To get a sense of just how serious fast-food franchises consider a new California joint liability proposal, look no further than McDonald’s, where opposition to the proposal has united the company and its franchisees.
The bill, which appears headed for passage after getting through a State Senate committee last week, would make franchisors liable for their franchisees’ employment law violations. But it is targeted at fast-food restaurant companies with at least 100 locations.
There are 184 limited-service chains that fit the definition in the California bill, known as AB 1228, or the Fast Food Franchisor Responsibility Act. The vast majority of those are franchised. It’s essentially a second round of regulations targeted exclusively at fast-food restaurants in the state, following last year’s Fast Act, which established a committee to oversee rules such as the minimum wage at such locations. That one is delayed as it awaits a referendum.
The joint liability bill is often conflated with proposed joint employer rules by the National Labor Relations Board that would qualify many franchises as “joint employers” of their franchisees’ workforces.
But those rules establish standards where a franchisor would be considered a joint employer. The California bill, on the other hand, is much broader. It has virtually no specific requirements governing when the joint employment standard would be applicable, except that the franchise be a fast-food chain. Unions, which have argued that fast-food franchisees are big violators of employment rules, are among the proposal’s biggest backers.
The franchise sector is, unsurprisingly, up in arms about the idea. Matt Haller, the CEO of the International Franchise Association, said in a blog post in the publication Fortune that the bill would make it easier for unions to sue and organize fast-food restaurants and would result in the industry pulling out of the state.
We do not know about that. But it would clearly make life more difficult in a state where it is already difficult to do business. Indeed, California’s regulatory moves have a way of uniting McDonald’s franchisors and franchisees like few other things these days.
The company and many of its operators have been at odds for more than a year, which has bled into the political arena. Franchisees, led by the independent operators group the National Owners Association (NOA), have submitted comments on franchise rules to the Federal Trade Commission and opposed the company in a battle over franchise regulations in Arkansas.
And when it comes to joint employer, the association notably said that if the company doesn’t want to be considered a joint employer, then it should “stop acting like one.”
Operators’ views on the topic are different when it comes to the California bill, however. Those franchisees are now coming out more forcefully against the bill, after a controversy involving a union-backed group’s intimation that NOA’s attorney backs the bill.
As we told you this week, Fight for $15, the union-backed group that has pressured McDonald’s for the better part of a decade, sent a flyer to legislators intimating that Robert Zarco, an attorney for NOA, agreed with the bill.
He does not. He demanded a retraction. And Fight for $15 appears to have removed text involving Zarco from its website.
Zarco, and franchisees, oppose the bill because it makes the liability automatic, rather than based on a standard of control. And that would likely force McDonald’s and other franchisors to take a more aggressive role in controlling operators’ businesses in such a scenario. Franchisees, suffice it to say, do not like that idea.
As such, the flyer and the implication that NOA’s attorney would be OK with it generated real concern within the system.
In a message to operators, seen by Restaurant Business, Danielle Marasco, chair of the internal franchisee group the National Franchise Leadership Alliance, indicated that NOA has offered to assist California operators, including fundraising to defend the brand. The NFLA in a meeting with the association indicated its “deep concerns regarding the negative impact” of the implications behind the flyer.
On Friday, NOA published a statement on its website saying that it "strongly opposes" AB 1228. "Forcing national franchise companies to assume legal liability and control over franchisees in no way helps franchisees," the statement said. "In reality, it will force greater corporate control, shattering the successful franchise model in California that has provided a path for thousands of hard-working entrepreneurs that have created hundreds of thousands of jobs."
That said, it’s not certain whether the flyer or anything else would make any difference. The bill has seemed destined for Gov. Gavin Newsom’s desk for some time. And the state’s legislators appear on board with proposals that target fast-food chain restaurants, specifically. This is just another one.
UPDATE: This story has been updated to include a statement from NOA.