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Support the Trademark Licensing Protection Act
by Robert Cresanti, Opinion Contributor - 09/13/18 4:30 PM ET
Greg Nash
During my time at the helm of the International Franchise Association (IFA), I have frequently heard concerns from our members in the franchising community about the uncertainty federal employment laws force on franchises. In fact, IFA just had more than 400 franchise business leaders on Capitol Hill, speaking directly with members of Congress about how this regulatory uncertainty slows down their business growth. Luckily for these small business owners, the franchising community may finally get some much-needed clarity, thanks to the "Trademark Licensing Protection Act" introduced by House Small Business Committee Chairman Steve Chabot (R-Ohio) and Rep. Henry Cuellar (D-Texas).
The Trademark Licensing Protection Act codifies what those in the franchising community have long understood – that maintaining brand standards should not force "joint employer" status on them in federal or state employment litigation. These brand standards – the shape of a hamburger patty, the logo on a bag, or the uniforms worn by a hotel employee – are the foundation of why consumers patronize our member businesses. They're what makes your experience at a Wendy's in Ohio the same as at a Wendy's in California. Unfortunately, ambiguity in the current law means that aggressive plaintiffs' attorneys have begun to point to these same trademarks to file joint employment lawsuits, causing untold expenses and slowing growth for businesses of all sizes.
{mosads}The Trademark Licensing Protection Act clarifies what consumers already know: those logos on bags, the quality of the product, and the uniforms worn by employees are not evidence of joint employment, they're brand controls exercised to protect trademarks. And they're the reason that franchise businesses are able to maintain the standards and consistency that consumers expect from one location to another.
The legal basis for franchising is grounded in the 1946 Lanham Act, which requires franchisors to police the use of their intellectual property licensed to third-party franchisees, since the trademark's value stems from its consistency and uniformity to the consuming public. The only way to give legal effect to brand protection is through intellectual property protections, specifically trademarks, trade dress, patents, copyrights, and trade secrets.
But by establishing control mechanisms to protect their brand – which franchisors are required by law to do – franchisors are penalized by employment law that increasingly considers them a "joint employer" over its franchisees, ultimately opening up franchisors to inappropriate additional liability and threatening the independence of franchisees.
This is the Catch-22 that the Trademark Licensing Protection Act will solve. Under the bill, brand controls as required under the Lanham Act cannot be used against franchises to establish "joint employer" status.
Notably, voters support the spirit of this bill. According to polling conducted by Morning Consult, 66 percent of voters support franchises protecting and enforcing their brand and trademarks, while even more (71 percent) say franchisors should be responsible for this protection. Moreover, more than 3-in-5 voters say franchisors should not be punished for enforcing proper use of their trademarks.
On behalf of the International Franchise Association and the franchise community, I applaud Chabot and Cuellar for their leadership in working to restore a common-sense definition of "employer" and provide franchise businesses the certainty and fair treatment necessary for continued job creation and economic growth.
IFA joins the majority of the American electorate who say Congress should act to clarify standards of employment and brand controls, by urging the members of the House of Representatives to support this important legislation.
Robert Cresanti is President and CEO of the International Franchise Association.
Tags franchise Franchising joint employer Steve Chabot trademark
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