California's Fast Food Franchisor Responsibility Act: A Deep Dive into Joint Employer Liability

California's legislative landscape is poised for a significant shift with the introduction of the "Fast Food Franchisor Responsibility Act," also known as Assembly Bill 1228. This legislation seeks to establish a joint employer liability framework in the fast food industry, holding franchisors accountable for the actions of their franchisees. The proposal comes amidst the backdrop of the "FAST" Act (AB 257), a previously passed but currently delayed legislation that could create the first-ever statewide Fast Food Council to oversee California's fast food industry. The FAST Act is expected to be on the November 2024 ballot The proposed AB 1228 bill delves into several critical areas that warrant a more detailed examination.

Shared Responsibility: A New Chapter in Fast Food Franchising

The cornerstone of AB 1228 is the concept of joint employer liability. This provision proposes to introduce a new section to the Labor Code, Section 2810.9, which would place a fast food franchisor in a position of shared civil legal responsibility and liability for its franchisee’s violations of a range of laws and regulations. This represents a significant departure from the traditional model where franchisors and franchisees operate as distinct entities. Under this new provision, franchisors could find themselves legally accountable for the actions of their franchisees, potentially leading to a more rigorous oversight of franchise operations.

However, one of the unique aspects of AB 1228 is the introduction of the right to "rectify" violations. This provision grants a franchisor a 30-day window to address a violation before any civil action could be initiated. This period could be extended to 60 days if the franchisor requests additional time to conduct an investigation.

While on the surface, this provision might appear as a protective measure for franchisors, it comes with stringent conditions. To cure a violation, a franchisor must:

1. Address every violation alleged: This means that the franchisor must take action to correct all the issues raised in the violation notice.

2. Ensure that its franchisee is in compliance with all relevant laws, orders, rules, and regulations: This requirement places the onus on the franchisor to ensure that the franchisee is not only rectifying the current violation but is also in compliance with all other relevant regulations.

3. Compensate any fast food restaurant worker who raised the violation: This provision ensures that the rights of the workers are protected. If a worker has raised a violation, the franchisor must ensure that the worker is compensated for any damages suffered as a result of the violation.

Franchise Contract Terms: A New Landscape

The bill also scrutinizes franchise contract terms. It explicitly forbids contracts between a franchisor and franchisee from negotiating indemnity agreements related to the terms of this proposed Labor Code section. Any agreement that attempts to shift liability from a franchisor to a franchisee would be deemed void and unenforceable. This provision could trigger a reevaluation of existing contracts and influence the negotiation of future contracts.

Looking Forward

The International Franchise Association (IFA) has voiced its opposition to the measure, suggesting that it could discourage aspiring entrepreneurs. As the bill navigates through the legislative process, it will be essential to keep an eye on its potential impacts on the fast food industry in California and beyond.