California's fast-food industry faces another landmark change

Legislation has been introduced to designate restaurant franchisors and franchisees as joint employers of a unit's staff.
Lawmakers are looking again at a joint-employer rule. / Photo: Shutterstock

When pushback mounted last year against California’s controversial fast-food wage bill, known as the Fast Act, proponents tried to sap the resistance by dropping a provision that would have made restaurant franchisors accountable for the labor practices of franchisees.

The bill passed without that backdoor effort to legally redefine licensee and licensor as joint employers.

Now a freestanding bill has been introduced to make that relationship a legal standard.

The restaurant industry’s largest union, the Service Employees International Union, designated passage of the Fast Food Corporate Franchisor Responsibility Act as a high priority. It described the bill as a “next pivotal step” in wining “respect and a stronger voice on the job” for fast food workers.

Like the Fast Act, the new bill is aimed exclusively at the limited-service sector of the restaurant business. It essentially extends culpability for infractions of state labor regulations to a fast-food restaurant’s franchisor if it has one. That means that an aggrieved employee could sue the franchisor as well as the franchisee, hoping to dig into the brand parent’s deeper pockets.

It also enables union organizers to spotlight scandalous treatment of employees by a single franchisee as the handiwork of the whole chain and thereby stoke public and worker outrage. Rousing sympathy against a brand would theoretically make unionization of that whole organization an easier sell.

The introduction of the Franchisor Responsibility Act drew an immediate response from the International Franchise Association, which has been leading the franchise community’s efforts to make the joint employer concept a legal standard.

“The franchise business model has afforded millions of people the opportunity to pursue the American Dream, especially people of color, women, immigrants and other underrepresented communities,” Matthew Haller, the association’s CEO, said in a press statement. “This bill will take away their independence and the livelihood they have dedicated to their business, their employees, and the people they serve—making them simply employees of their brand.”

Haller noted in his statement that the act was introduced and defeated in the state legislature just about six months ago.

The IFA added that the implementation of a joint employer law in California would prompt prospective franchisees to look for opportunities in other states.

New York is unlikely to be one of them. Lawmakers in the East Coast state recently introduced legislation that would make joint employer status a reality for franchisors and franchisees operating there.

California is home to 30,000 fast-food restaurants that employ more than 57,000 workers, according to the SEIU.

“For too long, corporations have exerted massive control over local operators and tried to buy themselves out of democracy, all in the name of boosting profits and returning ever-growing dividends to their shareholders,” SEIU President Mary Kay Henry said in a statement. “But workers refuse to back down, and together with their elected officials they are demanding a means of holding McDonald’s and other global corporations accountable for health and safety on the job.” 

The SEIU was the driving force behind the Fast Act, which shifts responsibility for setting the minimum wage and job place standards for fast-food workers from the California legislature to a Fast Food Council, a 10-person panel that includes two restaurant workers and two union representatives. Two more seats are reserved for both restaurant franchisees and franchisors, with the last two slots going to state officials.

The law is on hold until voters can decide via referendum in November 2024 if they want enforcement to begin.

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