Franchise not responsible for workers' compensation claim

Those who are familiar with the fast food and restaurant industry know that the franchise business model creates nuanced relationships between the franchise and the business owner. Franchisees are small business owners who purchase a “brand name” for their operation. They are required to uphold brand standards and keep in good standing with the national organization.

This arrangement also has an impact on employees of individual franchise locations, particularly in the area of workers’ compensation. A recent case here in Pennsylvania has potentially negative implications for franchise employees statewide.

Is a franchise responsible for an employee’s claim?

A state court took up this question last year after a franchise employee slipped and injured both knees in a Saladworks restaurant in March 2011. The injured employee filed a workers’ compensation claim with his employer (the owner of the local franchise). However, the owner did not have the necessary insurance to cover the employee’s injury.

The employee then filed a subsequent claim with the state’s Uninsured Employers Guaranty Fund (UEGF), which provides benefits to employees who may not be covered due to their employer’s lack of insurance. UEGF filed a claim against the Saladworks franchise itself. However, Saladworks argued that it had no relationship with the employee.

The court ruled in favor of the Saladworks franchise and left UEGF and the employee without compensation. The UEGF and another state board then filed an appeal with the state Supreme Court, but the court denied the appeal in December 2016.

What does this ruling mean for restaurant employees?

The state Supreme Court’s ruling to uphold the decision in favor of Saladworks means that franchise restaurant employees who are injured on the job may not be covered if their employer does not have the required insurance.

The attorneys who represented the employee called the case “far from over,” but stressed that the responsibility is on store owners to carry the necessary insurance to cover injured employees. When looking for a job in a restaurant, potential employees may never consider the insurance the employer carries. An employer’s lack of proper insurance coverage may never be an issue until someone is hurt on the job.

Although the court ruled in favor of the franchise in this case, fast food and restaurant employees should not be discouraged. If you are hurt at work, you can still seek coverage by speaking to a workers’ compensation attorney.