June 15, 2010 // Franchising.com // WASHINGTON — A new law in Oklahoma recognizes the important role that franchised businesses play in the economy and clarifies the definition of franchisees and employees, the International Franchise Association said today.
In defining the term "employee," the new law, signed June 11, clarifies that individuals who are party to a franchise agreement, as governed by 16 CFR 436, shall not be misconstrued as employees.
"In taking this step to protect the investment of franchise business owners, the Oklahoma legislature has illustrated the importance of the franchise business model in creating jobs and putting the economy back on the right track," said IFA Vice President of Government Relations David French. "We applaud Oklahoma lawmakers for ensuring that the more than 12,000 franchise businesses in the state are protected from misapplication of wage and labor laws."
As states seek to more effectively enforce employment laws, such as those relating to workers' compensation and unemployment insurance, many have implemented threshold tests for determining whether an employee has been misclassified as an independent contractor. The most common test is the three-prong "ABC test," which has recently been misapplied to legitimate franchise relationships. Without clear language to protect the franchise business model, the application of an "ABC test" can result in a misinterpretation of the relationship between franchisors and franchisees as an employment arrangement.
"IFA supports efforts by states to ensure workers are properly recognized under employment laws," French said. "We encourage other states to consider the Oklahoma law as a model for successfully curbing abuses of labor laws while ensuring that franchise businesses are not unfairly subject to unnecessary rules and regulations."
The International Franchise Association is the world's oldest and largest organization representing franchising worldwide. Celebrating 50 years of excellence, education and advocacy, IFA protects, enhances and promotes franchising through government relations, public relations and educational programs. Through its awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the 21 million jobs and $2.3 trillion of economic activity generated by franchising. IFA members include franchise companies in over 90 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.