Connecticut Bill Would Effectively End Franchising in the State

 

 

Last month, HB 5069, an Act Concerning Low Wage Employers, was introduced into the Connecticut State House by Reps. Riley (D-46), Albis (D-99) and Mushinsky (D-85).  Recently, it was passed out of the Labor Committee in a party-line vote and has yet to be moved to a new committee.  The bill would make the unprecedented move of obligating franchisors to pay taxes on the employees of franchisees, despite the two being completely separate business entities.  Intended to act as a surreptitious increase to the state’s minimum wage, HB 5069 would effectively end franchising as we know it in Connecticut.

The franchise industry has been a steady contributor to growth during the economic recovery, both nationally and in Connecticut.  There are roughly 8000 franchised establishments in the state, accounting for more than 100,000 jobs and $12.6 billion in annual economic output.  This economic engine cannot continue with such unreasonable government interference into the franchise relationship.

Connecticut businesses are already being pressed hard by the impending implementation of the Affordable Care Act’s employer mandate and the proposed increase to the federal minimum wage currently being considered by Congress.  This bill would redefine the franchise relationship, holding franchisors accountable for employees of franchisees, ignoring the decades of legal precedent establishing that these two entities are not joint employers.

Franchise businesses in Connecticut, as well as their employees and the customers who depend on them for essential goods and services, would be devastated if this bill were to pass.  Franchisors in the state would be faced with large new costs, making them more reluctant to extend opportunities for new locations.  Although the legislation would almost certainly face legal challenges were it to pass, challenges that would likely be successful, it could do significant damage to Connecticut businesses in the short time before it is overturned.

If you have any questions about this critical issue, please contact IFA’s Dean Heyl by phone at 202-236-5985 or dheyl@franchise.org.  If you are interested in joining IFA’s grassroots coalition against this bill, please contact IFA’s Erica Farage at 202-662-0760 or efarage@franchise.org.