Legislative Wins in the Heartland

Almost halfway through 2016, legislative challenges still await the franchise industry before the year’s end. IFA is already making proactive and defensive plans for 2017, including the possibility of new joint employer legislation.

By Dean Heyl, CFE

It has been a tremendously busy year on the International Franchise Association’s state advocacy front. We have seen our proactive joint employer legislation signed into law in Michigan, Wisconsin, Indiana, Utah, and Georgia. These states follow Tennessee, Texas and Louisiana from last year. We came up one vote short this year in the Virginia House in our efforts to override the governor’s veto, which came after the bill received bipartisan support. 

In California, IFA is supporting legislation which would reduce barriers to holding franchise expos and to negotiated sales agreements. Both of these bills are supported by franchisees and franchisors. On the East Coast, we continue to fight legislation hostile to franchise businesses in Connecticut and Massachusetts.

New Nebraska contract law signed

In Nebraska, IFA successfully advocated for legislation promoting a modern business environment. Under Nebraska’s old law, which barred severance clauses, the courts were forced to take an “all-or-nothing” approach to non-compete agreements, including those between franchisors and franchisees. A non-compete agreement found to be overbroad in any one of its provisions would be declared invalid in its entirety and all parties were left unprotected from unfair competition. 

Nebraska Gov. Pete Ricketts signed Legislative Bill 942, which contained an emergency clause making the law effective immediately. This newly enacted law brings Nebraska in line with the vast majority of other states, which allow the rest of a contract to stand if a portion is found illegal or unconstitutional. Joining IFA in supporting this law change were Nebraska franchisees and franchisors, the Nebraska Restaurant and Retailers Associations, and the State Chamber of Commerce, further demonstrating the value of IFA’s membership in state retail associations.

Iowa rejects dangerous sourcing bill 

In addition to the victory in Omaha, IFA was also successful in Des Moines, Iowa. Rather than passing legislation designed to address the concerns of a single disgruntled individual out of the more than 11,000 franchise establishments in Iowa, the legislature rejected Senate File 2277, which would have created unintended consequences beyond franchised businesses involved with petroleum marketing. 

This legislation would have chipped away at franchisors’ ability to set brand standards by allowing for the purchase of subpar petroleum products. Although on its face, the amended bill’s scope only concerned petroleum products, it would have set a dangerous precedent. As IFA explained to legislators, if this bill were to have passed, there would have been no logical reason to prevent franchisees from sourcing other products and services in a similar manner.

Proactive plans underway for 2017

While we are almost halfway through 2016, there are still numerous known and unknown legislative challenges before the year’s end. Likewise, IFA is already making proactive and defensive plans for 2017. Keep a lookout for new joint employer legislation set to be announced for consideration in 2017. 

We will continue to build on the success of this year in encouraging stronger state legislation to protect and promote franchising, and to pressure federal lawmakers to rectify the government overreach threatening to stifle franchising. 

Dean Heyl, CFE, is Vice President of Government Relations and tax counsel for the International Franchise Association.