Missouri Business Headlines

Senate committee considers bill to protect franchise relationships

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Established business relationships between franchisees and franchisors have been at risk of being negatively impacted by changes to the joint employer standard at the National Labor Relations Board (NLRB).

The key to franchising has historically always been that a franchisor and franchisee are distinct legal entities, with the NRLB only counting two separate businesses as joint employers if the putative joint employer had direct, immediate control over the employees of the other. However, a problem arose in 2015 when the NLRB created legal peril for these small local companies by replacing a clear, bright-line joint employer definition with a vague, multi-factored standard. Research showed this has cost businesses across the U.S. between $17–33.3 billion annually and killed up to 376,000 potential jobs.

Just this week, the NLRB issued a final joint employer rule, restoring the “direct and immediate control” test that had been in place for decades before being replaced by an “indirect control” test in 2015.

Several states have adopted laws that protect the independence of small franchisees and stops them from being linked to national lawsuits. Senate Bill 738, sponsored by Sen. Bob Onder (R-Lake St. Louis), seeks to bring similar legislation to Missouri.

Clarifying the joint employer standard at the state level is important because state employment law decisions can be impacted by the presence of a joint employer relationship. The franchise model of doing business works because the local franchisee with direct and immediate control over important aspects of employment maintains independence in operating his or her business and is responsible for compliance with state employment law.

The Missouri Chamber is an advocate for this reform to protect jobs and small businesses.

“The Missouri Chamber supports bringing certainty back to the franchisor-franchisee relationship and clearing up the murky state of the law as it is now,” said Matt Panik, the Missouri Chamber’s vice president of governmental affairs. “This legislation will bring greater predictability and stability for small employers in the franchise model across Missouri.”

SB 738 now awaits the committee’s vote.

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