Borgeas Introduces Bill to Exempt Franchisees and Franchisors from AB 5

Sacramento – Senator Andreas Borgeas (R-Fresno) introduced Senate Bill 967 to permanently exempt franchisees from Assembly Bill 5 (Gonzalez, 2019).  

“Under AB 5, franchisors could be exposed to liability for labor laws violated by their franchisees,” said Senator Borgeas. “SB 967 would ensure that franchisees would not be considered an employee of the franchisor but instead an independent contractor.”

As the state of California begins to wrestle with AB 5’s implementation, independent contractors and small businesses are left in a great deal of confusion. Specifically, franchisors and franchisees are grappling to interpret and comply with this haphazard law.

AB 5 could be devastating to the franchise model, which grants a license to operate a business under a franchisor’s trademark such as a fast food chain or gas station. While the franchisor controls the quality of goods and services, the franchisee is otherwise free to run their franchise and hire employees. This leaves the franchisor liable for decisions out of their control made by the franchisee.