Executive Summary
The California Senate has amended AB5. Certain non-franchise industries have been taken out of the bill’s exemptions while commercial fishing and professional services have been included. Still, no direct franchising at large amendment has been included.
Analysis
On August 30, 2019, the California Senate amended AB5. Unlike past amendments, the Senate’s Amendment takes out certain explicit industry exemptions and instead relies on cross-reference to other statutes to identify whether those exemptions are still included in the carve outs from the “ABC” Test. Contemporaneous with those technical changes are the additions of carve outs for commercial fishing and professional services such as fine artists and grant writers. Franchising at-large remains without mention.
Looking Forward
This bill is becoming closer and closer to the final version with only the Senate At-Large and a return to the Assembly At-Large remaining before this reaches the Governor’s desk. Debate and deal making will continue until the final hour but those deals will likely involve other industries that have political capital with their Democratic congress persons. If that is the case, we can fully expect this bill to go to referendum as some industries–particularly the gig economy–are being explicitly targeted by this bill and they have the financial ability to fund and connect with common constituents about how such a bill will hurt their industries.
One could hope the same could be true for the franchise industry but because it will take more than a change to the Dynamex “ABC” Test to give the labor unions the ammunition they need to upend the franchise industry in California. Nevertheless, every battle where there is a victory moves the SEIU and others one step closer to their ultimate goal of a joint employer finding for the franchise model in California and the franchise industry should remain vigilant to that potential. Said differently, bad facts make bad law and no one wants to be the franchisor that sets that awful precedent.
This article was originally published on the California Franchise Network.
As always, our team stands ready to assist your business with all of its franchising needs. If you have questions or need assistance, please contact the authors listed below.
Thomas O’Connell – Tom O’Connell is a Shareholder at Buchalter APC, where he serves as Chair of the firm’s Franchise Law Practice and Chair of Litigation for the firm’s San Diego office.
This communication is not intended to create or constitute, nor does it create or constitute, an attorney-client or any other legal relationship. No statement in this communication constitutes legal advice nor should any communication herein be construed, relied upon, or interpreted as legal advice. This communication is for general information purposes only regarding recent legal developments of interest, and is not a substitute for legal counsel on any subject matter. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal advice on the particular facts and circumstances affecting that reader. For more information, visit www.buchalter.com.
