Major Coffee Chain Claims Franchisees Violated Settlement Agreement Over Form I-9 Violations

Violated Settlement

One of the nation’s largest coffee and donut retailers has filed a lawsuit against several of its New Jersey-based franchisees concerning allegations that they violated their franchise agreement by failing to complete Form I-9 for many of their employees.

The filed complaint with a federal court in New Jersey argues how franchisees were causing damage to the company’s reputation by using its trademarks and proprietary marks. The complaint further explains that the continued use violates previous agreements for the franchisees to terminate their agreements or sell their franchises by an agreed-upon date. In addition, the complaint argues that the use of these properties outside of the scope of their franchise agreements and the company’s consent is likely to confuse or deceive the public into believing that the company approves the defendant’s actions.

In a previous lawsuit, an investigation revealed franchisees were failing to comply with Form I-9 requirements about completing and retaining records for new employees. This investigation sparked the current case, where the chain wishes to sever relationships with the franchisees. As a result, the franchisees agreed to cease their operations for the company to drop their allegations.

According to this previous lawsuit, the franchisees displayed a pervasive trend of failing to comply with Form I-9 requirements, with dozens of employees of the franchise missing complete Form I-9s, which determine whether new hires are authorized to work in the U.S. The former complaint also alleged that the franchisees failed to use the E-Verify process, which is a web-based platform for confirming a worker’s employment eligibility until August 2020. According to the company’s complaint, this resulted in a failure to verify the eligibility of numerous employees for months or years, which violated franchise requirements.

Further, the complaint alleges that the franchisees fraudulently attempted to disguise this violation by providing the Department of Homeland Security with inaccurate employee start dates. For example, the complaint revealed a contrast between the employee signature dates and the dates on the forms.

These allegations led to the terminated agreements and the lawsuit’s resulting settlement agreement. Under this settlement, the franchisees agreed that further use of the franchise’s properties would result in permanent harm and entitle the latter to injunctive relief. However, the franchise still claims it is due this relief because the franchisees violated the agreement.

Ensure compliance today by switching to an electronic I-9 management tool with I-9 Compliance.