IFA to Massachusetts Legislature: Current Statutory Environment Creates “Chilling Effect” on Franchise Development
Matthew Haller, 202-662-0770
Jenna Weisbord, 202-662-0766
BOSTON, July 16—The International Franchise Association today urged the Massachusetts legislature to amend the Commonwealth’s current statutory worker classification test, citing the negative economic consequences the current law is creating for franchisors seeking to develop new franchise locations and for current and prospective franchisees seeking to create more jobs through franchising.
“Massachusetts’ current statutory three-pronged ‘ABC Test,’ as well as recent related litigation to assess whether an employment relationship exists between franchisees and franchisors, has created a chilling effect on franchise growth in the Commonwealth,” said IFA’s Senior Director of State Government Relations, Public Policy & Tax Counsel, Dean Heyl. “IFA and our members are eager to work with lawmakers to develop a legislative solution that protects franchisees from being classified as employees while they act as their own bosses through franchise ownership.”
The ABC Test evaluates whether the individual is free from control and direction; whether the individual’s service is performed outside the usual course of business of the entity for which the service is performed; and whether the individual can conduct the business independently of the other entity. Massachusetts’ statute assumes an employment relationship unless all three prongs of the test are met.
In its testimony before the Joint Labor & Workforce Development Committee, Heyl urged support for Senate Bill 886, House Bill 1736, Senate Bill 870, and House Bill 1778.
IFA has received reports from several franchisors who have advised franchise systems without franchise locations in Massachusetts not to develop locations there until the relationship between a franchisor and a franchisee is clarified as an independent contractor relationship and not an employment relationship. Heyl’s testimony also cited numerous franchisors already in Massachusetts are considering reducing the number of individually owned establishments in favor of corporately-owned stores.
Heyl expressed that while franchisees and other small-business owners are the engines of the American economy, regulations that force franchisees to be treated as “employees” while they act as their own boss will serve only to deprive the economy of the entrepreneurial drive and talent of franchisees, and thereby hinder economic growth. In the Commonwealth of Massachusetts, there are more than 13,500 franchise establishments employing over 149,000 individuals and generating $15 billion in economic output annually.
To read the full testimony click here.
About the International Franchise Association
The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising. Through its media awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the economic impact of the more than 825,000 franchise establishments, which support nearly 18 million jobs and $2.1 trillion of economic output for the U.S. economy. IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.