Listen to this post

Franchisors who place strict controls on their franchisees may also have to answer for their franchisee’s human rights practices.

Product and service consistency is the backbone of coffee giant Tim Hortons’ successful business model. Tim Hortons, like many other successful franchisors, imposes a strict regime on its stores in order to ensure that all Canadians can get the same cup of coffee, in the same cup, regardless of where they order it. Control manifests itself through an extensive franchise agreement, detailed operations rules and regular audits of individual stores.

So, when a group of past and present employees alleged human rights violations at an individual B.C. store, it is not surprising that they named both the franchisee (their direct employer) and Tim Hortons, the franchisor, as respondents. Tim Hortons, for its part, felt that the allegations made against it were unjustified, as it was not the complainants’ actual employer. The franchisor consequently launched a preliminary application to dismiss the claims against it, on the basis that there was no reasonable prospect of success. United Steelworkers obo others v. Tim Hortons and others is the B.C. Human Rights Tribunal’s decision on the matter.

The Tribunal did not agree with Tim Hortons’ preliminary objection. The company’s fate remains to be decided but for now it remains an appropriate respondent and will have to participate in the proceedings and likely defend the allegations against it.

It is all about control

The relevant provision regarding employment discrimination in B.C. is s. 13 of the Human Rights Code, which reads:

A person must not:

(a) refuse to employ or refuse to continue to employ a person, or

(b) discriminate against a person regarding employment or any term or condition of employment.

It is worth noting that human rights legislation in other Canadian jurisdictions (including Ontario) contain similar provisions. The reasoning in this decision, could easily be applied elsewhere in Canada.

Additionally, these considerations are by no means a Canadian issue. Recent case law out of the U.S. has dramatically changed how franchisors structure their relationships with franchisees. Our U.S. colleagues have canvassed this important issue here.

The B.C. Tribunal drew on a previous case (Chartaigh v. Blenz The Canadian Coffee Company Ltd.) to determine the test for assessing whether Tim Hortons could qualify as a “person” under s.13 of the Code. It found the test turned on:

“… whether the franchisor exercises sufficient control over the franchisee to influence its behaviour and unreasonably failed to exercise that control in circumstances where the Code was being violated.”

In assessing the facts before it, the Tribunal considered all of the following as being indicia of control: Tim Hortons’ rigorous compliance program, particularly as it regarded employment standards; the presence of an internal grievance process linking individual employees to the company headquarters; and a history of franchisor-led employment-related investigations targeted at the particular store.

Whether Tim Hortons will ultimately be found liable will rest primarily on the results of a fact-based inquiry. A positive determination will require that Tim Hortons exercise sufficient influence and control over the employment aspects of the individual store’s operations. What exactly comprises “sufficient” influence and control is not yet clear, but this case will help clarify the standard.

The lesson here is a lesson that any dedicated parent knows too well, if you want to take credit for the great things that your kid does…. you’ll need to be prepared to also answer for their missteps as well.

Stay tuned for further developments.