IFA Files Amicus Brief in Mass. Case Defending Franchise Relationships

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For immediate release





Contact:
Alisa Harrison, 202-628-8000
Matthew Haller, 202-662-0770



aharrison@franchise.org


mhaller@franchise.org


twitter.com/franchising411

 



WASHINGTON, June 7, 2011-The International Franchising Association, representing the nation’s 825,000 franchise establishments, nearly 18 million jobs and $2.1 trillion in economic output, has submitted an amicus brief to the Massachusetts Supreme Judicial Court in the ongoing

Awuah v Coverall North America, Inc
. case to clarify the unique attributes of franchise businesses and viability of the industry as a proven job creator in Massachusetts. 



“Franchising is a powerhouse of small business economic activity and job creation in the Commonwealth of Massachusetts and has greatly increased small business ownership, particularly among women and minorities,” said IFA President & CEO Steve Caldeira. “On behalf of the franchise industry, we urge the court to fully take into account the unique attributes of franchising and the federal regulatory oversight of the franchise business model.  Wrongfully defining franchisees as employees of the franchisors instead of as business owners, as the federal district court’s ruling does, threatens the viability of franchising as a business model in Massachusetts and will likely lead to the closing of franchise establishments and a reduced rate of job creation in the state.” 


According to

The Economic Impact of Franchised Businesses

, a report conducted by PwC, there are more than 13,000 franchise business establishments in Massachusetts, collectively accounting for more than 320,000 jobs and $44.7 billion in annual economic output.

 



The brief submitted to the Supreme Judicial Court is a joint filing between the IFA, Friendly’s Restaurants Franchise, LLC, and Fantastic Sams Franchise Corporation in support of the franchise business model. 



In the spring of 2010, U.S. District Court Judge William G. Young held that based on Massachusetts’ employment statutes, the plaintiffs-franchisees of Coverall North America-were actually employees of the franchisor that had been misclassified as independent contractors.  Under the statute, individuals providing a service are considered employees if they meet one of three prongs of the “ABC Test” of employee misclassification.  The judge based his decision on prong B (“the service provided by the worker is outside the employer’s usual course of business”), asserting there is no distinction between the defendant’s business and that of its franchisees.  In what amounts to a threat to the entire franchise business model, the ruling could bring into question the legitimacy of every business that relies on contractually related firms as sources of revenue. 



In addition to filing an amicus brief in
Awuah v. Coverall North America, IFA is also working to protect the entire franchising community in Massachusetts by filing legislation to permanently address the underlying misclassification issue.  Recognizing that the franchising business model is unique and does not neatly fit within existing labor statutes, the legislation would exempt from the “ABC Test” any individuals who are party to a franchising agreement as regulated by the Federal Trade Commission under 16 CFR 436 through 436.11. 

 

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About the International Franchise Association

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 nearly 18 million jobs and $2.1 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.

 

 

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