The Pennsylvania Supreme Court has agreed to hear a case regarding whether or not a franchisor has any liability for workers’ compensation benefits when a franchisee does not have state-mandated workers’ compensation coverage.
The case, Saladworks, LLC, v. Workers’ Compensation Appeal Board (WCAB), involves a person who sustained an injury while on the job at Saladworks. The employee sought workers’ compensation benefits, but the franchisee (the entity actually running the day-to-day business operations) did not have a valid policy of workers’ compensation insurance. The injured worker then sought benefits through the franchisor, the company issuing the franchise. The WCAB overturned the workers’ compensation judge’s ruling that the franchisor was not a statutory employer. However, the Pennsylvania Commonwealth Court reversed, concluding that Saladworks could not be held accountable as a statutory employer.
The basis for the court’s ruling is the court’s perception of the fundamental business of Saladworks, LLC. The court found that Saladworks, LLC, was not in the restaurant business, but was in the franchise business. Because the employee was injured as a consequence of the restaurant business, the injury fell outside of the scope of Saladworks’ involvement or control. The WCAB had likened the relationship between franchisor and franchisee to that of contractor and subcontractor, but the court disagreed, finding that a franchisor has no control over the employees of a franchisee.
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