Franchising World April 2011

By:
IFA Government Relations & Public Policy Staff

International Franchise Association President Stephen J. Caldeira, CFE, expressed to readers in his December Franchising World column that with the conclusion of the midyear elections, it was time to plan for 2012.  IFA continues to move forward on its goals to repeal and improve the new health care law, gain access to credit and provide tax certainty for small-business owners.  The association, through its enhanced influence with members of Congress and various advocacy activities, including its Franchise Congress program, has made deep inroads on several fronts. These victories illustrate the dividends of educating and activating individual franchise professionals to contact their members of Congress on issues affecting the franchise industry, as well as increasing policymakers’ understanding that the industry creates jobs and contributes to the nation’s economy.

1099 Requirement Repeal Marks Significant   Franchise Victory
On April 5, IFA applauded the U.S. Senate vote to repeal the onerous 1099 tax reporting provision in the health care law as a major victory for franchise businesses. The provision placed an excessive cost burden and uncertainty on the more than 825,000 franchise establishments representing nearly 18 million workers in the United States.  
“We applaud Congress for taking a positive first step toward removing the excessive cost burdens and uncertainties imposed on franchise small businesses as a result of the health care law,” said IFA President and CEO Steve Caldeira, CFE.  “We hope lawmakers will continue to push for pro-growth policies that enable our members to grow their businesses and create local jobs.”
IFA’s number one priority for health care reform legislation is to ensure that health insurance is more affordable for franchised businesses and their employees. For a decade, IFA has supported legislation that would enable small employers to band together through national associations or franchise systems to purchase health insurance. IFA also supports proposals that strengthen consumer-oriented, affordable health insurance options. Finally, the franchised business community has long sought solutions to medical malpractice laws to curb the impact of litigation on health insurance premiums and the cost of medical care.
The Patient Protection and Affordable Care Act contains a framework that will encourage further shifting of health care costs onto the backs of small franchised businesses—in the form of a mandate on employers—and impose new taxes and fees that will be passed along by health insurance providers to consumers. IFA has serious concerns that this law will cost well over $1 trillion in the next 10 years. Much of the revenue necessary for this new federal spending will come from small franchised businesses through a series of taxes and penalties.
“The framework of the current law threatens the economic viability of franchised businesses still struggling to recover from the economic downturn by imposing excessive cost burdens onto the backs of small businesses which prevent them from growing and creating new jobs,” said Caldeira. “While we do not believe that PPACA achieves meaningful, long-term control of U.S. health care costs, the IFA is committed to reducing the cost of health insurance for small businesses and their employees, and we strongly encourage senators to develop new solutions that provide meaningful cost‐controls and consumer‐driven solutions.”

Menu Labeling Enforcement Delay
In January, the U.S. Food and Drug Administration delayed enforcement of its menu-labeling regulations for which IFA praised the agency’s action. “The FDA’s willingness to work directly with the IFA and the franchised restaurant industry will enable them to get the rules right the first time,” said Caldeira. The agency has instructed states and localities to delay enforcement of the regulations until a final federal rule is published.
In December, IFA submitted comments urging the FDA to complete a full rulemaking process for all provisions in the new menu-labeling regulations at the same time, rather than a tiered approach to help minimize the cost and confusion for small, franchise restaurants and more efficiently provide valuable information to consumers.
On April 1, the FDA released a notice of proposed rulemaking to implement the new menu labeling requirements. Comments are due by June 6. IFA will be  reviewing the proposal and providing comments. The FDA is expected to finalize its menu labeling rules by the end of 2011.
As part of the health-care reform package signed into law last year by President Obama, this law provides for a single national standard for nutritional information on restaurant menus.  The law would mean that franchise chain restaurants with 20 or more units nationally would no longer face a patchwork of state and local menu labeling mandates.  The menu labeling law mirrors the federal regulation for packaged food and gives flexibility in the manner that information is provided.  The provision, which was based on the IFA-endorsed Labeling Education and Nutrition Act, also offers liability protection for restaurants, recognizing the variation in the nutritional content of food that is hand-prepared.
IFA actively engaged FDA during the early phase of implementation, urging the agency to carefully consider the impact of the rules on small businesses as they interpret the intent of Congress. 

OSHA Withdraws Musculoskeletal Disorders Proposal
On Jan. 25, the Occupational Safety and Health Administration temporarily withdrew its proposal to require employers to report work-related musculoskeletal disorders, a step IFA proposed in March 2010 comments.  “In proposing to broadly define the term MSD to include any  disorder of any tissue in the musculoskeletal system, OSHA would disregard these fundamental scientific shortcomings and impose an insurmountable and counterproductive recordkeeping burden on employers,” IFA noted.  OSHA will seek small-business input via a meeting and electronic communications.
IFA submitted comments March 30, 2010 to OSHA in response to its proposed rule regarding recordkeeping requirements of employers when an employee is injured or becomes ill in the workplace.  The proposal sought to amend the OSHA 300 Log sheet where employers report to the agency such incidents.  It would amend the form to include a column for employers to identify musculoskeletal disorders as illnesses.  It also defined MSDs broadly as any level of discomfort, including, but not limited to back pain, muscle aches and carpal tunnel syndrome, which would trigger the duty for employers to report.
In 2001, IFA and the employer community successfully overturned a Clinton administration ergonomics regulation at OSHA that would have implemented the same broad MSD definitions and require employers to develop “one-size fits all” safety programs for these complex and not-well-understood ailments.  The comments submitted by IFA and other trade associations also pointed out how OSHA has grossly under-estimated the costs of this proposal, particularly on small businesses, and accordingly should have conducted a small-business review panel to learn more about how small firms would comply with this regulation.
IFA will continue to press for regulatory and legislative corrections to afford the best environment for franchise businesses to continue to operate and expand creating opportunities in local communities.

State Issues
The new year also marks the beginning of state legislative sessions.  IFA is actively monitoring on a daily basis the introduction of legislation in state capitals across the country.  To date, bills affecting franchising have been proposed in such states as Montana, New Jersey and North Carolina, as well as the territory of Puerto Rico.  IFA staff are working closely with our allies in those states and actively reaching out to lawmakers.  No bills have gained momentum toward passage as of yet and IFA members can keep informed by logging into the Government Relations section of IFA’s Web site at  

www.franchise.org


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The IFA continues to pursue a multi-state strategy to address the mis- classification of the franchisor-franchisee business relationship.  Some states have aggressively applied independent contractor statutes to the franchise business relationship, most notably in Massachusetts, under the Awuah decision.  IFA is moving forward in Massachusetts and other states to clarify that franchising is uniquely different from the traditional employer-employee relationship.