Judge: Jimmy John's can't be considered 'joint employer' of asst managers working at franchise shops

By Scott Holland | Jun 28, 2018

A federal judge in Chicago has ordered up a win for Jimmy John’s, saying the sandwich shop chain cannot be considered the joint employer of a group of assistant managers suing in search of overtime pay.

Since 2014, Jimmy John’s has contested two primary class action lawsuits, brought by assistant managers who alleged the sandwich chain should be held responsible for the decision to classify the ASMs as management employees exempt from the overtime and other wage requirements under the federal Fair Labor Standards Act. The plaintiffs have contended the classification was improper, as assistant managers at Jimmy John’s rarely, if ever, actually manage anyone or anything. Rather, plaintiffs estimated at least 90 percent of the ASMs’ duties are little different from those of hourly, so-called non-exempt restaurant employees, who qualify for overtime under the FLSA.

In 2017, U.S. District Judge Charles P. Kocoras barred the workers from suing their direct employers under FLSA. That decision was overturned by the U.S. Seventh Circuit Court of Appeals last December, which ruled the ASMs could sue the franchisees, and continue to do so before exhausting their lawsuit against Jimmy John’s corporate offices.

In a decision delivered June 14, but only unsealed on June 26, Kocoras  struck another blow, granting Jimmy John’s summary judgment by determining the franchisees should be considered the sole employer of the ASMs. The plaintiffs had alleged the corporate Jimmy John’s franchisor should be considered a “joint employer” under federal law, because it exercised control over the franchise shops.

Gerald Maatman   Seyfarth Shaw

While the parties agreed Jimmy John’s itself doesn’t hire and fire ASMs, the plaintiffs pointed to a series of corporate guidelines they say essentially dictate hiring decisions. Kocoras, however, said even detailed policies are not the same as personal involvement, writing, “it is evident that Jimmy John’s performs no actual role in the hiring process.”

He likewise explained franchise managers, not a corporate entity, are given power to discipline or fire franchise employees, including ASMs, despite discipline instructions in franchise operations manuals. While the plaintiffs cited emails from corporate “business coaches” who called for employees to be fired, Kocoras said they didn’t supply evidence showing franchise operators actually took disciplinary action.

Arguments about employee scheduling were similarly flawed, with Kocoras saying evidence is clear that franchise managers, and not the corporate office, set work hours and ASM salaries. Likewise, encouragement to adopt a corporate bonus program is different from a home office mandate.

“Influence and compulsion are two distinct concepts,” Kocoras wrote, “and influence alone, even if substantial, does not constitute control.”

He also said corporate requirements for franchise employee training and personal appearance stipulations do not rise to the level of joint employment. The latter, he noted, are about brand uniformity and quality control rather than dictating work conditions. The power Jimmy John’s wields to enforce contracts with its franchise operators, he added, can’t be used to establish a joint employee relationship with people a franchisee hires.

Turning back to the role of business coaches and power they wield over each franchise, including through audits that affect store ratings, Kocoras wrote that even if following every coach’s suggestion were mandatory, “there has not been a showing that business coaches’ suggestions go beyond that of ensuring compliance with brand standards.”

Ultimately the ASMs said the issue is not if Jimmy John’s enacted corporate policy qualify them as exempt from overtime pay, but whether franchises’ working conditions resulted in them doing tasks that are not exempt from overtime pay under FLSA protections. Kocoras disagreed, saying the real key is whether Jimmy John’s told franchise operators how to classify ASMs and whether to pay an hourly wage or a salary.

The operations manual, he noted, explicitly gives store owners the responsibility for classifying employees and warns that labor laws differ by state. Some ASMs, he noted, are indeed classified as non-exempt, factors he said entitled Jimmy John’s to summary judgment in its favor.

Jimmy John’s is represented in the action by attorneys with the firm of Seyfarth Shaw LLP, of Chicago.

In a statement emailed following the ruling, Seyfarth Shaw partner Gerald L. Maatman Jr., who represented Jimmy John’s in the action, said the company “is pleased with the court’s thorough and well-reasoned decision.”

The plaintiffs are represented by attorneys with the firms of Klafter Olsen & Lesser LLP, of Chicago; Myron M. Cherry & Associates, of Chicago; Foote, Mielke, Chavez & O'Neil LLC, of Geneva; Werman Salas P.C., of Chicago; and Outten & Golden, of Chicago.

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Organizations in this Story

Foote, Mielke, Chavez & O'Neil LLC Jimmy John's Franchise, LLC Klafter Lesser & Olsen Myron M. Cherry and Associates Outten & Golden Seyfarth Shaw, LLP U.S. District Court for the Northern District of Illinois Werman Salas PC.

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