Human Resources Certification Institute (HRCI) Practice Exam

A corporation's practice of requiring franchisees to use their computer system to process employee payroll is most likely to trigger which of the following conditions?

1. A claim of indirect control

2. The ostensible agency theory

3. Joint employment liability

4. All of the above

The correct answer is: All of the above

The requirement for franchisees to use the corporation's computer system for processing employee payroll can trigger various conditions surrounding the nature of the relationship between the corporation and the franchisees. In this case, claims of indirect control arise because the corporation, by enforcing specific processes like payroll management, may exert significant influence over how franchisees operate their businesses. This level of control can suggest a more integrated relationship than typically exists between a franchisor and a franchisee. Furthermore, the ostensible agency theory comes into play if the corporation's actions make it appear that franchisees' employees are acting on behalf of the corporation. If employees process payroll through the corporation's system, it may lead to the perception that the corporation has a role in managing those employees, blurring the lines of employer and employee relationships. Joint employment liability is also a pertinent issue when a corporation wields enough control over a franchisee’s employee practices. Employers can be held liable for employment-related claims if they share control over workers with another entity, implying a joint employment scenario. Therefore, because the requirement for franchisees to utilize the corporation's payroll system can lead to implications surrounding indirect control, ostensible agency, and joint employment liability, it is appropriate to conclude that all of these conditions are likely to