Franchisor is not Statutory Employer of Franchisee’s Employees under Workers’ Compensation Act

A restaurant franchisor was not liable as a “statutory employer” under the Workers’ Compensation Act for injuries sustained by an employee of its franchisee, the Pennsylvania Commonwealth Court ruled in Saladworks, LLC v. WCAB (Gaudioso and UEGF), __ A.3d __ (No. 1789 CD 2014, filed Oct. 6, 2015). Frank Gaudioso sustained injuries to his knees while working as a prep person at a Saladworks restaurant in Philadelphia. He petitioned for benefits against G21, LLC, the corporate owner of the Saladworks franchise, and later against the Uninsured Employers Guaranty Fund (UEGF). UEGF filed a joinder petition against Saladworks, which Saladworks moved to strike. The WCJ granted Saladworks’ motion and dismissed UEGF’s joinder petition, finding that Saladworks had no contact with or control over G21’s employees. On appeal, the WCAB reversed, holding that the WCJ erred in failing to address whether Saladworks was a “statutory employer” under Section 302(a) of the Workers’ Compensation Act, 77 P.S. §461. The WCAB concluded that, based upon the franchise agreement, Saladworks was Gaudioso’s statutory employer because it subcontracted with G21 to perform a regular or recurrent part of Saladworks’ business.

On appeal the Commonwealth Court reversed in an opinion authored by Judge McGinley. The Court rejected the WCAB’s characterization of the parties’ business arrangement, explaining that Saladworks’ main business is the sale of franchises to franchisees that wish to use its name, operating system and marketing expertise. Although Saladworks is connected to its franchisees through a franchise agreement, it is not in the business of selling salads. On this basis, the Court distinguished the instant case from Six L’s Packing Co. v. WCAB (Williamson), 44 A.3d 1148 (Pa. 2012), where a contractor was found to be the statutory employer of its subcontractor’s injured employee because the contractor had hired the subcontractor to perform an essential part of its business. Here, it was G21, not Saladworks, which was in the business of selling salads, and G21 was Gaudioso’s employer at the time of injury.

By | 2017-05-19T22:51:26+00:00 October 28th, 2015|Categories: Workers' Compensation|Tags: , , , , , , |Comments Off on Franchisor is not Statutory Employer of Franchisee’s Employees under Workers’ Compensation Act

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