Dive Brief:

• Dunkin' has sued several of its U.S. franchisees, claiming they failed to properly vet workers' employment eligibility, according to Restaurant Business.
• The company terminated agreements with a number of franchisees, which operate more than two-dozen units, and wants them to stop running their restaurants. The company reviewed each franchisee's employment verification documents and practices and found violations.   
• The publication reports that franchise agreement terminations have increased within the Dunkin' system, and that the company brought forth a similar suit in 2007. 

Dive Insight:

This isn't Dunkin's first go-round with employment verification issues. The company sued Delaware franchisees last year with similar allegations, and also brought lawsuits against franchisees in 2007 for hiring undocumented employees, according to Restaurant Business. 

This move has the potential for major implications in the restaurant space, which relies on immigrant employees. It is illegal to employ someone who is not authorized to work in the U.S., and, in theory, the employer would have to terminate the employee immediately. But that's not always how it works. According to a 2014 Pew Research study, 1.1 million undocumented immigrants work in the restaurant industry. 

It is incumbent on the company to ensure this verification, and Dunkin's lawsuits could mean the company is being mindful of the murky joint-employer questions that have come into play within the past few years. The U.S. Department of Labor is considering a rule that would clarify joint employer liability, while a 2015 ruling by the National Labor Relations Board increased franchisor liability and compliance issues related to employees. By taking their franchisees to task over employment verification, Dunkin' is protecting itself by ensuring compliance with federal employment law. 

Corporate could also be experiencing some pressure as verification audits of companies surge. According to the Associated Press, over 2,200 employer audits occurred from Oct. 1, 2018 to May 4, 2018, an increase of 60% compared to over 1,300 audits that occurred between Octobers 2016 and September 2017.

But this story doesn't seem so black and white considering the Delaware franchisees counter-sued, claiming that Dunkin' never provided an opportunity to correct the violations. The franchisees further accused the parent company of trying to take over stores to re-sell them for profit. These accusations are similar to those recently brought forth against Subway by its franchisees and underscores a bigger issue in the restaurant space — the franchisor/franchisee relationship is critical to the health of the brand. Such fractures have affected companies from Jack in the Box to McDonald's and Papa John's in the past year.