House Hearing Demonstrates New DOL Regulations Will Hurt Businesses and Workers

On Wednesday, June 10th, major regulatory changes expected from the U.S. Department of Labor (DOL) this summer were the subject of a House Subcommittee on Workforce Protections hearing. The forthcoming changes include the potential doubling of the salary threshold for overtime exemption and a new test for the primary duties of overtime-exempt workers. These modifications should concern franchise businesses, as they could severely limit opportunities for lower-level employees to advance in rank, limit the flexibility of business owners to manage their workers as they see fit, and increase compliance and payroll costs.

Subcommittee Chairman Tim Walberg (R-MI) shared his hope that despite an “administration notorious for overreach”, the Department of Labor should listen to employers’ concerns, and put forward a “proposal that encourages rather than stifles productivity, personal opportunity, and economic growth.”

The Subcommittee heard testimony from industry experts and academics regarding the current and proposed regulatory framework. While the witnesses disagreed in some aspects, they all agreed that the current enforcement structure of the Fair Labor Standards Act (FLSA) of 1938 needs to change. Three of the key witnesses were: Seth Harris, former Acting Secretary of Labor, Jamie Richardson, a Vice President of White Castle, Inc., a well-known quick service restaurant chain and Leonard Court, a labor lawyer and member of the U.S. Chamber of Commerce Labor Relations Committee.

The majority of Mr. Harris’ testimony addressed why the DOL should prioritize combating income inequality by raising the Federal minimum wage and increasing the salary threshold. To back up his claims, he relied on his theory that workers will see pay increases because employers will be forced to reclassify previously overtime-exempt workers as hourly workers, and these workers will then get more 1.5x pay for overtime for the work they previously did on salary.

Mr. Harris’ theories were countered by Mr. Richardson of White Castle, Inc., whom represented the views of many private-sector companies. Mr. Richardson explained that these new regulatory changes will add significant compliance costs, drive down worker opportunities and disrupt business in a negative manner. For example, of the over 400 White Castle restaurants, 445 of the 450 managers started as a cashier or a line cook, and worked their way up. If the primary duties test for a salary employee is narrowed based on strict percentages of time spent on managing, there will no longer be as many opportunities for lower-level employees to get managerial experience necessary for this advancement process. This is because a strict definition of primary duties will no longer afford many managers the flexibility to lead from the front and help out with non-managerial duties as needed. Employers will be forced to choose between classifying a worker as strictly management, and strictly hourly, which will in turn, reduce the amount of managers it can hire. It will also reduce opportunities for workers who depend on the ability to work outside the office to promote flexibility, because they will now fall under strictly hourly regulations, and out-of-office work is hard to measure on an hourly basis.

Contrary to Mr. Harris’ suggestion that these overtime changes would result in additional hours for many workers, Mr. Richardson and another human resources professional on the panel testified that- a reduction of salaried positions will also lead to reduced hours, reduced pay, and a feeling of demotion by these formerly salaried employees.  In addition, Mr. Richardson noted an Oxford University study on the effects of an increased salary exemption, which found that an increase to a salary exemption limit of $808 per week, would affect 1.7 million restaurant workers, and would cost business owners $5.2 billion per year. These increased costs will have a negative impact on raises, health benefits, and generous leave policies.

Leonard Court, a member of the U.S. Chamber of Commerce’s Labor Relations Committee, testified about how unfair DOL enforcement techniques create a negative environment for businesses. He cited numerous examples about how Wage and Hours Division investigators have been using a variety of “questionable” tactics to pressure business owners and human resources professionals into unfair and possibly unjustified settlements. Mr. Court also expressed concerns that the DOL needs to release more administrative interpretations of existing law, in order to give businesses more guidance on how to effectively comply with a complex web of regulations.

Among other issues, the three most concerning tactics employed by the DOL were: deliberately pressuring businesses not to use legal counsel, compelling immediate settlements by threatening litigation, and using bait and switch techniques to grab double punitive damages for new cases by using settled ones as admissions of guilt. These tactics result in an enforcement environment that, in the words of Mr. Court, has shifted from an approach of “cooperation and education to one of confrontation and coerced settlement.” Mr. Court cited one case that demonstrates this attitude, where despite months of investigation and six figures of legal fees, the WHD found no wrongdoing by the employer. The tactics and methods of the DOL are even more concerning in light of the Obama Administration’s authorization of expansive funding for franchise-specific Wage and Hour Division investigators.

The final version of these regulations is expected to be released soon, and it appears the potential changes are already creating uncertainty for businesses. As witnesses like Mr. Court and Ms. Berberich, a member of the Society of Human Resource Management observed, more helpful changes the DOL could make include adding clarity to the laws through opinion letters, and by promoting flexibility for the new generation of tech-savvy workers. Written transcripts of witness testimony can be found here, and the video of the full hearing is available here.

Join the First IFA International Toolkit Webinar on June 23rd


The international articles by IFA supplier members in the June issue of Franchising World Magazine are the first manifestation of the “IFA International Toolkit”.  IFA is shaping the Toolkit with the intent of it becoming a core resource for franchisors and franchisees interested in international franchising.  The International Toolkit will feature webinar courses that collectively comprise a curriculum in international franchising.  The Toolkit will be branded and located prominently on the main international page of IFA’s website.

The first of these webinars “Choosing A Deal Structure For International Franchise Expansion” will be presented by DLA Piper on Tuesday, June 23rd from 2- 3:15 pm ET.

During the free webinar DLA partners with deep international experience will discuss one of the essential questions for franchisors expanding abroad – what expansion model should be used for entering a foreign market? This webinar will examine different scenarios, drawn from real world experience, designed to illustrate how the choice can be made most effectively, and what factors might be considered in choosing one vehicle over another.


Mike Brennan, Partner, DLA Piper
Erik Wulff, Partner, DLA Piper
Tao Xu, Partner, DLA Piper

    Click here to register

Explore Global Growth at the International Franchise Expo


The 2014 International Franchise Expo attracted 3,956 international visitors from 96 countries. Expectations of even bigger international numbers in 2015 give U.S. franchisors the chance to explore global growth without crossing a border.  The IFA sponsored Expo takes place June 18th to 20th, 2015 at the Javits Center in New York City.

A key reason that nearly one in five attendees at this year’s Expo will be international is the U.S. Department of Commerce’s International Buyer Program (IBP).  As an IBP certified event, the commercial sections of U.S. Embassies and Consulates recruit pre-screened international buyers to attend the Expo and meet with U.S exhibitors.  The International Buyer Program produced 38 investor delegations to the International Franchise Expo in 2014 alone.

International franchising now also means franchisors entering the US.  As franchisors from outside the U.S. grow in scale and sophistication, many target the largest franchise economy in the world for expansion, seeking to follow the footsteps of IFA members like, InterContinental Hotels, Kumon, BoConcept, Tim Horton’s, Cartridge World, Yogen Fruz and Pollo Campero.  The 2015 International Franchise Expo will include 53 international franchisor exhibitors from 20 countries, including pavilions from the Brazil, Japan, Korea and the United Arab Emirates.

Educational programs related to international franchising enhance the value of participating.  Many of these educational sessions are for CFE credit.  Internationally oriented Seminars and Symposia at this year’s Expo include:

  • Master Franchising – Why do Some Succeed and Others Struggle
  • The Use of Master Franchising, Domestically and Internationally
  • Global Franchise Expansion:  Strategies for Lucrative & Planned Growth
  • An Overview of Key U.S. Trends and Regulatory Issues for International Franchisors
  • Strategies for Franchising into the U.S. Market
  • Navigating the US Marketplace
  • EB-5 Immigrant Investor Program – Tool for Franchise Network Expansion

To learn more and participate visit:


IFA Leaders Support the Growth of Franchising in Pakistan


Aziz Hashim, Phil Zeidman and Aslam Khan prepare to broadcast from the U.S. State Department

On March 2nd, IFA in conjunction with the U.S. State Department, USAID, and the U.S. Department of Commerce presented a video webinar on franchising for the business community in Pakistan to support economic development.

Aziz Hashim, Managing Partner, NRD Capital and IFA Vice Chair opened the webinar and introduced to listeners to franchising.  Phil Zeidman, Senior Partner, DLA Piper and IFA General Counsel followed by sharing an overview of franchise law.  Aslam Khan, CEO of Falcon Holdings related his journey from employee in the American Club in Islamabad to success as a franchisee in the U.S.

The U.S. Government worked with chambers of commerce and other business groups in Pakistan to promote the webinar and hosted groups in Karachi and Islamabad to watch the webinar live.  The webinar will be used on an ongoing basis for franchise education in Pakistan.  It will also serve as a recruiting tool for a Pakistan Special American Business Internship Training (SABIT) program delegation that will visit New York during the June 2015 International Franchise Expo.

Watch the webinar below.

Leaders in Franchising

Now that the successful IFA Annual Convention is concluded, it’s a good time to pause and consider how great this industry is thanks to its many talented, dedicated and innovator leaders.  We heard them preside over educational sessions during the convention and read about them in issues of Franchising World magazine.  But what do we know about them before their prominent franchise careers?

Let’s look at just three.  Besides the impressive summary below of IFA’s 2015 Chairwoman Melanie Bergeron, CFE, did you know she had a career in pharmaceutical sales and in college she was a magician’s assistant?  Or did you know that IFA 2014 Chairman Steve Joyce (president and chairman of Choice Hotels International, Inc.) worked in restaurants from the time he was 12?   Or did you know that IFA Pres. and CEO Steve Caldeira, CFE, began his career on Capitol Hill as a legislative correspondent?

The reasons behind the power of franchising are as numerous as its best and brightest franchisees, franchisors and suppliers!

Check out the #IFA2015 recap video!

IFA Chairman’s Snapshot — Melanie Bergeron, CFE

Current Posts/Achievements  

Chairwoman, TWO MEN AND A TRUCK/INTERNATIONAL, Inc., which has 298 domestic and 24 international locations.

Joined the family business in 1989 when she was awarded the first TWO MEN AND A TRUCK franchise in Atlanta.

Joined the home office in Lansing, Mich. in the 1990s.

Named TWO MEN AND A TRUCK president in 1994.

Became chief operating officer in 2002.

Assumed role of CEO in 2007.

Named chairwoman in 2009.

 Previous Posts

Career in pharmaceutical sales.

IFA Involvement

Member, IFA board of directors since 2008, holding such posts as Vice Chairwoman (2014), Treasurer (2013), Secretary (2012).

Chairwoman, Convention Committee (2014)

First Vice Chairwoman, Educational Foundation Executive Committee (2013-2014) and member since 2008; First Vice Chairwoman Educational Foundation Board of Trustees (2014).

Secretary, ICFE Board of Governors (2006-2011) and member since 2001.

Member, Franchisor Forum Advisory Board since 2006.

Member, FranPAC Advisory Committee since 2004.

Member, International Committee and International Interest Group since 2014.

Community/Business Organizations  

Member, Young Presidents Association.

Member, Central Michigan University Dean’s Business Advisory Council.


Winner, 2009 IFA Bonny LeVine Award


Bachelor’s Degree, Marketing and Business Administration, Central Michigan University, Mount Pleasant, Mich.




Page 4 of 90« First...23456...102030...Last »