California Bill Would Make Fast-Food Franchise Liable for Franchisees’ Violation of Wage Law

California Assembly Bill 1228 (A.B. 1228), otherwise known as the Fast-Food Franchisor responsibility Act, was introduced on February 16, 2023. If passed into law, fast food restaurant franchisors and franchisees will share all legal responsibility and liability for the franchisee’s violations of the California Labor Code.

A.B. 1228 would mandate that the complaints alleging wage law violation by a fast-food restaurant franchisee provide a written notice to the franchisor of their plan to file a wage lawsuit. The franchisor would be given 30 days (60 days if the franchisor makes a written request for additional time) to cure the alleged violation by making all complainants whole and ensuring that its fast-food restaurant franchisees comply with the underlying laws specified in the notice. Otherwise, complaints may include the franchisor as a co-defendant in a civil action.

A.B. 1228 would also provide the fast-food restaurant franchisee the right to sue its franchisor for monetary damages and injunctive relief if their franchise agreement creates a substantial barrier to the franchisee's compliance with the wage laws.

A.B. 1228 also points out that the civil liability laid out in this bill is nonwaivable, nor can a fast-food restaurant franchisee indemnify its franchisor for such liability in its agreement.

A.B. 1228 currently applies to a fast-food restaurant that is a part of a set of restaurants consisting of 100 or more establishments nationally that share a common brand or are characterized by standardized options for decor, marketing, packaging, products, and services.

The goal of A.B. 1228 is for “franchisors must take greater responsibility for achieving compliance with employer laws throughout their franchise networks," and this bill would "incentivize franchisors to ensure their part to ensure and enable compliance with employment laws." Meanwhile, in a statement, Assemblymember Holden said that he introduced A.B. 1228 to “protect workers and support local business” because he knew “how much pressure maintaining a safe and healthy working environment puts on local owner-operators, especially when global corporations refuse to contribute their share.”

By seeking the involvement of the franchisor into the wage and hour activity of the franchisee, A.B. 1228, would also create exposure under the National Labor Relations Act and potentially other labor/employment laws for the franchisor to be deemed a joint employer of the franchisee.