Franchises can better fight sexual harassment
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This month, the Department of Labor took an important step to make tens of thousands of American workplaces safer and more respectful. It proposed a new regulation that will enable franchised companies to improve and standardize workplace safety and sexual harassment policies. In the #MeToo Era, this is an important step for the nearly 8 million workers employed in the franchise sector.

This proposal would restore key benefits of the franchise business model, which allows local businesses to operate under a national brand. Historically, franchising offers entrepreneurs the chance to start and run their own business. It also provides opportunities to underserved communities; for example, minorities own a higher percentage of franchises than they do other businesses. Franchise owners enjoy lower up-front costs and get significant support from the brand, from workplace guidelines to marketing assistance. The model, well-executed, is a win-win for everyone involved.

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The Obama administration tried to change the rules of labor organizing three years ago because franchise small businesses have traditionally been more difficult to labor unions to organize. In 2016, the Department of Labor expanded the criteria under which national brands could be considered “joint employers” with franchisees, opening them up to unionization and litigation. This decision led to certain, foreseeable consequences – chief among them a decline in support from brands to franchise owners.

In a recent survey of businesses struggling with this regulation, we found that 92 percent of franchisees received less support from their national brand after the rule’s implementation. Distressingly, this included policies, guidelines and training intended to prevent sexual harassment.

No one wanted this less than the brands themselves. Over the years, they invested heavily in the design and implementation of effective measures to combat sexual harassment, along with other issues, such as human trafficking. 

They built world-class departments staffed with experts and specialists who worked to standardize and improve the customer and worker experience across dozens, or sometimes thousands, of different locally-owned companies. Under the purposefully opaque 2016 standard, however, this good work became a liability, not an asset. By providing support to a franchisee, the brand risked undermining the entire franchise business model.

To be clear: Local franchisees continued to implement their own policies to curtail sexual harassment. But without the ability for national brands to provide support, such efforts often incur high costs, which smaller franchisees struggle to afford.

Moreover, the policies are more scattershot. The business name could be the same at two locations, but people could have radically different experiences at each place. No one – the brand, the franchisee, the worker, or the customer – benefitted from this new system.

By contrast, the Trump administration’s new standard is better and more clearly designed. It will enable businesses to once again provide franchisees with expert assistance on sexual harassment policies, along with a variety of other important issues. Under the draft rule’s language, a national brand that requires “workplace safety measures” and “sexual harassment policies” at its franchisees does not automatically become a joint employer.

This exemption is a victory for workers, customers, and common sense. Unfortunately, it has largely been ignored in the broader debate. 

Typically, the coverage of the old joint employer rule focuses on the substantial economic damage. A similar regulation, issued by the National Labor Relations Board in 2015, has already cost franchise businesses more than $33 billion and resulted in 376,000 fewer job opportunities. The old Department of Labor regulation, which covered a broader segment of federal law, would have likely led to even higher costs. While concerns over sexual harassment are just as important, if not more so, these costs represent one more mark against the old and soon-to-be-defunct standard.

The Trump administration deserves credit for proposing this new rule – and it needs the courage to continue. As leaders at the International Franchise Association, we urge the Department of Labor to issue the final regulation swiftly following the mandatory 60-day comment period. Our members are eager for a legal framework that allows them to leverage their expertise and resources to support their franchisees. 

It’s better for everyone when businesses and franchisees can work together to fight the scourge of sexual harassment.

Mr. Cresanti is president and CEO of the International Franchise Association. Ms. Monson is president and CEO of FASTSIGNS International, Inc., and is a board of member of IFA.