The National Labor Relations Board’s (NLRB) August 2015 ruling in Browning Ferris Industries completely upended the standard definition of “joint employer,” throwing thousands of business arrangements into limbo. In doing so, the NLRB ignored legal precedent and can now hold franchisors liable with their franchisees for labor violations. Despite this sweeping federal regulation, a plethora of state legislatures are defying the NLRB and passing legislation that preempts the new “joint employer” standard, opting instead for the traditional definition that franchisors and franchisees are separate entities.
A recent Bloomberg BNA article highlighted the role that IFA, along with other business oriented groups, has had on facilitating this proactive franchise legislation across the US. “We are actively pursuing this legislation this year and have a strategy to continue pursuing this legislation in as many states as we can going forward,” said Jeff Hanscom, IFA director of State Government Relations. The IFA has successfully passed bills in Michigan, Louisiana, Tennessee and Texas, while legislation is moving in Colorado, Georgia, Indiana, Utah, Virginia, and Wisconsin.
Michigan is the most recent state to codify the franchisor-franchisee relationship, and bill sponsor Rep. Eric Leuthesuer (R) explained why he chose to take action on this issue: “What you are seeing in the states is legislatures looking at things that probably never needed to be addressed in statute because they were largely considered settled, common sense or intuitive for a long time. And now, because of court rulings, a lot of things that were common sense are now being thrown into some confusion, or potential confusion, or potential chaos. That’s not good for anybody.”
Through the Coalition to Save Local Businesses, the IFA continues to pressure Congress to act on the “joint employer” issue and provide a remedy for small business owners in America. Judging by the success the IFA has had in state governments, it is clear that these legislators see the negative consequences impacting business owners in their districts, and states continue to lead the way.