Joint employer changes and new legislative movement high on the minds of franchisors and owner-operators
The Franchise Action Network’s annual meeting will take place next week, and there are several subjects you can expect to hear bandied about at the industry event, if you’re there.
Perhaps the biggest issue — or at least the one that’s received the most ink over the last month — will be the new joint employer standard proposed by the National Labor Relations Board in late August. Thought leaders from around the industry have called the ruling everything from world-changing to small beans, but the jury is still out, since the decision could be overruled or at the very least challenged in the coming months.
If it remains unchanged, the ruling could add new risks to both franchisors and franchisees, as franchise businesses would now be classified as joint employers whenever the franchisor exercises “indirect control” over a franchisee. The decision is broad, and could conceivably make all franchisors and franchisees joint employers, even if the franchisor plays no role in the hiring, firing or directing of the franchisee’s employees.
Earlier this month, a collection of U.S. lawmakers introduced legislation to invalidate the ruling with the “Protecting Local Business Opportunity Act”. The proposed legislation aims to reverse the NLRB decision, specifically in relation to suggestions that a company could be held liable for labor law violations committed by a contractor.
Sen. Lamar Alexander (R-TN), chairman of the Senate Committee on Health, Education, Labor and Pensions announced the bill in a Sept. 9 press release.
“The NLRB’s new joint employer standard would make big businesses bigger and middle class smaller by discouraging companies from franchising and contracting work to small businesses,” he and Rep. John Kline wrote. “The board’s effort to redefine the idea of what it means to be an employer will wreak havoc on families and small businesses across the country. Our commonsense proposal would restore policies in place long before the NLRB’s radical decision, the very same policies that served workers, employers, and consumers well for decades.”
Discussion will also likely revolve around franchise legislation proposed by U.S. Rep. Keith Ellison (D-Minn).
The first, “The SBA Franchise Loan Transparency Act” was designed to inject increased transparency into the Small Business Administration loan process. The bills would require first-year revenue estimates be included in the documents franchisors must disclose to franchise owner-operators, according to Ellison.
“The current model for franchising tilts the balance of power too strongly to the franchisor,” Ellison said. “When we empower franchisees, we encourage small business owners to invest in their employees and our communities.”
I am not so sure that this proposal actually helps a prospective franchisee, and may make a company think twice about franchising. Currently, this disclosure is not required by the FTC Rule or by any franchise registration states.
The “Fair Franchise Act,” also proposed by Ellison, requires that franchise agreements are transparent and do not include misleading or false information in franchise disclosure documents, as well as other requirements. The bill builds on the “Small Business Franchise Act of 1999” proposed by Rep. Howard Coble (R-NC).
The IFA has offered to prep business owners with professional advocacy training and schedule appointments with members of Congress during the meeting, so you can be sure your feelings on recent developments are registered with those in power.