Sacramento Capitol Building image via wikipedia user Suvicce

published on February 28, 2020 - 4:07 PM
Written by The Business Journal Staff

Sen. Andreas Borgeas (R-Fresno) has introduced a bill that would help bring certainty to franchisees when it comes to AB 5, the state’s new contractor law.

Franchisors and franchisees have been struggling to interpret and comply with the law, which makes it more difficult for employers to classify workers as contractors. AB 5 institutes a new test that serves to classify more workers as employees entitled to benefits.

Many local eateries are owned by franchisees. Borgeas said AB 5 could cloud the relationship between franchisors and franchisees.

“Under AB 5, franchisors could be exposed to liability for labor laws violated by their franchisees,” Borgeas said.. “SB 967 would ensure that franchisees would not be considered an employee of the franchisor but instead an independent contractor.”

AB 5 could be devastating to the franchise model, which grants a license to operate a business under a franchisor’s trademark such as a fast food chain or gas station, Borgeas added. While the franchisor controls the quality of goods and services, the franchisee is otherwise free to run their franchise and hire employees. This leaves the franchisor liable for decisions out of their control made by the franchisee.

SB 967 was introduced Feb. 11, and has been referred to the Senate Committee on Labor, Public Employment and Retirement for action on or after March 13.

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