McDonald's franchisees, and their attorney, push back against proposed California joint employer rules

An independent group of the chain’s operators blasted a proposed rule in that state that would make fast-food franchisors liable for franchisees’ employment law violations after a union-backed group hinted their attorney favors them.
McDonald's California fast-food legislation
McDonald's franchisees called proposed California joint liability legislation a "direct attack" on their business. | Photo courtesy of McDonald's.

The views of McDonald’s franchisees on joint employer have become a focal point in a battle playing out in California.

On Monday, the National Owners Association, an independent group of McDonald’s operators, sent a letter to membership reiterating its opposition to rules that would make fast-food franchisors liable for the employment law violations of their franchisees.

The message, seen by Restaurant Business, called the legislation “a direct attack on our businesses, the franchising model and the American Dream.”

That message, however, followed a controversy last week involving the association’s attorney, Robert Zarco.

Last week, the union-backed group Fight for $15, which favors the legislation, sent a flyer to California legislators intimating that Zarco favors the legislation. A copy of the flyer was seen by Restaurant Business. It features the headline, “Powerhouse franchisee attorney supports joint liability.”

In a letter to Fight for $15, and seen by Restaurant Business, Zarco demanded a retraction and said he does not support the bill, which he argues would damage the franchise relationship.

“I have never indicated support for this bill as written, but rather, provided my interpretation of such bill and the potential legal and relationship consequences that could be brought upon the franchisors, franchisees and the employees in the event such statute would be approved by the California legislature and signed by the governor,” he wrote.

The controversy underscores the sensitivity of the issue in California and some of the behind-the-scenes politicking going on as restaurants and labor-backed groups battle over the latest proposed set of regulations on the industry.

The bill, AB 1228, is known as the Fast Food Franchisor Responsibility Act. It argues that the industry “has long been rampant with employment law violations” that are more common among franchisees than in corporate-run locations. And it would make franchisors share in the legal responsibility for franchisees’ employment law violations.

The bill is targeted specifically at national limited-service chains in the state that operate 100 or more locations. The bill has already passed the California State Assembly and was approved by a committee in the State Senate last week.

In essence, it would be a state-level version of federal joint-employer rules currently being considered by the National Labor Relations Board, only targeted specifically at limited-service restaurants.

McDonald’s operates more than 1,242 locations in California. Only Subway, with more than 2,200 locations, has more restaurants in the state among franchised brands, according to data from Restaurant Business sister company Technomic.

McDonald’s franchisees’ views on joint employer, and on franchise regulations in general, have become a central component in an ongoing controversy between operators and their Chicago-based franchisor.

Franchisees have argued that the brand exerts too much control over their business. While they argue that they do not want more joint employer regulations, they also say that the company has put itself into a position to be declared one based on its actions. McDonald’s, for its part, argues that its efforts—notably inspections of franchisees’ restaurants—are designed to improve sales by improving operations.

Franchisees have taken some of their complaints to state and federal regulators, essentially taking their battle into the political world.

But the two sides appear in full agreement on the California bill.

Zarco has publicly argued that federal joint employer rules, in general, could create an incentive for franchisors to put fewer restrictions on their franchisees, lest they be considered jointly liable for their franchisees’ employment actions. But the California bill does not make a specific distinction on the level of control fast-food franchisors have over their operators.

In his letter to Fight for $15, Zarco argued that the California legislation is “strict liability” legislation and would have the opposite effect that he wants for franchisees. He said the legislation could “force franchisors to undertake protective measures to insulate themselves from such liability in a manner that will likely impair the franchisor/franchise/employee relationship to the detriment of such relationship.”

The McDonald’s franchisees were more direct. The bill “will annihilate the businesses and livelihoods of franchisees throughout the state of California.”

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