The Department of Justice backed off no-poach challenges in franchise agreements in 2019, but the state doubled down. The result? Washington state challenged a raft of no-poach/no-hire provisions in 225 franchise systems, resulting in agreements requiring franchisors to agree not to enforce the offending provisions not just in Washington but nationwide. On April 28, 2020
THE BALLAD OF THE HARE AND THE TORTOISE: FASB delays ASC 606
Surprise! On April 8th, FASB delayed for one year the implementation of the new ASC 606 revenue recognition standards for private companies,[1] citing the coronavirus pandemic. In addition to delaying implementation, FASB indicated it would investigate “how to reduce implementation costs relating to applying Topic 606 to initial franchise fees.” While the
ACT NOW!!! New PPP and EIDL funds will disappear FAST
Yesterday, legislation adding an additional $310 Billion to the Payroll Protection Program (PPP) and $50 Billion to the Economic Injury Disaster Loan (EIDL) funds passed the Senate, and passage in the House is imminent. But the new funds will disappear quickly!
The original massive PPP and EIDL appropriations evaporated in less than two weeks. Although
A Rough Roll-Out for Payroll Protection Loans
Need and speed can be a dangerous combination. Just ask Peter “Maverick” Mitchell. That’s a lesson that lenders and borrowers are discovering with CARES Act Payroll Protection Program (PPP) loans. The CARES Act’s PPP provisions promise accessible liquidity support for franchises and small businesses. Indeed, Treasury Secretary Mnuchin said PPP or Emergency Income
CARES ACT – A LIQUIDITY LIFELINE (With tough choices for franchising)
Let’s face it—COVID-19 has decimated the franchise industry, along with the rest of the economy. The food service, hospitality, travel and the service sectors had very tough decisions to make almost instantly, with very little guidance. Questions persist: Can or should franchise businesses continue to operate? How can workers be protected? How can business be supported and bills paid? How long will it last, and how quickly can the industry get back on its feet?
We still don’t know the answer to the last two questions. But the Coronavirus Aid, Relief and Economic Security (CARES) Act, signed on March 27, 2020 should help staunch the financial bleeding. CARES offers franchise businesses a liquidity lifeline in the form of loans (which can become grants), deferred payments, and tax relief. CARES is targeted to small businesses (fewer than 500 employees) but in a coup for franchising, franchises, specifically “any organization operating as a franchise that is assigned a franchise identifier code by the SBA,” are exempted from the size eligibility requirements. This is especially significant for multi-unit franchisees, whose multiple locations when combined would have exceeded the 500 employee limit. In an earlier parallel move, Congress enacted the Families First Coronavirus Response Act (FFRCA) to protect liquidity for individuals and families. The overarching intent of these massive spending bills, unprecedented in our nation’s history, is to help businesses and individuals weather the challenge of COVID-19. Neither law is intended to be a stimulus.
CARES poses tough choices to businesses that are already in shock, the result of an abrupt closure or dramatic sudden catastrophic decline in income. Should employees be laid off or retained? Is it better to off-load employee expense, normally a business’ greatest expense, or keep them employed and bear the potential burden of the increased sick pay and family medical leave payments mandated by FFRCA? If a business opts to maintain employees, will it be able to survive financially? If employees are laid off, how quickly will they return to the workplace in light of the greatly expanded and very generous unemployment benefits mandated by CARES? When the virus struck, the workforce was fully employed; there was no excess of workers. Thus, workers who are financially dissuaded from returning to work when the virus emergency ends may dampen or delay the economic recovery that is the goal of CARES.
Continue Reading CARES ACT – A LIQUIDITY LIFELINE (With tough choices for franchising)
Franchising: Batting a Thousand in Spring Training!
In my recent post commenting on the Department of Labor’s joint employer rule, I wondered whether the NLRB would follow suit. Now we know, and the answer’s positive. It’s very good news for franchising!
As we noted in a blog post earlier this week, the NLRB, after a major rulemaking process in which it received
Meanwhile in the NLRB, the McDonald’s Case Continues
Recently, we lauded the Department of Labor’s return to the control test of joint employment. Perhaps presciently, we 
wondered whether the NLRB would follow the same course.
The latest turn in the NLRB case involving McDonald’s and the “Fight for $15” group should give us the answer to that question – but not
Positive News on the Joint Employer Front!
In 2014, David Weil assumed the reins at the Department of Labor’s Wage and Hour division. Dr. Weil, an economic scholar, set his sights on the concept of joint employment. In academia, his work focused on what he termed a “fissured” employment model, one in which a worker’s economic position depended not only on his
Happy Holidays? More challenges in franchising
It’s the holiday season, but franchise lawyers may find little in recent events to celebrate. The challenges just keep on coming!
Most recently, we’ve been challenged by California’s AB5 legislation and Dynamex decision, the DOJ’s brief foray into challenging “no poach” provisions and the State of Washington’s energetic embrace of that campaign. Unfortunately, recent developments
Time to Exhale . . . CAUTIOUSLY: Ninth Circuit has good news for franchisors
I admit I was among the scores of franchise lawyers whose blood pressure skyrocketed with passage of California’s AB 5. If a Franchise Agreement establishes an independent contractor relationship between franchisor and franchisee, will the A-B-C test render the franchisor the employer of the franchisee? And if that’s the case, how is the franchisor