Senators James Lankford (R-OK) and Angus King (I-ME) introduced a bipartisan bill that would help protect franchisors from joint-employer liability for employment law violations. The new legislation would allow franchisors to license their brands without requiring them to participate in collective bargaining or be held responsible for wage and labor violations committed by a franchisee.
The legislation — dubbed the Trademark Licensing Protection Act of 2019  — is in response to a decision by the National Labor Relations Board in which the board reversed  a 30-year standard that a business needs “direct and immediate” control over their subcontracted businesses or franchisees. This ruling ultimately meant that actions taken by a trademark owner to maintain brand standards may cause courts to consider the trademark owner a joint employer of a franchisee’s employees, according to Lankford.
The proposed legislation aims to codify the regulatory changes to ensure a future federal agency decision cannot return to this environment again.
According to the International Franchise Association, the legislation seeks to resolve the uncertainty in federal law by reaffirming that brand standards designed to preserve or enhance the brand may not be used as evidence of employment controls in litigation.
A study conducted by the IFA found that franchise businesses have seen a 93% increase in lawsuits due to this type of legal uncertainty. The expanded joint-employer standard has also cost franchise businesses $33.3 billion per year, resulted in 376,000 lost job opportunities, and led to 93% more lawsuits, according to the IFA research .