Outside the Box: Franchises need legal protection from joint-employment lawsuits

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Workers at franchisees are the backbone of local economies throughout America.

No matter where we travel or where we live, we visit hotels, gyms, restaurants with well-known national or local brands who operate as America’s hidden small businesses — franchises.

These nearly 3,000 national and local brands we know and trust thrive on consistent quality and operations, while at the same time creating economic opportunities for entrepreneurs across the country to own and operate a franchise small business. These independent owners are responsible for 8 million jobs, making them the backbone of their local economies and pillars of their communities.

But the relationship between these brands we know and trust and the small business owners who make them work has for years suffered from a costly legal Catch-22 that threatens their existence — unless Congress acts.

Here’s the catch: federal trademark law requires franchise brands have standards to protect the brand, but federal employment law penalizes franchises for establishing the same standards.

For example, a hotel brand standard may require employees to wear branded uniforms so that every location looks the same to the public; however, those same uniforms have been used as evidence of joint employment in litigation.

This kind of uncertainty around brand control is stifling to entrepreneurs and local businesses but could be fixed with common-sense legislation. Fortunately, there’s a bipartisan solution with the Trademark Licensing Protection Act (TLPA).

The TLPA simply says that brand standards aren’t employment standards. The reason is simple: brand standards are responsible for the quality, consistency, safety, and uniformity that consumers expect from franchises; but they don’t dictate how to achieve them.

In other words, brand standards tell you to keep the bathroom clean or the front desk staffed, but don’t tell you if you need to use Clorox or Lysol to do so, how many employees are needed during certain times, or what they should be paid. Those decisions are left to the business owner, or franchisee.

That combination of guidance and independence allows franchise owners across the country the flexibility to grow their businesses, hire and train new employees, and give back to their cities and towns. Without TLPA protections, such independence is increasingly hard to maintain.

Despite the common-sense solution the TLPA provides, a recent op-ed argues that the fix is harmful to workers and local business owners.

Read the opposing viewpoint: Bipartisan legislation would let fast-food companies off the hook for harming workers

First, the piece claims that recent regulations and legislative proposals weaken employees’ ability to hold corporations accountable for workplace violations, but there is one glaring problem with this argument: if legal liability remains unclear, accountability will remain elusive.

By creating certainty in the law, franchise businesses will be better equipped than ever to protect their employees and reduce the legal burden of small business owners. Unlike the arguments made against TLPA, this legal burden is quantifiable: over the last years, lawsuits related to joint employer status have nearly doubled.

Additionally, nothing in the TLPA prevents a brand that does exercise employment controls over its franchisee’s employees to be deemed a joint employer.

Moreover — and contrary to criticism — the TLPA will help franchise brands implement stronger sexual harassment prevention programs. Under current law, brands can work with their franchisees to make new tools and resources on workplace harassment training available, but without legal clarity from the TLPA they are limited in what they can require their franchises to implement.

A recent study found the uncertainty facing entrepreneurs is stymieing growth to the tune of $33.3 billion annually and 376,000 jobs not created. Without the TLPA in place, many entrepreneurs will continue to view franchising as too risky a proposition. This is a shame, since franchise ownership is often seen as the safest path to business ownership, particularly for minorities, women and veterans who have traditionally owned franchises at a higher rate than non-franchises, according to the U.S. Census Bureau.

This is the kind of assistance that legal clarity for business fosters.

Passing the TLPA will get franchise businesses — the brands we love and trust — on steadier footing to tackle problems that plague all kinds of businesses and organizations.

Bipartisan work is few and far between in Congress these days, so it is no small feat that policy makers across the political spectrum led by Sens. Angus King (I-Maine) and James Lankford (R-Oklahoma) worked to introduce the TLPA.

The legislation is bipartisan for good reason: it is a common-sense solution to a legal problem that has hindered small business owners for too long.

Matt Haller is senior vice president for government relations and public affairs at the International Franchise Association.