On Wisconsin! New Law Protects Franchisors From Being Considered Joint Employers of Franchisee Employees

On March 1, 2016, Governor Scott Walker (R) of Wisconsin signed 58 bills into law. One of the most important was Senate Bill 422, which makes it very difficult for franchisors to be considered employers of the employees of their franchisees for the purposes of various state employment laws. 

No doubt, this law was in reaction to the NLRB’s efforts to consider franchisors co-employers of franchisee employees by dramatically broadening its joint employer standard, previously reported here.

In 2014, the NLRB issued a press release announcing the issuance of several complaints against McDonald’s, asserting that the franchisor jointly employs its franchisees’ employees.
           
Senate Bill 422 clarifies that under Wisconsin law, a franchisor is not the employer of a franchisee’s employees for unemployment insurance, worker’s compensation, and certain equal rights provisions.  According to the Governor’s office, “[t]his bill ensures Wisconsin franchisors are not unfairly liable for the actions of franchisees, will prevent frivolous lawsuits, and encourages franchisees to act responsibly.”  The bill was opposed by many Wisconsin Democrats.
 
According to the new law, 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:

1. The franchisor has agreed in writing to assume that role.
2. 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.

Takeaways

It should be noted that the Wisconsin law is only applicable in Wisconsin, and does not directly impact federal laws on joint employer status, such as the National Labor Relations Act.  However, if other states pass similar laws, it may create some pressure on Congress and a new Administration to address the issue.  Indeed, it would truly be ironic for a franchisor to be considered a joint employer with its franchisees under federal law, but not under state law.
 
If you have any questions about this Alert, please contact the author or the Arent Fox professional who generally handles your matters.