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Matthew Haller, 202-662-0770

Jenna Weisbord, 202-662-0766

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@franchising411

IFA CAUTIONS DEPARTMENT OF LABOR ON RADICAL NEW GUIDANCE ON EMPLOYEE CLASSIFICATION

WASHINGTON, D.C., July 16, 2015 – The International Franchise Association, the world’s largest organization representing franchise owners, criticized new so-called “administrative guidance” from the Department of Labor (DOL) that deals with independent contractors as unnecessarily intrusive and called it yet another in a long list of Obama Administration directives that will make it harder for millions of small businesses to operate and grow. The guidance applies an “economic realities” test to decide whether a worker can be an independent contractor or must instead be classified as an employee.

“Franchise business owners are simply exhausted and frustrated by the Obama Administration’s death by a thousand cuts’ attempt to transform the workforce and ignore the concerns of the small business community. You simply cannot apply decades-old economic theory from the classroom into the real world that obliterates long-standing precedent. It will clearly stifle job creation and small business ownership opportunities in the franchise industry,” said IFA President & CEO Steve Caldeira, CFE.

“The new guidance fundamentally misinterprets how franchising works. Many franchisees use contractors because of the unique nature of their businesses that require flexibility to meet market demands in the industries in which they operate. They should not be forced to change their business model because of some unelected, pro-labor, anti-business bureaucrats in Washington,” added Caldeira.

The DOL claims that misclassification is “most common” in construction, housecleaning, in-home care and trucking. The DOL’s so-called “misclassification guidance” in these industry categories alone will impact more than 5.8 million business owners, and nearly 25 million workers, including both their employees and independent contractors, based on analysis of Economic Census data and additional information provided by FRANdata, a firm specializing in franchise industry research. Franchise businesses, both with employees and those that engage independent contractors, account for 6.8 percent of these businesses. Nearly 83,000 franchise businesses and more than 400,000 workers, both employees and independent contractors, will be impacted by the DOL’s “administrative guidance” issued by Wage and Hour Division Administrator David Weil, a Boston University economics professor with no real-world business experience.

The following industry categories would be impacted: Construction (including Building Construction, Heavy and Civil Engineering Construction, Specialty Trade Contractors, Architectural, Engineering and Related Services, Interior Design Services); Cleaning and Facilities Services (including Facilities Support Services, Services to Buildings and Dwellings, Waste Management and Remediation Services), Individual and Family Services, and Truck Transportation.

In addition, the interpretation on contract workers comes only one week after the DOL proposed a rule to expand overtime provisions to millions of employees that will now face being transferred from full-time to part-time status.

In addition, the National Labor Relations Board’s General Counsel is attempting to expand the joint employer standard to make employers liable for workers they don’t employ. Taken together, these directives from the DOL have created an atmosphere of uncertainty for franchise businesses as the federal government continues its aggressive assault to change the definition of both employers and employees to benefit the unions, whose membership has steadily declined from approximately 35 percent in the mid-fifties, to under 7 percent in 2015.

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About the International Franchise Association

Celebrating 55 years of excellence, education and advocacy, the International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising and the more than 780,000 franchise establishments that support nearly 8.9 million direct jobs, $890 billion of economic output for the U.S. economy and 3 percent of the Gross Domestic Product (GDP). IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law, technology and business development.

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Phone: +1 202/628-8000 Fax: +1 202/628-0812 www.franchise.org