October 7, 2015 (Lansing) – The state’s leading small business organization, the National Federation of Independent Business (NFIB), testified before the Senate Commerce Committee today along with a number of Michigan based franchise owners in support of legislation that would clarify the relationship between franchisor and franchisee employees. The legislation is necessary because of a recent ruling by the NLRB (National Labor Relations Board) that changed current law in the relationship between employers, franchise arrangements and independent contractors.
“The
Michigan legislature is taking action to be sure that, in matters of state law,
the ruling by the NLRB will not affect the traditional and correct
interpretation of the employer and employee relationship that has governed
franchise law in our state for decades,” said NFIB State Director Charlie
Owens. “The bottom line is that the NLRB actions in expanding the definition of
a joint employer to include a franchisee’s national brand will destroy the
franchise model leading to industry consolidation, store closures, a loss of
jobs and economic activity and entrepreneurial investment.”
On August
27, 2015 the National Labor Relations Board (NLRB) issued a ruling concerning
the relationship between employers, franchise arrangements and independent
contractors. The agency issued a radical reconstruction of the “joint employer
rule” which has been settled law for decades. In its ruling the NLRB expanded
the definition to include both indirect, direct, and even potential,
unexercised control over employees in a joint employer determination. The
previous joint employer standard had been in place since 1984. Under that
standard, an entity was a joint employer only if it exercised direct and
immediate control over another business’s employees, including having the
ability to hire, fire, discipline, supervise or direct an individual. Entities
were joint employers only when they share that direct control over the terms
and conditions of employment for the same employees. Previously, most
franchisors, franchisees (independent businesses), and subcontractors were
treated as separate businesses.
Senate Bills
492 sponsored by Senator Jack Brandenburg (R-8) and 493 sponsored by John Proos
(R-21) amend the Franchise Act and the Workers Disability Act to clarify that
franchisors and franchisees are treated as separate businesses under Michigan
law. Companion House Bills 4901 sponsored by Representative Joe Graves (R-51)
and 4902 sponsored by Representative Daniela Garcia (R-90) have also been
introduced.
Owens said
that more bills would be forthcoming as other state laws are examined to
determine if the clarification is necessary.
NFIB is also working at the federal level supporting legislation that has been introduced in Congress to nullify the actions of the
NLRB. The “Protecting Local Business Opportunity Act” HR 3459 is sponsored by
U.S. Representative John Kline from Minnesota. Michigan Congressmen John
Moolenaar, Tim Walberg, Bill Huizenga and Mike Bishop are all co-sponsors of
the bill. In the U.S. Senate an identical bill, S.2015, is sponsored by Senator
Lamar Alexander from Tennessee.
