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Protecting small franchisees with SB 38

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Missouri’s small franchise owners are currently at risk of being linked to big lawsuits that only involve their national brand.

This problem began in 2015 when the National Labor Relations Board created legal peril for these small local companies by replacing a clear, bright-line joint employer definition with a vague, multi-factored standard. Recent research showed this change has cost businesses across the U.S. between $17–33.3 billion annually and killed up to 376,000 potential jobs.

Twenty other states have adopted legislation that protects the independence of small franchisees and stops them from being linked to national lawsuits.

Senate Bill 38, sponsored by Sen. Bob Onder (R-Lake St. Louis), seeks to bring similar legislation to Missouri with the Small Business Franchise Protection Act. At a Senate committee hearing on Jan. 31, he said the key to franchising has historically always been that a franchisor and franchisee are distinct legal entities.

“In Missouri, the economic impact of franchising is enormous, with 17,000 businesses employing 178,000 employees with a payroll of over $6 billion,” said Onder. “Until 2015, the decades-old standard was that the NRLB only found two separate businesses to be joint employers if the putative joint employer exercised direct and immediate control over the employees at issue.”

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

“We support this bill because it will bring greater predictability and stability for employers, especially in the franchise model across the state. The murky state of the law really has a chilling effect right now on the franchise model and we want to bring certainty back into that relationship,” said Matt Panik, the Missouri Chamber’s vice president of governmental affairs.

SB 38 now awaits a committee vote.

The House version of this bill, HB 300, is sponsored by Rep. Nick Schroer (R-O’Fallon).

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