Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Connecticut Bill to tax franchisors for franchisees’ low wages would “effectively end” franchising in state: IFA, (Mar 24, 2014)

By John W. Arden, J.D., LL.M.

A Connecticut bill that would tax franchisors for their franchisees’ payment of low wages to employees would “effectively end franchising as we know it in Connecticut,” according to a March 20 posting on the International Franchise Association (IFA) FranBlog.

The proposal, HB 5069, would require covered employers—including franchisors—to pay a quarterly fee to the Connecticut Labor Commissioner for any employee—including employees of franchisees—whose wages do not meet the standard rate predetermined by the Commissioner. Each quarterly fee would be equal to one dollar for each hour a low paid employee worked during the previous quarter. The fees would be deposited in the state general fund.

“Intended to act as a surreptitious increase in the state’s minimum wage,” the legislation “would make the unprecedented move of obligating franchisors to pay taxes on the employees of franchises, despite the two being completely separate business entities.”

Franchising has been a steady contributor to growth, both nationally and in Connecticut, the IFA said. There are approximately 8,000 franchised establishments in the state, accounting for more than 100,000 jobs and $12.6 billion in annual economic output. “This economic engine cannot continue with such unreasonable government interference into the franchise relationship,” the trade organization commented.

The bill was introduced by the Labor and Public Employees Committee on February 10, passed out of the Labor Committee on March 18, and has yet to be moved to a new committee.

“Although the legislation would almost certainly face legal challenges were it to pass, challenges that would likely be successful, it could do damage to Connecticut business in the short time before it is overturned,” the IFA remarked.

The International Franchise Association is the world’s oldest and largest organization representing franchising worldwide. Celebrating more than 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.

News: FranchisingDistribution ConnecticutNews