May 06, 2016

Georgia’s New Legislation Seeks To Protect Franchisors Threatened By *Browning-Ferris*

On Tuesday, May 3, 2016, Georgia Governor Nathan Deal signed Senate Bill 277, the “Protecting Georgia Small Business Act,” into law.  Smith Gambrell & Russell attorneys were instrumental in drafting the final language of the legislation. The Act will become effective January 1, 2017.  The legislation is in response to the August 2015 decision from the National Labor Relations Board in Browning-Ferris Industries of California, Inc., that has dramatically expanded the number of entities that may be potential joint employers.  Read more about the joint employer standard created by Browning-Ferris here.  The impact of Browning-Ferris is particularly critical in the context of the franchisor/franchisee relationship.  Read more here.

In relevant parts, the Act states that “neither a franchisee nor a franchisee’s employee shall be deemed to be an employee of the franchisor for any purpose.”  Despite the broad sweeping language of the Act, federal law, including the interpretations of the National Labor Relations Board and the United States Department of Labor’s Wage and Hour Division, preempts contradicting state law.  As such, the Act will only apply to matters of state law such as unemployment insurance and state income tax.  Because of the limited applicability of the Act, franchisors in the business industry should continue to:

  • Review and revise agreements with suppliers, franchisees, vendors, service providers, etc. to include indemnification agreements;
  • Update Franchise Agreements and Franchise Disclosure Documents to ensure workers are properly designated;
  • Avoid having franchisor’s corporate name on things like the franchisee’s workers’ paychecks, job applications, employee handbooks, etc.;
  • Encourage franchisees to have their employees sign a document in which the employee expressly acknowledges his/her understanding as to who the employer is (and is not);
  • Utilize in-store signage that expressly states that the location is operated by a franchisee and staffed by employees of the franchisee; and
  • Review and revise agreements with staffing companies to ensure that the staffing company has sole control over the essential terms and conditions of employment such as hiring, firing, discipline, supervision, direction of work, hours, and wages for temporary workers.

If you have any questions regarding these issues raised in this client alert, please contact your labor and employment counsel at Smith, Gambrell & Russell, LLP.

This client alert is intended to inform clients and other interested parties about legal matters of current interest and is not intended as legal advice.

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