Dunkin and Supercuts franchise groups sue California’s AB5 law

Groups such as the International Franchise Association, the Dunkin Donuts Independent Franchise Owners Association and the Supercuts Franchisee Association said they filed a lawsuit Tuesday night against the state of California over Assembly Bill 5, a law recent state restricting gig work like carpooling and freelance writing.

The Asian American Hotel Owners Association is also part of the lawsuit, which seeks to ban California from applying the so-called ABC test of AB5, intended to prevent companies from misclassifying workers, to the relationship between franchisees and franchisors.

CFOS MONITOR A POSSIBLE MINIMUM SALARY INCREASE UNDER SUBMISSION

“AB 5’s misapplication of the ‘ABC test’ to franchise is destructive for franchise brands and fails to understand the most fundamental aspects of the franchise business model,” said Robert Cresanti, chief executive officer of the International Franchise Association, in a press release. maintain consistency and uniformity in its independent franchises, federal law requires that a brand be required to establish standards that apply to the operations of all individual owners, thereby ensuring the quality and consistency expected by consumers.

“As a federal judge recently said, applying the ABC test to the franchise business model ‘would gut franchising,” “Cresanti continued. “Our action will help these California businesses operate with clear rules and regulations that allow them to continue to grow, hire. Workers, and give back to their communities.”

The lawsuit, filed in U.S. District Court for the Southern District of California, claims AB5 is preempted by the Federal Trade Commission franchise rule and Lanham Law.

“We haven’t been served yet,” a spokesperson for the California attorney general’s office told FOX Business. “However, the California Department of Justice has and will continue to advocate for laws designed to protect workers and ensure fair business and labor practices.”

California Governor Gavin Newsom, a Democrat, signed AB5 in September 2019 and it came into effect on January 1. The law, sponsored by state congresswoman Lorena Gonzalez, requires many companies to treat their employees like employees, and it aims to encourage companies to create more full-time jobs.

“The codification of the Dynamex decision through AB 5 was never intended to prevent legitimate franchises or small businesses from operating, but rather to prevent the abuse of these business models to misclassify workers,” said Gonzalez to FOX Business in a statement. Courts are looking at the scope and application of the Dynamex decision in pending cases, such as Vazquez v. Jan-Pro Franchising International, where a group of janitors was found to have been misclassified under a franchise model at three levels. I expect the courts to continue to provide important clarity on these issues throughout the judicial process. “

Earlier this year, the International Franchise Association was hoping for a clarification bill from Gonzalez to address the “uncertainty” created by AB5, Matt Haller, a senior vice president of the International Franchise Association, told FOX Business in January. Now the group has turned to litigation.

CLICK HERE TO LEARN MORE ABOUT FOX BUSINESS

“It’s not that we oppose AB5 or oppose AB5’s goals… seeking to eradicate misclassifications of workers,” Haller said in January. “But let’s be clear, no one who buys a franchise business, whether it’s a Popeyes restaurant or a Hampton Inn, should be an employee of the brand they license that brand with. This is where federal law conflicts with laws like AB5. “

Fox News’ investigation of the California attorney general’s office was not immediately dismissed.

GET FOX BUSINESS ON THE ROAD BY CLICKING HERE