Fame cuts both ways at Wahlburgers
Fame in franchising is a double-edged sword, as actor and former Funky Bunch member Mark Wahlberg and brothers Paul and Donnie just learned.
Their Boston-based burger chain, Wahlburgers, was sued in federal court in New York in late August over alleged wage theft, in what is becoming a familiar line of attack for plaintiffs’ attorneys.
What is unusual is the news outlets picking up the story—notably, the Hollywood Reporter, presumably on the case because of Mark Wahlberg’s A-list actor status. His newest movie, about the offshore drilling rig Deepwater Horizon disaster, was slated to premier September 30.
(Also notable are the bad puns in some of the stories, like this one by Christopher Coble: “Bad Vibrations: Marky Mark’s Wahlburgers sued for wage theft.” When FT’s Nancy Weingartner did a cover story on the chain last year, they specifically asked her to skip such references, so I’m guessing they’re not enjoying the puns today.)
‘Is it branding, or is it real?’
The suit claims “rampant” wage theft at its Coney Island franchise, but doesn’t seek to hold only the franchisee responsible. The Wahlberg brothers themselves, the complaint says, “pride themselves on taking an active role in managing their locations and insuring that their restaurants meet their high standards,” and so should be included in the remedy.
And their frequent assertions that Wahlburgers is a family business, including on a reality TV show that aired the ups and downs of the operation, is being held against them.
“They can’t have it both ways,” says Mitch Schley, of the Schley Law Firm in New Jersey, who represents the plaintiffs. The Wahlbergs say “they care about the people, they care about the customers, they take it seriously, all those things. So, is it branding, or is it real? If they’re serious about it, let them be serious about it. Let them care that their locations are violating the law.”
By now the number of brands dealing with “joint employer” allegations is long: McDonald’s, most famously, followed by a litany that includes legacy brands like Domino’s and emerging ones like World of Beer.
In a McDonald’s case in July, a federal judge in California added a new weapon for plaintiffs’ attorneys to the mix: the term ostensible agency, or the employee’s reasonable belief that they were employed by McDonald’s, according to Law 360. The judge granted class certification to workers at five McDonald’s locations alleging wage theft.
The plaintiffs’ attorney on that case, Michael Rubin, called the ruling a “two-barreled joint employer shotgun” that he and other attorneys can use against franchisors. The ruling in July “gives plaintiffs two bites at the liability apple,” both under the ostensible agency theory and on joint employer, he told Law 360.
The Wall Street Journal blasted the judge’s decision, calling ostensible agency an “obscure legal theory,” that “has rarely been applied to franchise relationships...and other franchisors could be collateral damage,” the Journal editorial said.
Wahlburgers executives declined a request for an interview, but sent a statement that clearly (and not surprisingly) seeks to place responsibility on the franchisee.
“Our Coney Island franchisee has committed to upholding Wahlburgers’ brand standards and implementing employment best practices,” it said in part. “We are pleased that they’ve initiated an internal review to ensure that there was no wrongdoing, and they’ve decided to take immediate measures to reinforce appropriate management practices and operations at the restaurant.”
For attorney Mitch Schley’s purposes, ostensible agency, joint employer, family values and any other term suits him just fine—he said he’s following all of those threads and taking them into account when crafting arguments for plaintiffs.
But he’s hitting hardest on the famous family. “They’ve got to decide what they want to be. Do they want to be family or do they want to be strangers?” he said.
Taking on the Olympics
Michael Kaplan, a Zerorez franchisee in a Minneapolis suburb, said he was “sick of being cynical” that his voice didn’t matter, so he decided to take on the mighty U.S. Olympic Committee by filing a lawsuit in August in U.S. District Court in Minneapolis.
Kaplan had simply wanted to congratulate the “11 amazing Minnesota athletes” competing in the Olympics in Rio, using social media to do so, he said. But his attorney, Aaron Hall of JUX Law Firm in Minneapolis, warned him that the USOC guards its trademarks ferociously, and often goes after businesses to cease and desist any mention of the games.
“We are looking to stop encroachment on our free speech and our constitutional rights,” said Kaplan. “It’s easy to be cynical about it and just accept it as fact,” that organizations like the USOC are going to clamp down on use of social media and protect their marks. “However, I was sick of being cynical. I decided I was frustrated enough with the overreach, and thought we should seek a declaratory judgment to get clarity on the rules.”
Added Hall: “The Olympics is having a chilling effect on small businesses’ free speech. I have heard from a lot of people. I think it really touched on a nerve.”
In early September, the USOC filed a motion to dismiss the lawsuit, saying among other things there is no concrete dispute between the parties, and hence no jurisdiction for a federal court to rule.
Many franchisees are also familiar with another chilling effect when they wish to speak out: Their franchisors may not approve. That was not the case with Kaplan, who said he spoke with his franchisor before filing the lawsuit. “Obviously we’re not acting without their blessing. They said if you’re passionate about it, go for it,” Kaplan said.
And he is, so much so that both Kaplan and Hall said they will keep fighting. “We’re going to stick with this until we get clear guidance for all small businesses that want to share their Olympic spirit,” Hall said.
Beth Ewen is editor-in-chief of Franchise Times, and writes the Continental Franchise Review® column in each issue. Send interesting legal and public policy cases to firstname.lastname@example.org.