Resolution on the Misapplication of Employee Classification Laws Exposed

The Resolution on the Misapplication of Employee Classification Laws was adopted by ALEC's Commerce, Insurance and Economic Development Task Force and approved by the ALEC Board of Directors on January 15, 2012.

ALEC Bill Text

Summary

This resolution recognizes that business format franchising is a major contributor to the United States economy. The resolution also recognizes that franchising is a contractual business relationship, not akin to an employment relationship.

Model Resolution

WHEREAS, franchising contributes $1.2 trillion to the United States economy through 820,000 franchise businesses; and

WHEREAS, franchise businesses employ over 9 million workers; and

WHEREAS, franchising has been a major source of economic expansion in the United States, particularly in the retail trade and services sectors, providing entrepreneurs with a proven route to business ownership; and

WHEREAS, business and franchise agreements are contracts that govern the duties and obligations of the parties to these agreements; and

WHEREAS, Section 10 of the U.S. Constitution and most state constitutions specifically prohibit impairment of contracts that are freely and openly entered into by the parties; and

WHEREAS, the area of contract law is a well established and settled area of law with sound guiding principles outlined in the uniform commercial code; and

WHEREAS, legislation or regulations which would improperly classify franchisees as “employees” is a misinterpretation of labor and contract policy and deprives franchise investors of valuable economic opportunities; and

THEREFORE, BE IT RESOLVED, that the American Legislative Exchange Council (ALEC) opposes enactment of laws that interfere with business and franchise agreements freely and openly entered into by parties.

BE IT FURTHER RESOLVED, that ALEC opposes enactment of laws and regulations that have the effect of classifying franchisees as “employees” of the franchisor.