McDonald's Franchisees Oppose California's Joint Employer Rules Proposal

McDonald's franchisors and franchisees have joined forces to fight the new California Assembly Bill 1228, or the Fast-Food Franchisor Responsibility Act. The bill, which would hold both franchisers and franchisees responsible for labor violations and recognize franchisers as joint employers, passed the California State Assembly on May 31st and has since been reviewed by the State Senate. The final step requires the approval of Governor Gavin Newsom.

Such solidarity between franchisers and franchisees is unusual: even now, they oppose the bill for different reasons. Franchisers object to being saddled with the legal liability, while operators argue that franchisers exert too much power already. In recent years, McDonald's has implemented stricter regulations on operators, like frequent surprise inspections and new requirements that make it harder for operators to renew agreements or expand their businesses. In response to the new rules, the National Owner's Association (NOA), an organization of McDonald's operators, argued "If McDonald's does not want to be considered a Joint Employer, they need to stop acting like one." The organization expressed fears that the new law would invoke even stricter regulations from McDonald's and damage the already shaky relationship between the franchisor and franchisees.

Under the Fast-Food Franchisor Responsibility Act, anyone intending to file a lawsuit against a franchisee — including allegations of wage theft, sexual harassment, discrimination, and safety violations — would need to provide written notice to the franchisor. The franchisor would then have 30 days to rectify the problem, 60 if they submit a request for additional time. The franchisor would also be responsible for ensuring that franchisees complied with the law going forward. It would apply to fast-food franchises with 100 or more establishments nationwide.

The bill comes as part of a larger push toward fast-food labor reform. It was taken from Assembly Bill 257, known as the Fast Food Accountability and Standards Recovery Act or "FAST Recovery Act," which passed in 2022. In addition to the regulations imposed by Assembly Bill 1228, the FAST Recovery Act would've created a Fast Food Council to advocate for workers' rights. However, the bill was blocked. Restaurant owners and major fast food corporations successfully gathered enough signatures for a referendum, and the bill will be put to a vote as part of the November 2024 General Election.