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Fast Food Spent $4M to Stop California Accountability Bill

The proposed legislation would hold companies liable for accusations of harassment, wage theft and other forms of mistreatment. The fast food industry has spent $3.9 million from Jan. 1 through June 30 on lobbying efforts to kill the legislation.

Fast food chains have spent nearly $4 million this year on lobbying and advertising campaigns to stave off a California bill that would hold corporate owners responsible for abuses that occur at franchise restaurants, according to a Sacramento Bee analysis.

Their target, Assembly Bill 1228, would hold companies and their franchisees jointly liable for accusations of harassment, wage theft or other forms of mistreatment.

Opponents of the measure have spent more than $3.9 million from Jan. 1 through June 30 to fight the bill.

Currently, employees of McDonald’s, Wendy’s and other fast food outlets deal solely with individual franchise owners over such allegations. The bill, authored by Assemblyman Chris Holden, D-Pasadena, would force parent corporations to assume a portion of accountability.

The bill brings back the most controversial provision of a Holden bill from 2022 that created a fast food council to improve restaurant working conditions.

Assembly Bill 257 enjoyed more support, especially after Holden dropped the joint liability portion toward the end of the session. Fast food companies are still fighting that measure through a ballot measure voters will consider in 2024.

AB 1228 stalled in the Senate Judiciary Committee ahead of the July 14 deadline for bills to advance out of policy committees. Chair Tom Umberg, D-Santa Ana, will likely help the bill get a hearing after the month-long summer recess ends on Aug. 14.

But it is unclear whether the measure can make it through the Legislature, even if it passes out of the Judiciary Committee. The bill squeaked out of the Assembly in April with 42 votes — just over the 41-vote threshold.

Republicans opposed to the measure continued push the industry argument that changing liability rules will prompt changes that hurt franchisees.

But some Democrats argued workers are in need of greater protection, and lawmakers could continue fine-tuning the bill. Ultimately, more than a dozen Democrats declined to vote on AB 1228, and a handful joined Republicans in voting against it.

Now, with only a few weeks of session left, Umberg has committed to obtaining a waiver to allow the bill a Judiciary hearing in August or September. Supporters are confident the Legislature will move the measure forward.

Big Spending Against AB 1228

Fast food companies and industry groups have been lobbying against AB 1228 throughout the legislative session, although they ramped up their efforts during the spring and summer as the bill advanced through the Capitol.

No on AB 1228 is the primary group opposing the measure. It spent about $3.5 million from April through June, according to Secretary of State’s Office records. That’s on top of $150,000 the group spent from January through March.

The remaining funds came from industry groups and fast food restaurant chains. Jack in the Box and Chick-fil-A have spent a collective $83,500 fighting AB 1228. Yum! Brands — which owns KFC, Taco Bell and Pizza Hut — spent at least $33,728 to defeat the measure.

Additional opponents lobbied against AB 1228 along with other bills, making it difficult to separate the total funds spent solely against AB 1228.

Some gave money to Save Local Restaurants, the group leading the ballot initiative against AB 257. Its lobbying arm is also fighting AB 1228.

Supporters of AB 1228 have put up only a fraction of the money fast food companies have spent. But it’s unclear by how much. One of its main proponents, the California Labor Federation, has spent more than $365,000 on lobbying so far this year. That’s for a slew of bills, though, not just AB 1228.

End of Franchise Model?

A large chunk of No on AB 1228’s lobbying money has funded advertising campaigns opposing the bill. Digital, mail and video ads show concerned franchisees expressing fears their business model will end if lawmakers pass the bill.

The ads falsely claim AB 1228 “forces national corporations to take control over local franchise restaurants.” Although the bill could prompt companies to become more involved in franchisees’ employment practices, it does not require franchisors to change the way they oversee restaurants.

But franchisees believe this increased liability would result in corporations exerting more control and possibly lead to the eventual elimination of franchising. The business model has been a staple of American capitalism for decades, particularly in the fast food industry.

Franchises allow owners and corporations to share in the operations and profits. Franchisees sell a corporate product and must adhere to certain company standards, including operations and advertising.

Franchisors already exert control over certain parts of franchisees’ businesses, but their limited role in employment prevents them from facing responsibility for labor violations.

“Franchisees fear in the long run, and the corporation’s will just start ending the franchise agreements or we’re not going to do any more new franchises,” said Kathy Fairbanks, a public affairs strategist speaking on behalf of the No on AB 1228 campaign.

Frivolous lawsuits could be another problem, according to Fairbanks.

“It’s going to incentivize trial lawyers to file meritless lawsuits and meritless claims against both the franchisees and the corporations,” she said.

The Push for Worker Protections

Advocates, like leading sponsor Service Employees International Union, say the current franchisee model leaves independent owners to fend for themselves. The result, they contend, is increased wage theft, harassment, discrimination and other violations of employment law.

“We know that these problems that workers have been raising are very real,” said Isabel Urbano, a spokeswoman for SEIU. “More and more workers are brave enough and bold enough to finally speak out, go on strike and say that something needs to change around.”

AB 1228 represents a larger movement by labor groups to empower low-income workers, who are overwhelmingly people of color. SEIU spearheaded a campaign in 2016 to raise California’s minimum wage to $15, as well as last year’s AB 257 fight.

Holden and bill proponents believe joint liability would force franchisors to take a more active role in preventing employee abuse at their restaurants.

“What they’re really saying is, if we do have a rogue operator who isn’t doing the right thing, who isn’t treating the employees correctly, who is creating a hostile environment, they don’t want to have any responsibility of having to hold them responsible as a franchisee,” Holden said.

©2023 The Sacramento Bee. Distributed by Tribune Content Agency, LLC.

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