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Guest post by: Anne Barr Become an Author

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Many business owners have used independent contractors when appropriate and especially when the needs are part time and/or irregular hours. Using independent contractors can save the business owner on payroll taxes and can be a plus if the need is occasional.

In this economy, many states are required to implement balanced budgets and carry no deficits forward at the end of each fiscal year. Often state officials believe that businesses routinely misclassify their workers as independent contractors as a way to avoid the financial responsibilities of being their employer.

In the last 12-18 months, many state legislatures have introduced bills seeking reform to the laws concerning wage, workers compensation and/or unemployment insurance to broaden the definition of who is classified as an “employee” under such laws.

Most of these bills seek to make anyone who performs services under the “direction and control” of another person that person’s employee. The only exception would be when the employer can show that the person providing services is completely free from such direction and control.

This aggressive enforcement of independent contractor laws in the last few years has created much attention for the franchise business model. The franchise model is all about “being your own boss”. Each franchisee is responsible for their own employees. Under federal law, a franchisor must maintain certain control over the use of its marks….the brand or system. (which is the value component to one who becomes a franchisee and invests in the business opportunity)

Typically, when the franchisee signs the Franchise Agreement, they must agree to protect the marks or brand. However, according to some state laws and/or proposed amendments to state laws, the franchisee may be classified as the franchisor’s employee.

Because becoming a franchisee is an entrepreneurial choice, franchisees expect to be their own boss and the boss of their own employees…….NOT employees of the franchisor. These state laws will punish the entrepreneur and consequently negatively effect positive economic growth.

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