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Franchised Employees Might Be Employees of Franchisor

By Megan L. Anderson and Maisa Jean Frank
February 28, 2013

In a troubling development for franchisors, a Missouri federal district court has conditionally certified a class of plaintiffs in a collective action brought against Hotshots Sports Bar & Grill under the federal Fair Labor Standards Act (“FLSA”) and Missouri's wage and hour laws. The ruling in White v. 14051 Manchester, Inc., 2012 U.S. Dist. LEXIS 170052 (E.D. Mo. Nov. 30, 2012) is concerning because it holds, at least preliminarily, that employees of independently owned franchises may be considered employees of the franchisor under the FLSA, based on a common form of control exercised in most franchisor-franchisee relationships.

The named plaintiffs in the White case are current and former servers and bartenders of Hotshots locations who claim that they were unlawfully required to participate in a tip-sharing pool with “back of the house” employees. Under the FLSA and many state wage and hour laws, tips are the property of the employee, and an employer may not require tip sharing. Employees may voluntarily elect to share or pool tips, but wage and hour laws typically forbid mandatory tip sharing.

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