The Department of Labor successfully stated a claim for record-keeping violations against a franchisor, because the franchisor failed to keep records on the hours worked by the specific individuals actually performing work under the franchise agreements. Using a franchise agreement, a janitorial company engaged corporations – and only corporations – to provide services to the company’s clients. The franchisees were typically one or two person operations, and the owners of the franchisees typically did the actual work themselves. The DOL sued the franchisor janitorial company, alleging that it failed to keep required records for those individuals who actually performed work for the company’s clients. At first, its use of franchise agreements protected the janitorial company; the case was dismissed by the trial court. But the Circuit Court reinstated the suit. The DOL’s allegations that the individuals performing the work were economically dependent on the janitorial company were enough to allege that those individuals were, by law, employees of the franchisor janitorial company, and therefore enough to allege the janitorial company was required to keep the FLSA records. Acosta v. Jani-King of Oklahoma, Inc., No. 17-6179 (10th Cir. Oct. 3, 2018)
Beware! An employer’s corporate structure – including even arguably proper use of independent contractors – might not protect you from record-keeping requirements. This suit will continue and might result in increased record-keeping requirements for all employers who use independent contractors. To be safe, you should know who is doing the work and the hours they keep.