Proposed Legislation in Georgia: Franchisees Are Not Employees

Legislation currently working its way through the Georgia General Assembly provides that franchisees may not be considered employees for purposes of Georgia’s workers’ compensation laws. House Bill 548, sponsored by Rep. Chuck Martin, amends the definition of “employee” in Georgia’s workers’ compensation statute by clarifying that “[i]ndividuals who are parties to a franchise agreement as set out by the Federal Trade Commission franchise disclosure rule…shall not be deemed employees for purposes of this chapter.”

The bill was likely introduced in response, at least in part, to the Massachusetts Supreme Court’s controversial decision in Coverall N. Am., Inc. v. Commissioner of the Div. of Unemployment Assistance, 447 Mass. 852 (2006). There, the court held that an individual franchisee was an employee of its franchisor and was thus entitled to unemployment insurance when the franchisee’s business failed. As industry pressure mounts, we expect similar legislation to be introduced in a number of states.

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