This week, the Ohio Senate approved HB 494 by a vote of 23-9 and then the Ohio House of Representatives agreed to the changes made by the Senate by a vote of 60-25. This bill further clarifies that the employees of a franchisee will not be considered employees of a franchisor for the purposes of Ohio Minimum Fair Wage Standards, Workers’ Compensation, Unemployment Compensation, or Income Tax laws. 

Through the legislative process, the Senate Transportation, Commerce, and Workforce Committee made two changes to the bill; one being a technical amendment and the second being the establishment of the Women-owned Business Enterprise Program by the Department of Administrative Services. 

HB 494 was introduced, in part, due to the National Labor Relations Board (NLRB) decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015), which upended 30 years of precedent and established an unworkable joint-employer standard that could have a devastating impact on the franchise business model. In Browning-Ferris the2015 NLRB ruled that employers could be deemed joint employers simply by reserving control or exerting indirect control over the same workers. This eliminated the previously long-standing requirement that an employer actually exercise control rather than simply having a contractual right to do so. The board in the case also threw out the precedent that an employer must exercise direct,immediate, and not limited and routine control over an employee ruling that indirect control, such as through an intermediary, was sufficient to establish joint employment.

While state law cannot overturn the NLRB decision—steps to achieve that are progressing at the federal level—HB 494 will prevent state agencies and regulators from extending the Browning-Ferris­ joint-employer standard when interpreting state laws here in Ohio. The legislation clarifies that the employees of a franchisee will not be considered the employees of a franchisor unless the franchisor expressly assumes that role in writing. HB 494 simply codifies what the parties to franchise agreements always knew the law to be and improves Ohio’s legal climate by bringing stability and predictability to this area of the law.

The Ohio Chamber twice submitted letters of support for the bill as it made its way through both the House and Senate. We look forward to Governor Kasich signing this important, common sense piece of legislation.