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AAFD Takes Action on California Franchise Legislation

Posted on Date: Feb 26, 2020

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AAFD has weighed in on two legislative issues in California in the past couple of weeks.  The first, AB-2672, which will make updates to the California Franchise Relations Act.  This bill was authored by Assemblyman Chris Holden, who also authored AB-525 in 2015, which made significant improvements to the Act.  AAFD is proud to be a sponsor of AB-2672.  The second action is on SB-967, which is a bill designed to exempt franchises from the requirements of AB-5, a worker classification bill.  On this bill, AAFD has taken an opposition position until amendments are made ensuring franchisees have the basic tenets of business ownership before their brand is exempt.  Details on both are below.

  1. AB-2672 will provide technical updates to AB-525, the franchise legislation passed in 2015. A copy of the letter submitted by the AAFD can be found (here).  A link to the legislation is here.  It will accomplish three items listed below:
  • Make the existing law enforceable on all franchise agreements that have been amended since 1/1/16. This is in addition to contracts new or renewed from that date.
  • On a termination or non-renewal, and the franchisor takes possession of the business, it updates the language that any offset the franchisor takes, must be agreed upon by the franchisee or adjudicated in a court.
  • On a transfer, it would make the current laws language apply to all transfers, not just those on contracts new or renewed since 1/1/16. This language includes the requirement that upon submitting for a transfer, the franchisor must provide, in writing, the approval standard. It also requires approval decision in 60 days, and if not approved, must provide in writing why.
  1. SB-967, a bill on worker status: independent contractors: franchiser and franchisees. This bill would exempt franchises from the AB-5 worker classification tests passed last year which codified existing case law established by the Dynamex case.  While AAFD agrees that franchisees should not be considered employees of the franchisor, it opposes an exemption unless the franchisor recognizes the basic tenets of business ownership.  Those requirements are listed in the letter (here) to Senator Borgeas, the author of SB-967. As stated in the letter, AAFD will remove its opposition and support the intent of the bill if an amendment is made matching our requirements.  A link to the legislation is here.

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