Georgia Fights Feds To Save The Franchise Model

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Georgia lawmakers fought back against federal overreach Tuesday by passing a law that clearly defines franchises as multiple, individual entities instead of one, massive company.

A franchise most often consists of several, independently-owned businesses that contract a corporation’s brand name, supply line, and product practices. The National Labor Relations Board (NLRB) has worked to change the model by making it easier to declare the franchises of a corporation a single employer. Georgia Gov. Nathan Deal signed a measure that counters the federal attempt to change the model.

“This legislation is pro small business and enables business owners to do what they do best, grow the local economy and keep Georgia the number one state to do business,” Republican Sen. John Albers, who sponsored the measure, said. “It is a privilege to stand together with our local community and business owners to bring prosperity and jobs to this great state.”

The NLRB can declare two companies that contract with each other a joint-employer if one has direct control over the employees of the other. The board has worked to expand the joint-employer standard to consider indirect control in a move that drastically changes decades of established law. It argues the expanded standard is needed to protect worker rights.

“Through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees’ operations, beyond protection of the brand,” the NLRB has previously argued in a legal brief. “To make it a putative joint employer with its franchisees, sharing liability for violations of our Act.”

Federal officials haven’t yet defined what exactly the expanded standard entails, making it difficult for businesses to comply. The NLRB can now declare two or more companies joint-employers on a seemingly case-by-case basis. Many business models rely on contracting beyond just franchising, so the move could very well subject countless employers to a slew of legal ramifications.

“Georgia has taken a critically important step to protect local, franchise business owners and their employees,” International Franchise Association President Robert Cresanti said in a statement. “While the new federal joint employer standard threatens the future viability of the franchise model, we applaud state legislatures like Georgia.”

McDonald’s and Browning-Ferris Industries are the main cases that have allowed the NLRB to revisit the joint-employer standard. Feds declared Browning-Ferris a joint-employer with Leadpoint Business Services Jan. 12 while the McDonald’s case is still ongoing. The standard usually helps to resolve labor disputes, but critics of the expanded version fear it could cause major problems.

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