California lawmakers are considering a fast-food bill this month that would dramatically change the relationship between restaurant workers and the corporate chains whose products they sell.
If Assembly Bill 257 passes, California would be the first state to assign labor liability to fast food companies and not just their individual franchisees.
The bill’s provisions would allow workers and the state to name fast-food chains as a liable party when workers claim violations of minimum wage or unpaid overtime at a franchised establishment.
The wording of the bill would also allow a franchisee to sue a restaurant chain if their franchise agreements contain strict terms that leave them no choice but to violate labor laws.
It’s part of a broader bill pushed by unions to more strictly regulate fast food businesses. AB 257 also includes a measure to create a state-run fast food sector board to set wage and labor standards across the industry.
Last week, the bill survived the “waiting file” process, where controversial bills are often quietly killed. After approving the Senate Appropriations Committee, the bill awaits a vote on the floor.
Governor Gavin Newsom has not taken a position on the bill, but his Treasury Department opposes it, saying it would create ‘ongoing costs’ and add to delays in the government’s labor enforcement system. ‘State.
If it becomes law, supporters said it could deter wage theft and other abuses in the low-wage industry.
“How do you hold the companies at the top of the food chain, who really set the terms and conditions of employment, accountable for the lower levels – California has been way ahead of that,” said Janice Fine, professor of social studies and employment. relationships at Rutgers University. “What happened in California is a real effort to try to understand the cracked economy.”
The California Fast Food Bill
The fast food bill is one of the most controversial measures the legislature is considering in its final weeks in session.
The California Chamber of Commerce and the state restaurant association lobbied against it, arguing the bill would upend the franchise business model and ultimately increase costs for franchise owners and consumers. On Wednesday, a group of franchisees swarmed the Capitol to oppose the bill.
The Service Employees International Union and its Fight for $15 campaign have led a series of strikes over the summer to rally for passage of the bill, including an overnight rally at the Capitol this week.
Currently, most workers who allege wage theft, for example at a McDonald’s, Burger King or Jack in the Box, can only name the owner of their specific franchise as responsible for their reimbursement – even if they work under the banner of a multi-billion dollar fast food company.
In other industries, California has already done some of what AB 257 proposes to do for fast food. In some cases, the state has extended responsibility for employment conditions beyond the level of contractors or suppliers to large companies with which they do business, even if they do not directly employ the workers.
For example, in 2014, lawmakers made companies that use contract workers liable for wage theft committed by these worker agencies. Lawmakers then did the same for contractors in the janitorial, gardening, construction and nursing home sectors.
Last year, the legislature passed a measure blaming major fashion brands for wage theft by apparel makers in their supply chains.
Wage theft in fast food
Fast food is the latest industry to attract this type of regulation, and it is one of the largest and most visible.
Restaurants such as fast food joints, take-out businesses and cafes employed more than 700,000 workers statewide, according to federal data in June. Proponents of the bill estimate that 80% of workers are black, Latino or Asian and that two-thirds are women.
SEIU and Fight for $15 say the industry is plagued with labor violations. The union released a survey of 400 workers this year in which 85% said they had been victims of wage theft.
Business groups said the bill unnecessarily targets fast food. The Employment Policies Institute, a national restaurant-related think tank, released a report this month showing that the percentage of wage claims filed against this industry segment is lower than its share of the California workforce. .
If approved, the bill could mark a turning point in US labor law.
Typically, under the franchise model, fast food companies enter into agreements with franchisees that dictate various standards for the sale of food products under their brand, but leave wages, hours, and working conditions up to the franchisee.
The model paved the way for business ownership for many minority-owned entrepreneurs, proponents point out.
But critics say companies like McDonald’s and Domino’s have been allowed to make a profit while distancing themselves from responsibility for how restaurant workers are treated.
The question of the relationship of franchisors to workers remains unresolved at the federal level. In three presidential administrations, the National Labor Relations Board has back and forth on the advisability of automatically considering franchisors and franchisees as “co-employers”. Courts, including the Supreme Court of California, have generally dismissed this idea under existing law.
“These franchise models have been an avenue and a way for companies to avoid the responsibility of being employers,” said Emily Andrews, director of education, labor and worker justice at the Center for Law. and Social Policy, a national left-wing anti-poverty organization. organization.
Studies have shown that franchisors can exert significant pressure and control over franchise business owners.
In an article published last year, law professors from the University of Miami and Cornell University examined 44 franchise agreements from 2016 and found that more than three-quarters gave the chain exclusive power to terminate contracts, placing a franchisee “in a position of economic dependence”. .”
“Franchisees may respond to intensive franchisor oversight and tight profit margins by illegally chiselling wages as the only cost variable that the franchisor does not directly monitor,” the law professors wrote.
The International Franchise Association disagrees, arguing that the business model is defined by the independence of franchise owners in work decisions. The fast food bill, they said, would reduce those owners to middle managers, and big companies would take away opportunities in California if they were required to monitor labor law compliance.
“You would hold an entity accountable or assign liability for things over which it has no control,” said Jeff Hanscom, spokesman for the Washington, DC-based association, which includes franchisors and franchisees. “You take a franchise and turn it into a corporation.”
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