Illustration depicting an illuminated neon sign with a Franchise concept.

On March 2, 2016, Wisconsin Senate Bill 422 was signed into law. This bill clarifies that a franchisor is not the employer of a franchisee’s employees under several areas of Wisconsin law:  unemployment insurance, worker’s compensation, Wisconsin’s wage and hour laws and Wisconsin’s fair employment laws. Employer liability will attach to a franchisor as it relates to franchisee’s employees only where:

  • The franchisor has agreed in writing to assume that role; or
  • The franchisor has “exercised a type or degree of control over the franchisee or the franchisee’s employees that is not customarily exercised by a franchisor for the purposes of protecting the franchisor’s trademarks and brand.”

Wisconsin Senate Bill 422 ensures that franchisors are not unfairly liable for the actions of franchisees, it is intended to prevent frivolous lawsuits against franchisors, and it encourages franchisees to act responsibly with the employees that they supervise.

The new law will certainly be welcomed by franchisors doing business in the State of Wisconsin, and it stands in sharp contrast to recent efforts by several federal agencies (namely the NLRB, OSHA and the Department of Labor’s Wage and Hour Division). Those federal agencies have made statements and issued guidance that ostensibly narrows the gap between franchisors and franchisees on joint employment issues, and which have caused serious frustrations for franchisors. Quarles and Brady will continue to closely track these developments. We will continue to closely track joint employer developments and keep you apprised.