How Will The NYC Transparency Law Affect Franchisees?

by | May 24, 2022 | Blog, For Franchisees

When laws are passed that impact business operations, it is often up to the franchisee – who is considered an independent business owner – to stay on top of those new rules to avoid penalties, fines or litigation. 

A new law regarding pay transparency in New York City is expected to go into effect this Fall. It provides a perfect example of how and why franchisees need to stay updated on local and state legislation in an effort to protect their business and steer clear of lawsuits.  

Details And Laws That Franchisees Are Required To Know 

In Item 1 of the franchise disclosure document (FDD), the franchisor must disclose, in a general way, “any laws or regulations specific to the industry in which the franchise business operates.”  However, ultimately, the onus is on the franchisee to research and determine what laws apply.

Some franchisors may provide guidance with respect to which laws will apply to a franchisee, particularly if that franchisor has operations in the jurisdiction where the franchisee will operate. 

However, unless the franchise agreement provides otherwise (which it usually does not), the franchisee will have sole responsibility for ensuring compliance with all applicable rules and regulations. 

NYC Pay Transparency Law and Franchisees 

Consider how updates to the New York City Human Rights Law (NYCHRL), which will go into effect on Nov. 1, 2022, may impact your independently operated franchise location. This legislation is known as the NYC Transparency Law, and applies to employers with at least four employees in the Big Apple on their payroll. And, the owner will count as an employee. This law is making headlines because it will require employers to openly disclose the minimum and maximum salaries for each given position on any advertisement.

The new law uniquely recognizes the terms: “advertisement” and “covered listings.” According to the NYC Commission on Human Rights: “Covered listings include postings on internal bulletin boards, internet advertisements, printed flyers distributed at job fairs, and newspaper advertisements. The law does not prohibit employers from hiring without using an advertisement or require employers to create an advertisement in order to hire.”  

This means any position posted – internally or publicly-facing – will need a salary range. Advertisements that cover multiple jobs, promotions, or transfer opportunities can include salary ranges that are specific to each opportunity. 

Other forms of compensation, like health benefits, overtime pay and paid time off, are not included as elements of the salary.  

There is another bottom line factor. Violating the NYCHRL may result in paying monetary damages to affected employees and civil penalties of up to $250,000. Franchisees should consult the NYC Human Rights page for more information on the new law. 

Franchisees are required to comply with local and state laws that impact their franchise businesses in their particular jurisdiction. If you are unsure of the scope of your obligations as a franchisee or the requirements for your franchisor to provide guidance or support, consult a franchise lawyer.  

Still Have More Questions? Contact Lusthaus Law

Contact Lusthaus Law if you operate a franchise and need help understanding your responsibilities. Our extensive experience representing franchisors and franchisees can help you avoid mistakes and protect your interests.


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