California State Assembly passes franchisor-franchisee joint liability bill

Dive Brief:

The California State Assembly passed AB 1228, the Fast Food Franchisor Responsibility Act, Wednesday evening. The bill would establish joint employer liability for fast food franchisors and franchisees.
The bill next heads to the California Senate, which has until September 14 to consider and vote on the bill, according to the Senate calendar.
The bill has drawn support from labor unions like the Service Employees International Union, and opposition from industry groups including the International Franchise Association.

Dive Insight:

AB 1228 holds fast food chains, defined as brands with more than 100 units nationally, liable for state labor law violations at franchisee-operated restaurants.

The IFA called on the California Senate to reject the bill, saying the legislation would take control away from franchisees. The IFA said franchisees met with legislators in Sacramento to voice opposition to the bill earlier in May.

“This will eliminate the equity local restaurant owners have built over decades and take away any future opportunities for franchise business ownership,” Jeff Hanscom, IFA vice president of state and local government relations, wrote in a statement emailed to Restaurant Dive.

In a SEIU statement emailed to Restaurant Dive, Serigio Valderrama, a San Diego McDonald’s worker, said companies have passed responsibility and liability for violations to their franchisees, allowing the franchisors to avoid accountability for breaking the law.

“California is one step closer to ending fast-food corporations’ longtime abuse of the franchise system,” Valderrama said. “Instead of investing in local franchisees and communities to address rampant health and safety violations, the industry has insisted they have no responsibility for many of the half-million fast-food workers who wear their uniforms.”

AB 1228 originated with a section in a draft of AB 257, The FAST Recovery Act, in 2021, which initially sought to establish joint employer liability in addition to forming a fast food sector wage and standards council with representatives of business, labor and the state. However, the bill’s progressive backers removed the joint liability section in an amendment in June 2022 as part of a futile attempt to stymie industry opposition, SEIU President Mary Kay Henry said in a previous interview.

AB 257 passed both of California’s legislative houses last year, but will face a referendum challenge backed by national fast food brands in November 2024. It is possible that AB 1228 will face a similar challenge if it passes the Senate. An industry group formed to oppose the law, called No on AB 1228 coalition, vowed to redouble its lobbying efforts to stop the bill, according to a statement emailed to Restaurant Dive.

In recent years, California’s referendum system has emerged as a tool for major corporations to override the actions of the state legislature and repeal labor law reform, in the case of Prop 22, and stop environmental protection efforts.