IFA Applauds Georgia Saying Franchisees Can’t Be Employees
ATLANTA —The Georgia General Assembly passed a bill that codifies that someone who has signed a franchise contract cannot be an employee.
The International Franchise Association today applauded the Georgia General Assembly for unanimously passing legislation that it supports as codifying franchisee-franchisor relationship as contractual business relationships instead of consumer relationships. The trade group, representing largely franchisors, says the bill is a landmark decision for other states to improve the business environment for companies to grant franchise licenses. In essence, it advocates that if a franchise agreement is signed, the signee cannot be an employee, no matter how he is remunerated.
The new Georgia law comes after considerable confrontation from franchisees against a few janitorial franchisors. Massachusetts recently ruled that Coverall franchisees were really disguised employees who weren't even making minimum wage. Other states are now trying similar cases in which the franchisor collects customer payment and then pays the franchise owner after expenses are taken out.
"We applaud Georgia legislators for being the first state to formally recognize that the franchisee/franchisor relationship represents a contractual business relationship, not an employment relationship," said IFA Senior Vice President of Government Relations & Public Policy Judith Thorman. "As a result of this law, franchising will continue to thrive as a growing economic force in the Georgia economy across many business lines including restaurants, hotels, automotive, health care, business and personal services, and real estate, among other business sectors."
Upon the Governor's signature of the bill, Georgia will be the first state in the country to adopt such a law. State Senator Tim Golden and Assemblyman Chuck Martin were the cosponsors of HB 548, which unanimously passed the Senate on March 26 and the House on Feb. 28.
"IFA will continue to educate lawmakers in other states about the importance of clarifying state franchise laws regarding the independent contractor status of franchisees, given the huge economic impact of franchising to local economies," said Thorman.
The legislation is a result of IFA's ongoing work with the American Legislative Exchange Council (ALEC), which recently adopted as official policy a Resolution on the Misapplication of Employee Classification Laws, recognizing that business format franchising is a major contributor to the United States economy and that franchising is a contractual business relationship, not akin to an employment relationship.
Noting the tremendous positive effect that the granting of business format franchise licenses has had on the U.S. economy, ALEC passed the resolution, which was the basis for Georgia HB 548. The ALEC resolution states that any "legislation or regulations which would improperly classify franchisees as 'employees' is a misinterpretation of labor and contract policy and deprives franchise investors of valuable economic opportunities."
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