Joint Employer Rulemaking

Advocates in the Franchise Action Network have been calling on Congress and regulatory agencies to address the joint employer standard and provide certainty to small and large businesses, promoting economic growth and job creation. But what exactly is this “joint employer” standard?

In 2015 the National Labor Relations Board (NLRB) issued a decision in Browning-Ferris Industries of California, Inc (BFI) which changed the definition of what constitutes a “joint employer”. This decision overturned more than thirty years of bipartisan precedent, replacing the predictable and clear “direct and immediate control” standard for determining who can be considered an employer with a vague test based on “indirect” and “potential” control over workers’ terms and conditions of employment. This exposed a wide range of businesses, including franchisors and franchisees, to workplace liability for another employer’s actions, and for workers they themselves do not employ. As a result, franchise businesses are facing more operational costs, decreased business values, less compliance and training assistance from franchisors, less growth, and curtailed job creation as a consequence of this new joint employer standard. For those who enter franchising seeking to become proud, entrepreneurial owners of their particular store, restaurant, auto repair shop, hair salon, or any business imaginable, this new standard falsely asserts: you are not a business owner, you are just middle management of the brand.

In a study of more than 75 franchise brands, the expanded joint employer standard cost the average franchisee an annual revenue loss of $142,000 and $21,000 profit loss. For businesses in total, the expanded joint employer standard cost between $17 billion and $33.3 billion per year. It also eliminated between 194,000 and 376,000 potential new jobs.

To read the full study and learn more about the harmful economic impacts of the expanded joint employer standard, visit www.jointemployerfacts.com.

Now though, the NLRB has a chance to rectify the situation with its Notice of Proposed Rulemaking (NPRM) on the joint employer standard, offering a new, proposed rule which would return the joint employer standard to its thoughtful, historical, and fair precedent. This is a major step toward resolving the existential threat for franchise businesses. On January 28, 2019, IFA submitted its public comments on the NPRM, urging the NLRB to provide much-needed clarity for America’s franchised businesses.

Under the proposed rule, an employer may be found to be a joint employer of another employer’s employees only if the entity possesses and exercises substantial, direct and immediate control.

The final rule will provide clear lines for the determination of joint employer status and a recognition that brand controls and other support provided as part of the franchise business model do not constitute factors that can be used to establish joint employment between franchisors and franchisees.

If you would like to get involved, please Become a Member of FAN Today!

Please click here to learn how the expanded joint employer standard threatens businesses everywhere.

Please click here to view a quick video about how the joint employer standard has changed and what it means for small businesses across America.

 

Trademark Licensing Protection Act

UPDATE: On August 31, 2018, House Small Business Committee Chairman Steve Chabot (R-OH) and Rep. Henry Cuellar (D-TX) introduced H.R. 6695, the Trademark Licensing Protection Act of 2018, which clarifies that licensing trademarks, and controlling or exercising those trademarks, do not create an employment relationship.

The Lanham Act requires that licensors (franchisors) police the use of their intellectual property licensed to third parties since the trademark’s value is that it is consistent and uniform to the consuming public. Absent control over the nature of the products and services, the brand loses quality, which jeopardizes its purpose. However, employment law penalizes franchisors for establishing control mechanisms to protect their marks. There is great uncertainty under some federal employment laws about what amount of control will trigger a finding that the franchisor is a “joint employer” over its franchisees. Franchisors and franchisees risk being deemed joint employers if the franchisors take actions needed to protect the brand.

TAKE ACTION: The Trademark Licensing Protection Act resolves the discrepancy between employment and trademark law regarding controls put in place by licensors and franchisors. Tell your legislators you support this legislation. Take action by texting “TRADEMARK” or clicking here.

 

Labor & Workforce Development

According to economic data, franchising directly employs 8.2 million Americans across the country, encompassing more than 300 different types of businesses. Regardless of the type of business, at the most basic level working in a franchise helps people learn valuable skills including communication, customer service, teamwork, time management, use of a POS system or similar technology, and much more.

FAN supports workforce development initiatives designed to achieve and promote inclusive growth in local communities. In many instances, franchises are often the first businesses willing to invest capital and resources in low-income and economically disadvantaged areas; their presence and operations then serve as a litmus test for the additional economic activity an area could support.

As a strategic initiative of IFA, a member of the Opportunity Zones Coalition, FAN joins other groups including the Chicago Community Loan Fund, the Detroit Opportunity Fund, and the National Development Council as proponents of Opportunity Zones, a provision in the recently passed Tax Cuts and Jobs Act which encourages private investment and economic development in over 8,700 low-income zones nominated by state governors and certified by the U.S. Department of the Treasury across America.

 

Taxes

FANs have long fought for lower tax rates to stimulate the franchise sector. Tax reform improves the business environment for franchisors, franchisees, and prospective investors. FANs frequently engage with Congress and Department of Treasury officials during The Franchise Action Network Annual Meeting & Fly-In, addressing tax concerns facing franchise businesses. Through these efforts of FANs from across the country, IFA secured $8 billion in federal tax savings for franchise businesses each year as part of the Tax Cuts and Jobs Act, including

  • $2.5 billion in Pass-Through Tax Deductions for the nearly 2,000 franchisors and 200,000 franchisees that are pass-through entities
  • $3 billion in Continuation of State and Local Tax Deductions for more than 300,000 individual/married tax filers with direct franchise investments
  • $200 million in Professional Services Pass-Through Exemptions for 300 franchisors and 20,000 franchisees
  • $2 billion in Immediate Expensing of Equipment Purchase savings for more than 20,000 franchise locations across the country

Hundreds of FANs and IFA member franchisors and franchisees have pledged to reinvest their tax savings in their businesses, including improving employee benefits. IFA also proudly calls upon FAN to help advocate for tax credits to minority groups and veterans seeking to overcome the initial financial hurdles to owning and operating a franchise.

 

Healthcare

Whether a large franchisor company with thousands of locations or an individual franchisee successfully running a single unit, delivering affordable health care is one of the most pressing issues facing franchising. According to polling conducted prior to the Midterm Elections in 2018, 83% of registered voters said that the cost of healthcare was important to their vote, with nearly three quarters saying it was very important.

In June of 2018, the Department of Labor issued a rule which allowed for increased access to Association Health Plans (AHPs). AHPs allow small businesses to band together and purchase insurance, leveraging their combined purchasing power to offer lower premiums than comparable plans on the individual insurance exchange. Early plans being formed or expanded since this ruling complies with ACA mandates, do not exclude individuals with pre-existing conditions and don’t impose annual or lifetime limits on coverage.

FANs fully support AHPs and any steps to develop, implement, and offer best-in-class AHPs for the franchising community.

 

State & Local Issues

FAN not only keeps advocates aware of issues at the federal level: it also monitors at the state and local levels. Recent examples of issues which IFA has mobilized FAN include:

  • Fighting against predictive scheduling bills that unfairly single out franchises, particularly at the city/local level
  • Opposing discriminatory minimum wage increases that falsely consider local franchises as “big” businesses, not individually owned and operated businesses, exposing them to shorter timeframes to phase-in wage increases
  • Ensuring state-level joint employer standards are designed to enable franchise business growth, whether through opposing expanded standards or codifying the traditional “direct and immediate control” standard.
  • Fighting against the codification of harmful joint employer laws in various cities
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