There is a bill that has passed the California Assembly and is in front of the California Senate that, if passed in its current form, will make you, our franchisee, our employee and your employees our employees. This bill is called AB 5. It would codify the "ABC Test" for determining whether someone is an employee or an independent contractor as the definition for the state of California for all wage, hour and labor issues.
The bill is intended to protect people working in the "gig economy" and make them employees of the entity. The best example of what this bill is trying to "help" or "fix" is Uber drivers. Using the "ABC Test" (more details on this below), Uber drivers would become employees of Uber and thus Uber would be required to pay them more, pay overtime, provide benefits, etc. However, the law is currently written quite broadly and there will be many "unintended consequences". One of those unintended consequences, unless the language in the bill is modified, is that most franchisees in the state of California will become employees of their franchisor.
We--the International Franchise Association, and FASTSIGNS International as a franchisor--are working hard to get an exemption for franchising added to the bill. So far, we have not been given any promising indication that the exemption language will be added.
To protect franchising in California, we need a BIG presence in Sacramento to lobby for any chance of the exemption language be added to the bill. We have scheduled a Lobby Day in Sacramento on Tuesday, August 27 from 9:00 AM to 3:00 PM. I need you there! Franchising needs you there. Jim Howe, FASTSIGNS International's VP of Franchise Support, will be representing our company there. However, since he is not a California voter, he won't have the impact YOU will.
Here is the ABC Test:
To not be considered an employee, the "worker" (or in your case, the franchisee) must be able to prove ALL of the following:
A. the worker is free from the control and direction of the entity in connection with the performance of the work, both under the contract for the performance of the work and in fact
B. the worker performs work that is outside the usual course of the entity’s business; and
C. the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
There is no way you as a franchisee can prove all 3 in regards to FASTSIGNS International. Since we sell signs via National Accounts, you fail the prong "B" of the test. Our brand standards and brand controls likely have you failing prong "A" of the test. If you fail any of the prongs of the test, you are deemed an employee of the entity as AB 5 is currently written.
So, unless we can get the franchising exemption language added to the bill and it is passed in its current state, you will be deemed employees of ours and since you manage your employees, they will be considered employees of ours.
Labor unions want AB 5 passed as is. Trial lawyers want AB 5 passed as is. U.S. Senator and presidential candidate Elizabeth Warren wrote an Op Ed in the Sacramento Bee recently asking all democrats to push AB 5 to be passed with no exemptions.
The unintended consequences of AB 5 passing without an exemption for franchising will have far-reaching negative effects for franchising in California.
Please take 4 minutes right now and use this link to send a letter to your elected representatives to ask them to add the franchising exemption: https://p2a.co/i3WKNsY? After you send email using the link, please let me know.
And, I am asking you to make the time to spend all day Tuesday, August 27 in Sacramento with the IFA. Please join Jim Howe, our Vice President of Franchise Support, at this Lobby Day.
If you will attend, please use "reply all" and let us know. I hope to have at least 25 California franchisees participate. Please be one of them.
I have attached 3 documents that will help \you learn more about this issue.
Thank you for your help and support!