Subway is one of the largest franchisors in the world, with over 26,000 restaurants in the United States alone. It is also in one of the industries most prone to wage and hour claims, a fact reflected in both Department of Labor (DOL) investigations and litigation involving individual outlets. And, predictably, some claimants pursuing wage and hour litigation against a franchisee have also tried to bring the corporate franchisor in as well. The potential threat against the company has increased with aggressive efforts by the National Labor Relations Board and other enforcement agencies to broaden concepts such as joint employer relationships.

While wage and hour claims are technically not a class action issue, Subway had taken the novel approach of entering into an agreement with the DOL to step up joint efforts to encourage FLSA compliance by Subway franchisees. These include:

  • Development by the Wage and Hour Division of the DOL of “easy to use” compliance materials for use in the restaurant franchise industry
  • Assistance by Subway and its franchisees in the development and dissemination of those materials
  • Provision of compliance support to franchises
  • Ongoing meetings with the DOL to improve franchise compliance
  • Compliance training by Subway

Whether this approach will work remains to be seen. Encouraging wage and hour compliance by franchisees should in theory reduce the number of violations (claimed or real) and hence the number of lawsuits, class actions, collective actions and DOL adverse findings. At the same time, raising awareness may itself generate more claims, and the franchisor’s efforts to encourage wage and hour compliance could conceivably be used by plaintiffs to bolster their joint employment arguments.

The bottom line: While only time will tell, the approach taken by this very large franchisor suggests that one way of winning class action litigation may be to prevent the types of violations that might lead to claims in the first place.