House File 327 - Introduced HOUSE FILE 327 BY COMMITTEE ON COMMERCE (SUCCESSOR TO HSB 5) A BILL FOR An Act relating to franchisor-franchisee relationships for 1 the purposes of certain employment laws and including 2 applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1512HV (3) 88 je/rn

H.F. 327 Section 1. NEW SECTION . 85.55 Franchisor-franchisee 1 relationship. 2 1. For purposes of this section, franchisee and franchisor 3 mean the same as defined in section 523H.1. 4 2. For purposes of this chapter and chapters 86 and 87, 5 a franchisor shall not be considered to be an employer of a 6 franchisee or of an employee of a franchisee unless any of the 7 following conditions apply: 8 a. The franchisor has agreed in writing to be considered to 9 be the employer of the franchisee or of the employees of the 10 franchisee. 11 b. The franchisor has been found by the workers’ 12 compensation commissioner to have exercised a type or degree of 13 control over the franchisee or the franchisee’s employees that 14 is not customarily exercised by a franchisor for the purpose of 15 protecting the franchisor’s trademarks and brand. 16 Sec. 2. NEW SECTION . 91A.15 Franchisor-franchisee 17 relationship. 18 1. For purposes of this section, franchisee and franchisor 19 mean the same as defined in section 523H.1. 20 2. For purposes of this chapter, a franchisor shall not be 21 considered to be an employer of a franchisee or of an employee 22 of a franchisee unless any of the following conditions apply: 23 a. The franchisor has agreed in writing to be considered to 24 be the employer of the franchisee or of the employees of the 25 franchisee. 26 b. The franchisor has been found by the commissioner to have 27 exercised a type or degree of control over the franchisee or 28 the franchisee’s employees that is not customarily exercised 29 by a franchisor for the purpose of protecting the franchisor’s 30 trademarks and brand. 31 Sec. 3. Section 91D.1, Code 2019, is amended by adding the 32 following new subsection: 33 NEW SUBSECTION . 2A. a. For purposes of this subsection, 34 franchisee and franchisor mean the same as defined in section 35 -1- LSB 1512HV (3) 88 je/rn 1/ 4

H.F. 327 523H.1. 1 b. For purposes of this chapter, a franchisor shall not be 2 considered to be an employer of a franchisee or of an employee 3 of a franchisee unless any of the following conditions apply: 4 (1) The franchisor has agreed in writing to be considered 5 to be the employer of the franchisee or of the employees of the 6 franchisee. 7 (2) The franchisor has been found by the labor commissioner 8 to have exercised a type or degree of control over the 9 franchisee or the franchisee’s employees that is not 10 customarily exercised by a franchisor for the purpose of 11 protecting the franchisor’s trademarks and brand. 12 Sec. 4. NEW SECTION . 96.36 Franchisor-franchisee 13 relationship. 14 1. For purposes of this section, franchisee and franchisor 15 mean the same as defined in section 523H.1. 16 2. For purposes of this chapter, a franchisor shall not be 17 considered to be an employer of a franchisee or of an employee 18 of a franchisee unless any of the following conditions apply: 19 a. The franchisor has agreed in writing to be considered to 20 be the employer of the franchisee or of the employees of the 21 franchisee. 22 b. The franchisor has been found by the department to have 23 exercised a type or degree of control over the franchisee or 24 the franchisee’s employees that is not customarily exercised 25 by a franchisor for the purpose of protecting the franchisor’s 26 trademarks and brand. 27 Sec. 5. NEW SECTION . 216.22 Franchisor-franchisee 28 relationship. 29 1. For purposes of this section, franchisee and franchisor 30 mean the same as defined in section 523H.1. 31 2. For purposes of this chapter, a franchisor shall not be 32 considered to be an employer of a franchisee or of an employee 33 of a franchisee unless any of the following conditions apply: 34 a. The franchisor has agreed in writing to be considered to 35 -2- LSB 1512HV (3) 88 je/rn 2/ 4

H.F. 327 be the employer of the franchisee or of the employees of the 1 franchisee. 2 b. The franchisor has been found by the commission to have 3 exercised a type or degree of control over the franchisee or 4 the franchisee’s employees that is not customarily exercised 5 by a franchisor for the purpose of protecting the franchisor’s 6 trademarks and brand. 7 Sec. 6. APPLICABILITY. This Act applies to work performed 8 on or after the effective date of this Act. 9 EXPLANATION 10 The inclusion of this explanation does not constitute agreement with 11 the explanation’s substance by the members of the general assembly. 12 This bill provides that, for the purposes of certain 13 specified employment laws, a franchisor shall not be considered 14 to be an employer of a franchisee or of an employee of a 15 franchisee unless at least one of two specified conditions are 16 met. The first condition is that the franchisor has agreed in 17 writing to be considered to be the employer of the franchisee 18 or of the employees of the franchisee. The second condition 19 is that the franchisor has been found by the governing state 20 agency to have exercised a type or degree of control over 21 the franchisee or the franchisee’s employees that is not 22 customarily exercised by a franchisor for the purpose of 23 protecting the franchisor’s trademarks and brand. 24 The affected employment laws are Code chapter 216 relating 25 to civil rights, Code chapters 85, 86, and 87 relating to 26 workers’ compensation, Code chapter 91A relating to wage 27 payment collection, Code chapter 91D relating to the minimum 28 wage, and Code chapter 96 relating to unemployment insurance. 29 Franchisee is defined under Iowa law as a person to whom a 30 franchise is granted, including a subfranchisor with regard to 31 its relationship with a franchisor and a subfranchisee with 32 regard to its relationship with a subfranchisor. Franchisor 33 is defined under Iowa law as a person who grants a franchise or 34 master franchise, or an affiliate of such a person, including 35 -3- LSB 1512HV (3) 88 je/rn 3/ 4

H.F. 327 a subfranchisor with regard to its relationship with a 1 franchisee, except as otherwise provided by state law. 2 The bill applies to work performed on or after the effective 3 date of the bill. 4 -4- LSB 1512HV (3) 88 je/rn 4/ 4