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What Waivers are in Your Franchise Agreement?

 

Last week, I discussed the class action lawsuit that has been allowed to continue against Uber in California and is challenging the classification of its drivers as independent contractors instead of employees.  At the moment, only those drivers who did not waive their right to class actions in their license agreements are eligible to join the lawsuit, although some drivers are protesting the enforceability of the waiver.  This type of waiver is not exclusive to Uber and is a common provision found in most contracts, including franchise agreements.  A waiver of the right to bring a class action is usually found in connection with the provisions requiring that disputes be submitted to arbitration.  The waiver may look something like this:

Arbitration must be conducted on an individual, not a class-wide, basis; only we (and/or our Affiliates, and our and their respective owners, officers, directors, agents, and employees) and you (and/or your Owners, Affiliates, officers, directors, agents, and employees, if applicable) may be the parties to any arbitration proceeding described in this section; and no such arbitration proceeding may be consolidated with any other arbitration proceeding between us and any other person, corporation, limited liability company, or partnership. Notwithstanding the foregoing or anything to the contrary in this section, if any court or arbitrator determines that all or any part of the preceding sentence is unenforceable with respect to a dispute that otherwise would be subject to arbitration under this section, then all parties agree that this arbitration clause will not apply to that dispute and that such dispute will be resolved in a judicial proceeding.

 

You may be thinking to yourself that this provision is just boilerplate language that cannot really have much of an effect, but that is not the case as several federal and state courts have found these types of waivers to be enforceable.  However, some states have specific franchise laws that prohibit the franchise agreement from limiting certain rights of franchisees, including the right to litigate claims against the franchisor.  As such, it is possible that different states may have different positions on whether or not this type of waiver is enforceable in franchise agreements.  It is also important to know that a class action waiver is most certainly not going to be the only waiver contained in your franchise agreement.  Other common waivers to look for in franchise agreements include the waiving of your right to a jury trial, your right to object to venue or jurisdiction, and your right to claim punitive damages.  There are also other acknowledgements located throughout the franchise agreement and so you need to pay very close attention any time it says, “You acknowledge and agree that…” and understand what exactly it is you are agreeing to.  Having these acknowledgements and waivers in the franchise agreement can limit your ability to enforce some of your rights, or make certain claims against the franchisor, and is another important reason for you to make sure to read through the entire Franchise Disclosure Document and franchise agreement, or hire an attorney to do it for you, so that you fully understand exactly what is in the documents before signing on the dotted line.

To learn more about common acknowledgements in the franchise agreement, check out The Franchisee Acknowledges What?