We wanted to start our first monthly roundup by telling you that it has been a momentous month for lawmakers passing labor legislation – but, even ‘momentous’ may be understating it.
The end of the legislative session in California brought with it the passage of AB 5, the law watched closely all around the country: it will reclassify a massive number of working people, defining them as employees rather than independent contractors.
Like countless other pieces of legislation that originate in California, this idea is expected to spread to other states.
If you’ve been following The Daily Prep, you’ve read plenty about the arguments on both sides of the issue. Supporters of AB 5 argue that many app-based companies – like those who provide rideshare services – have misclassified employees as independent contractors in an effort to skirt labor laws that require workers receive protections like workers’ compensation insurance, paid family leave, and health insurance. Opponents have argued that workers prefer the independence that comes with being a contractor rather than an employee.
So, will restaurants, who generally already classify workers as employees, be impacted by legislation aimed at larger tech companies? The short answer is, they might be. For one thing, the cost of food delivery could go up because third-party delivery services expect to see significant increases to their operating costs under the new law. But, that’s not all.
In its current form, AB 5 leaves open the possibility that franchisees could be considered employees of a franchisor. In case you missed it, check out this article, which we shared yesterday here in The Daily Prep: New California Law a Fatal Threat to Franchising.
No, the law doesn’t directly address the franchisee-franchisor relationship, but legal experts say that’s precisely the problem. Unless future amendments to the law offer clarification, questions over the nature of franchisor-franchisee relationships could end up being decided by courts.
In other words, stay tuned.
The Daily Prep Team