The California version of the ABC test is arguably the most hostile to franchising. Nonetheless, the risk is not confined to California.
This is because the ABC employee classification test, with variations, has been adopted in a majority of states including, in addition to California: Alaska, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Louisiana, Maine, Massachusetts, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.
Despite this wave of ABC test adoption, absent federal action, such as the PRO Act or DOL adoption of an ABC joint employment test, some states are likely to retain a direct control-based employment standard. But the direction is clear: away from a direct contract standard toward the troublesome ABC test.
As if its aggressive ABC test wasn’t enough, the California legislature very recently but narrowly defeated the so-called FAST Recovery Act, designated AB 257. That Act would have established unelected councils with power to establish industry-wide standards on wages, hours and working conditions in the fast food industry. In addition, it would have established joint liability for fast food franchisors and franchisees, substituting the newly-established councils’ employment policies for those of the owner-franchisee. In an ironically positive vein, the FAST act would make it very difficult to support a theory that the franchisor or the franchisee controlled or directed the employees of fast food franchises.
The FAST Act failed by a mere three votes. It is likely to appear again.