Legal Newsline

Thursday, September 19, 2019

Subway takes steps to protect itself from wage, hour claims

By Kristin Danley-Greiner | Aug 31, 2016

MILFORD, Conn. (Legal Newsline) -- Going by the volume of investigations and litigation involving individual franchisee-owned Subways by the U.S. Department of Labor (DOL), it wasn’t surprising when Subway — one of the largest franchisers in the world — recently adopted a different approach to stymie wage and hour claims.

Wage and hour claims are usually not a class-action issue, said Gregory Mersol, partner at Baker & Hostetler LLP. But Subway has agreed to work with the DOL and encourage Fair Labor Standards Act compliance by Subway franchisees.

“This is a completely different approach than what you’re seeing other people using,” Mersol told Legal Newsline. “I was expecting it to be more complicated than it turned out. I give them a lot of credit for taking this head on. Wages and hours cases can get expensive.”

The compliance steps Subway adopted include developing “easy-to-use” compliance materials by the DOL for the entire restaurant franchise industry, distribution of those materials by Subway and its franchisees, support to its franchisees to help become compliant and compliance training of franchisees by Subway.

The statute governing wages and claims is one of the most complicated, Mersol said. It was enacted during the Depression, and the concepts it uses are related to 1938, not modern times with thousands of franchisees under one franchiser. 

Subway allows its franchisees to have some reign as business owners while offering significant support and setting guidelines to assist them. It’s that relation that has led others to file lawsuits against the franchiser, in addition to the local franchise for wage and claims issues.

“Subway says franchisers can use their name to sell their sandwiches, but also must follow a considerable amount of rules and standards. That way, when you go into any Subway, you know you’re going to get a quality product that’s the same everywhere,” Mersol said. 

“Subway offers franchisers a low fee, training and support, even model blueprints for someone wanting to build a building.”

But parties are alleging that if a franchise has such specific standards for its food and how the building looks, then it should have the same level of responsibility for employment issues.

“You can’t ignore that anymore," Mersol said. "So Subway is taking a step back and trying to prevent that from happening in the first place. An agency or attorney will look at a single Subway shop, and maybe Jane or Joe Doe own it and didn’t realize they were making an employee work off the clock or don’t fully understand what work is compensable. 

"But that agency or attorney would much rather go after 10 or 100 or 1,000 employees across an entire franchise. So Subway is trying to stop that from happening.”

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Baker and Hostetler