Resolution on the Misapplication of Employee Classification Laws

Summary

This resolution recognizes that business format franchising is a major contributor to the United States economy. The resolution also recognizes that franchising is a contractual business relationship, not akin to an employment relationship.

Model Resolution

WHEREAS, franchising contributes $1.6 trillion to the United States economy through 733,000 franchise businesses; and

WHEREAS, franchise businesses employ over 13 million workers; and

WHEREAS, franchising has been a major source of economic expansion in the United States, particularly in the retail trade and services sectors, providing entrepreneurs with a proven route to business ownership; and

WHEREAS, business and franchise agreements are contracts that govern the duties and obligations of the parties to these agreements; and

WHEREAS, Section 10 of the U.S. Constitution and most state constitutions specifically prohibit impairment of contracts that are freely and openly entered into by the parties; and

WHEREAS, the area of contract law is a well established and settled area of law with sound guiding principles outlined in the uniform commercial code; and

WHEREAS, legislation or regulations which would improperly classify franchisees as “employees” is a misinterpretation of labor and contract policy and deprives franchise investors of valuable economic opportunities; and

THEREFORE, BE IT RESOLVED, that [insert state here] opposes enactment of laws that interfere with business and franchise agreements freely and openly entered into by parties. Furthermore, notwithstanding any voluntary agreement entered into between the United States department of labor and a franchisee, neither a franchisee nor a franchisee’s employee shall be deemed to be an employee of the franchisor for any purpose.

BE IT FURTHER RESOLVED, that [insert state here] opposes enactment of laws and regulations that have the effect of classifying franchisees as “employees” of the franchisor.

Adopted by the Commerce, Insurance and Economic Development Task Force at the States and Nation Policy Summit, December 1, 2011. Approved by the Legislative Board January 2012.