WI Legislators Move Quickly to Limit Franchisor Employment Law Exposure

franchise_lawMADISON, Wis.—Wisconsin lawmakers have recently introduced legislation that would specifically exempt franchisors from being covered by certain Wisconsin employment laws regarding workers employed by franchisees. The legislation is in response to a recent NLRB decision that dramatically changed the definition of “joint employer” under the National Labor Relations Act and expanded the number of organizations that could be found liable for workplace regulation.

More specifically, this legislation would prevent Wisconsin franchisors from being found liable for a franchisee’s non-compliance with Wisconsin laws pertaining to employment discrimination, minimum wage, worker’s compensation and unemployment insurance with respect to workers employed by a franchisee. The exclusion would not apply if the franchisor agreed in writing to share this liability, or if the franchisor exercised a type or degree of control over the workers “that is not customarily exercised by a franchisor for the purpose of protecting its brand.” Senate Bill 422 was introduced in the State Senate on December 3, 2015 and a companion bill, AB 578, was introduced in the State Assembly on December 7, 2015.

Although the recent NLRB decision did not specifically address the common franchisor-franchisee arrangement, it was written broadly enough to encompass that arrangement and many other common business relationships including temporary staffing, distributor-supplier, and manufacturer-retailer. The ruling, Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), has also drawn a sharp rebuke in Congress where legislation has been introduced in both chambers to overturn the decision.

Clark & Gotzler partner Mike Gotzler expects this legislation to be supported broadly by many Wisconsin employers, not just Wisconsin franchisors and franchisees. Gotzler stated, “From an employer’s perspective, the most troubling aspect of the Browning-Ferris decision is its very broad pronouncements and lack of certainty. Employers will welcome legislation that clarifies their responsibilities.”