United States: More States Moving To Limit Fallout From Browning Ferris

More states seem to be jumping on the bandwagon to address the issues surrounding joint employer liability which were raised to a new level by the Labor Relations Board's Browning Ferris decision earlier this year. Michigan has joined, as of today, and Virginia and Wisconsin may join other states, including Texas, Tennessee and Louisiana, which have already passed legislation aimed at protecting franchisors from being considered a joint employer with their franchisees. Below is a summary of the legislation.

Michigan

In Michigan, SB 492 and SB 493 were introduced in the House and the Senate in November. They both limit a franchisor's liability to the franchisee in the employment context. Both bills were passed and signed by the Governor and will become effective today. This legislation effects many statutes including those dealing with franchise investment, worker's compensation, employment and wages. The language of the bills reads as follows "To the extent allocation of employer responsibilities between the franchisor and franchisee is permitted by law, the franchisee shall be considered the sole employer of workers for whom it provides a benefit plan or pays wages except as otherwise specifically provided in the Franchise Agreement."

Virginia

Virginia House Bill No. 18 proposes to add language to the definition of "employee" in section 40.1-2 of the Virginia Code to clarify that a franchisee's employee shall not also be considered the employee of a franchisor. The proposed additional language is: "Notwithstanding any voluntary agreement entered into between the U.S. Department of Labor and a franchisee, neither a franchisee or a franchisee's employee shall be deemed to be an employee of the franchisee's franchisor for any purpose." This has been referred to the Committee on Commerce and Labor.

Wisconsin

In Wisconsin, Senate Bill 422 and Assembly Bill 578 were introduced in early December. Both have been referred to committee. They follow the intent of both the Michigan and Virginia legislation in protecting the franchisor in the employment-related context by clarifying when the franchisor can be deemed an employer of their franchisee's employees. The following language is proposed to be added to multiple statutes in Wisconsin: "...a franchisor is not considered to be an employer of a franchisee or of an employee of a franchisee, unless any of the following applies: (a) The franchisor has agreed in writing to assume that role. (b) The franchisor has been found by the department or the division to have exercised a type or degree of control over the franchisee or the franchisee's employees that is not customarily exercised by a franchisor for the purpose of protecting the franchisor's trademarks and brand."

We will continue to track these legislative developments.

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