Special Session

ALEC-inspired proposal lets franchisors escape responsibility, puts onus on small businesses for violations

In another twist in the ongoing saga of the special legislative session, the first section of the General Assembly’s so-called Regulatory Reform Act (HB3) deals a blow to restaurant and other franchise owners who take actions at the direction of the franchisor (the corporate entity that grants an individual or corporation the right to run a location of its business). Following in the footsteps of states like Texas, Tennessee, and Louisiana, the proposal seeks to put liability for wage and hour, workplace injuries, and unemployment benefits squarely on the backs of franchisees, even when the illegal acts may have been committed in conformity with the policies and procedures of the franchisor. In other words, if the bill passes, a local Waffle House franchise owner, for example, could be sued for following the orders of Waffle House’s corporate headquarters, while the headquarters remains shielded from challenges in court.

The American Legislative Exchange Council (ALEC), at the apparent behest of the International Franchise Association, has been promoting similar legislation in states across the country. The impetus for these bills appears to be the 2015 decision by the National Labor Relations Board, Browning-Ferris Industries of California, Inc. d/b/a BFI Newby Recyclery, 362 NLRB No. 186 (Aug. 27, 2015), in which the Board interpreted of the definition of employer to cover the franchisor. Scrambling to avoid liability, franchisors are supporting bills that dramatically scale back their liability for a host of workplace violations for which they are responsible– simply by changing the definition of employer to exclude franchisors. Under HB3, franchisors would no longer be jointly responsible if the workers at a particular outlet were denied overtime, injured, or wrongly fired. All liability would rest on the local business owner, who might have been acting at the behest of the franchisor and will have to absorb a judgment that they may very well not be able to handle.

But why, lawmakers might argue, should a franchisor be considered an employer if all of the control over the employees rests with the franchisee? Of course, they shouldn’t – and they wouldn’t, under existing North Carolina law. The only purpose served by the franchise provision of HB3 is to let franchisors off the hook when they do exercise control over the employment relationship. And that is the height of unfairness both to the injured, underpaid, or unemployed worker, and also to the franchisee, who may be a small business owner who is simply doing what they are told.

Check Also

Attorney General moves to limit anti-worker “no poaching” agreements

North Carolina Attorney General Josh Stein took an ...

Top Stories from NCPW

  • News
  • Commentary

Investigation shows that dangerous chemical was included in materials received by NC composting faci [...]

Republican teacher marches to a different drummer on matters of public education Angela Coffman is a [...]

On Wednesday afternoon students at UNC-Chapel Hill will leave their classes for a day of protest act [...]

It would take eight years to undo what an unconstitutionally-elected GOP super-majority did to votin [...]

Abortion is not a crime, yet the North Carolina General Assembly just came a step closer to making i [...]

Throughout his long and mostly uninspired political career, Richard Burr has filled the role of a cl [...]

The post Burr’s brief…and boxers appeared first on NC Policy Watch. [...]

North Carolina’s dubious ranking of having the 10th highest rate of uninsured people in the nation c [...]