This article from the Business Review starts with the frightening revelation that class action lawsuit websites are inviting potential plaintiffs to join or start a class action on a 24 hour a day basis. This threat for large franchisors is real.
Franchisors face litigation from franchisees and customers, but recently some of the big franchise settlements and lawsuits involve franchisors in the role of employers. A number of class actions (against both franchisors and non-franchisors) involve FLSA and other employment statutes that regulate the classification of employees and the need for overtime pay. See previous blog entries on CKE and Pizza Hut. Recently, the federal court in California denied Pizza Hut's motion to appeal the court's earlier ruling that the company misclassified its employees as exempt from receiving overtime pay. This ruling leaves Pizza Hut vulnerable to a potential judgment of $300 million.
According to this article, an overtime adjustment does not end the debate. Other employment practices have drawn class action fire as well. For example, Polo's requirement that its employees buy and wear Polo clothing is the subject of a class action, as well as Wal-Mart's policy not to pay employees for breaks.
Posted by franchiselawblog at October 1, 2004 06:59 PM