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California Bill Would Create Automatic Joint Liability for Large Franchisor-Franchisee QSRs

Last month, California legislators introduced the Fast-Food Franchisor Responsibility Act (“AB 1228”).  It’s core creates joint liability between franchisees and franchisors and was part of the original Fast Food Recovery Act (“AB 257”). These joint liability provisions were stripped out of AB257 in 2022, in the 11th hour, so it could garner enough support to pass. Our readers may recall, AB 257 is the law, which when implemented, would create a fast-food council to oversee fast food wages and working conditions of the large franchise QSR workers in California.

Now, those same California legislators are looking for a second bite at the apple with AB 1228. At its core, AB 1228 attempts to secure greater wage and hour law compliance by holding large franchisors and franchisees jointly liable for franchisee violations of California’s labor laws.  If passed, the new law would require a QSR franchisor to share with its franchisee civil liability for the franchisee’s violations.

What’s Old, is New

Joint employer liability between QSR franchisors and their franchisees is not new. From 2012 to 2019, the McDonald’s franchisor and 31 of its franchisees were accused of being joint employers.  Brody and Associates successfully defended the New York McDonald’s franchisees in this case.  The case was hotly debated and contested for almost a decade before it settled with no finding of any joint employer status.  The SEIU, the largest union fighting for joint employer liability, is now hoping to do through state legislators what they couldn’t do through the NLRB.

Why it’s Wrong

Opponents of the bill are ringing the same bell they rang when AB 257 was introduced. The bill is overreaching and irresponsible. It picks on and penalizes just large QSR franchisors; this is unfair.  It also will destroy such franchising in California.  

AB 1228 would make subject franchisors jointly responsible with their independent franchisees for illegal employment practices in every restaurant.  Once this occurs, QSR franchising in California will be destroyed. Franchisors will simply replace these independent businesspeople with their own staff as the old franchise agreements expire. In the interim, the franchisor will likely highly regulate the franchisee. Upwards of 15,000 franchised restaurants in California could totally lose their independence and become company controlled.  This destroys the reason most franchisees bought their franchise – to be independent business owners.  The franchisee will simply become an extension of the franchisor taking away the franchisee’s independence and potentially their livelihood in the process.

Adding insult to injury, the legislators of AB 1228 classify the QSR’s subject to this bill the same as AB 257 —a company with at least 100 units nationwide.  This will penalize larger franchises while giving smaller franchises and non-franchised QSRs a pass.  Making it even harder for larger QSR’s to compete.

 Not surprisingly, and rightfully so, AB 1228 has drawn much criticism.

What’s Next

AB 257 is on hold at least until after a statewide referendum scheduled for November 2024.  In the interim, AB 1228 will keep the ongoing battle between QSR’s and California union leaders on the front burner. If AB 1228 passes without significant amendment, it will be a huge win for the union, which is attempting to use California as its centerpiece for overhauling the QSR labor market.

Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.