Wage Increase Fairness Act Aims to Slow Speed of Minimum Wage Increases for Franchisees

By Jarina D. Duffy

A new bill, the Wage Increase Fairness Act, was introduced into the House of Representatives on February 4, 2021, which intends to prevent local ordinances from putting added requirements on independently owned franchisees that are still considered “small businesses” in regards to potential minimum-wage increases. Officially, the bill intends to “amend the Fair Labor Standards Act of 1938 to prohibit States and municipalities from adopting certain laws and ordinances, and for other purposes” (See H.R.830 — 117th Congress (2021-2022)). The bill was sponsored by Representatives Scott Peters (D-CA) and Rodney Davis (R-IL). Because of some local ordinances, franchised businesses are often required to implement certain standards before other small businesses simply because the franchised business is part of a larger franchise system.Franchisors and franchisees fear that the implementation of new, higher minimum wage requirements might be one of those standards whereby a franchised business would be required to meet the new standard before other local small businesses. This uneven implementation of such a standard may have a detrimental impact on small-sized franchised businesses.

Essentially, without the bill, a franchised business may be required to implement the new, higher minimum wage standards despite being the same size as non-franchised small businesses in their area. The bill aims to allow all similarly-sized businesses to be treated equally when it comes to the franchised vs. non-franchised criterion. As everyone in the franchise world knows, many franchisees operate small businesses, sometimes even family owned and operated, despite being a part of a larger franchise system. All employment decisions, including hiring, firing and wage determinations, are (largely) made by the franchisees and not the franchisors. Without this bill, these relatively small businesses will not be treated as the size that they are, but instead will take on the size of the entire franchise system.

We will follow the progress of this bill and post any updates on the Kent Franchise Law Group Blog. If you have any questions about how this bill may affect your franchised business or franchise system, please reach out via email jarina.duffy@kentfranchiselaw.com or by phone at 610-205-6061.

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