IFA Files Amicus Brief to Kentucky Supreme Court Involving Subway

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



aharrison@franchise.org


mhaller@franchise.org


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WASHINGTON, Jan. 19, 2011—The International Franchise Association has filed an amicus brief before the Kentucky Supreme Court to clarify that a franchisor cannot be considered the employer of its franchisees’ workers for purposes of paying workers’ compensation in the Commonwealth of Kentucky.

In the case being appealed, Doctors’ Associates, Inc. v. Uninsured Employers’ Fund, et al., the Kentucky Court of Appeals vacated a decision holding that Subway’s franchisor, Doctors’ Associates, Inc., was not required to make workers’ compensation payments for an employee for one of its franchisees and remanded with instructions to consider the issue further.

“The lower court disregarded the unique character of the franchisor-franchisee relationship that the Kentucky Supreme Court has previously recognized as being separate and distinct from ordinary employment relationships,” said IFA President & CEO Steve Caldeira. “Simply treating franchisors as another type of employer ignores the fact that franchisees do not perform work for the franchisor. They perform work on their own behalf for their own customers and get paid by those customers.”

IFA’s brief argues that to require franchisors to pay workers’ compensation for workers employed by their franchisees would be contrary to the unique nature of franchising. The Federal Trade Commission, as well as Kentucky common and statutory law, has consistently addressed franchising as a unique business-to-business relationship that is distinct from ordinary employment relationships.

IFA believes that the Kentucky Court of Appeals wrongly concluded that selling sandwiches was a regular and recurrent part of Doctors’ Associates, Inc.’s business, and therefore that the Subway franchisee was performing work that the franchisor otherwise would ordinarily perform itself. However, the court ignored the fact that the vast majority of business performed by Doctors’ Associates, Inc. is devoted to marketing and selling franchises, not sandwiches. Because a franchisor and its franchisees are engaged in different businesses, IFA’s brief argues franchisors should not be liable for paying workers’ compensation costs for their franchisees’ employees. 

“Upholding the decision of the lower court would ultimately make it more difficult for franchised businesses to operate in Kentucky and have a chilling effect on future growth and economic opportunity for the people of Kentucky,” said Caldeira. According to a 2008 study, Economic Impact of Franchised Businesses, more than 14,000 franchised establishments employ a staggering 176,000 workers and generate $11.8 billion in annual economic output in Kentucky.

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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 21 million jobs and $2.3 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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