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Employment Status of Franchises

On May 4, 2017, North Carolina Governor Roy Cooper signed legislation (S.B. 131) establishing the employment status of franchises. Codified at N.C. Gen. Stat. § 95-25.24A, neither a franchisee nor a franchisee’s employee is an employee of the franchisor for any purposes. This applies to, but is not limited to, all the following North Carolina laws:

  • Wage and Hour Act.
  • Employment Security.
  • Workers’ Compensation Act.

Per the law, a franchisee and franchisor have the same definitions as set out in 16 C.F.R. § 436.1:

  • A franchisee is any person who is granted a franchise.
  • A franchisor means any person who grants a franchise and participates in the franchise relationship. Unless otherwise stated, it includes subfranchisors. A subfranchisor is a person who functions as a franchisor by engaging in both pre-sale activities and post-sale performance.

The law became effective on May 4, 2017.

Read NC S.B. 131