Georgia Governor Nathan Deal recently signed House Bill 548, a bill involving Georgia’s franchise laws, after it passed both the Senate and House earlier this year. The law prohibits franchisees from being labeled as employees of their franchisors. This new legislation views the franchisor and franchisee relationship as a contractual agreement only, not employment. It could afford some significant clarification regarding franchise obligations for all parties involved.
The law’s passage was successful partly due to the International Franchise Association which represents both franchisors and franchisees. The IFA says it’s elated with the enactment. It makes Georgia the first state to take the step toward formally recognizing the strictly contractual relationship between franchisors and franchisees.
The new law is considered part of Georgia’s workers’ compensation law. It specifies that individuals who are party to a franchise agreement as determined by the Federal Trade Commission Franchise Disclosure Rule shall not be deemed employees. This may not resolve all franchisor-franchisee relationship quandaries, such as tort or agency liability; however, it will protect franchisors from the liability related to franchisee workers’ compensation claims.
Regardless of the gaps that may exist in the new law, Georgia lawmakers and those involved in the franchise industry acknowledge that it represents a positive step for Georgia entrepreneurs.
Launching a franchise model for business or operating a franchise in Georgia can be a great opportunity for entrepreneurs. The process of establishing a franchise can be complex and typically requires a series of documents and disclosures, terms and conditions which must be established in accordance with Georgia and federal franchise laws. Individuals desiring to work through this potentially complex process may benefit from working with an experienced attorney through the planning and execution to ensure that all aspects are adequately covered.
Source: Blue MauMau, “Georgia Now Protects Franchisors Disguising Employees as Franchisees,” Janet Sparks, May 22, 2012