought an order requiring Jani-King of Oklahoma to comply with the Fair Labor Standards Act and keep records of its franchise owners as if they were employees. The department filed suit last year after conducting an investigation on the issue for about three years before that.
Jani-King moved to dismiss the DOL’s lawsuit on two main grounds. First, the department’s suit would “effectively serve as an unconstitutional seizure of property because the proposed remedy would necessarily void the franchisees’ franchise agreements,” Gardere said in a press release. “Second, the portion of the FLSA at issue applies plainly to individual persons and not corporate entities.”
The U.S. District Court for the Western District of Oklahoma dismissed the department’s case “with prejudice,” meaning the lawsuit is final unless the labor department appeals, which they have 30 days to do. The DOL has made no statement about its plans.
Hoffman points out the issue as a whole is far from over, however. Her firm is now handling private plaintiff litigation in which franchisees in the Houston area recently filed suit alleging they are employees of Jani-King of Houston.
Meanwhile, President Trump’s appointments to the National Labor Relations Board, an agency independent from the Department of Labor that enforces workforce rules, are pending, but those new appointees are expected to change course from the Obama era’s board.