The standards used to determine joint employer status and the proper identification of an individual as an independent contractor within franchise systems are changing. In order for a franchisor to minimize liability associated with joint employer status, vicarious liability and misclassification of employees as independent contractors, franchise systems must focus on controls that relate primarily to the protection of a franchisor’s brand and the integrity of the product or services provided to the marketplace by its’ franchisees. By focusing on these essential elements of a franchise system, rather than the day-to-day operation of a franchisees’ business, the franchisor may mitigate the risk associated with the on-going attack against the franchise business model. Specifically, franchisors should avoid the following;
- Imposing employment policies/practices upon the franchised business
- training employees of the franchised business
- imposing scheduling requirements and pricing controls upon the franchised business
- securing contracts/customers on behalf of the franchised business
- sub-leasing office/retail space to the franchised business
- acting as a guarantor/surety of the franchised business
In order to mitigate risk, franchise systems should examine their franchise agreements, operating manuals and internal policies to determine where a system may step over the line of policing essential policies to ensure brand integrity and into the day-to-day business operations of its’ franchisees.
Once again, franchised businesses will grow faster than the rest of the economy, driving job creation as entrepreneurs seize upon franchise opportunities. According to the International Franchise Association, Franchised businesses will outpace the general economy in 2014. The IFA released the following statistics:
- Franchises are expected to add nearly 200,000 new jobs in 2014.
- The number of franchise businesses is expected to rise by 12,915 units in 2014, bringing total establishments to 770,368.
- Within franchising, business services, commercial and residential services, and quick service restaurants are expected to be drivers of job creation.
The significance of franchising in our economy is clear. Let’s hope that 2014 does not see a continuation of cumbersome state and federal regulations impeding the ability of franchised businesses to spur economic growth.
The word out of Harrisburg is that meaningful legislative activity on this issue will commence in the House very soon, possibly this week. The latest version of House Bill 790 includes an amendment providing that grocery stores, big-box retailers, convenient stores and pharmacies would not be able to obtain beer licenses unless they first acquired a restaurant license. The Bill would also allow private entities to bid on 1,200 new wine and spirit licenses one year after the law’s enactment, providing beer distributors a right of first refusal of a wine and spirit license. An installment plan would also allow beer distributors to pay off the cost of a wine or spirit license over four years if they pay an additional 5 percent. The amendment also created a new license to allow grocery stores to sell unlimited amounts of wine. Additionally, the state-run wholesale operation would be auctioned off a year after the law’s enactment, where one wine and spirit wholesale license would be approved for each applicant. The prohibition on alcohol sales at gas stations would also be lifted. The Bill is expected to receive support or opposition along party lines with most Democrats lining up against the bill and most Republicans in favor. It seems this version of the long discussed Privatization effort may have some momentum, stay tuned.
Reliable sources announce that the DOL is expected to delay the March 1, 2013 Exchange Notice deadline. This delay is welcome news for employers!! By way of background, in 2013, employers will be required to provide employees with notices of their options regarding the Affordable Care Act health care exchanges. However, given the significant challenges establishing the ACA exchanges, much of the information that employers are to provide is not yet available. Once formal guidance is received, I will share the new deadline.