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The fast-food model lets corporations escape liability. California might chart a new course

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FILE - This June 25, 2019 file photo shows a McDonald's sign outside the restaurant in Pittsburgh. More than 50 Black former McDonald's franchise owners are suing the burger chain for discrimination. In a federal lawsuit filed Tuesday, Sept. 1 in Chicago, the 52 plaintiffs say McDonald's steered them to less-profitable restaurants and didn't give them the same support and opportunities given white franchisees. AP Photo/Gene J. Puskar, File)
Fast-food workers across California plan to walk off the job in a push to expand legal liability beyond individual franchisees to their corporate franchisers. (Associated Press)

When you pass a McDonald's you might assume it's operated by the global mega-corporation. But in many cases, it's a franchise owned and run as a small business.

This model has been a pathway for entrepreneurs — many of whom are women, immigrants and minorities — to build wealth and become upwardly mobile. But it has also left workers in one of America's largest industries with little formal recourse for poor wages or unsafe work conditions.

Fast-food workers at stores scattered across California plan to walk off the job Nov. 9 and rally outside McDonald’s locations in San Diego, Los Angeles, San Jose, Oakland and Sacramento in a push to expand legal liability beyond individual franchisees to their corporate franchisers and to protest workplace health and safety conditions.

The protests aim to pressure state lawmakers to support AB 257, a proposed law that would establish a statewide Fast Food Sector Council made up of workers, corporate representatives, franchisees and state officials that would meet every three years to negotiate industry standards on wages, work hours and other conditions for fast-food workers.

The bill would hold fast-food corporations responsible for ensuring their franchisees comply with a variety of employment and public health and safety orders, including those related to unfair business practices, employment discrimination, the California Retail Food Code, as well as new standards issued by the council. The bill would make franchisee violations of employment laws enforceable against franchiser and franchisee equally.

The planned action comes during a burst of protests and strikes this fall, dubbed "Striketober," as workers push for better workplace conditions and wages. Low-wage workers, having experienced decades of stagnating or declining wages and benefits, are fed up. The COVID-19 pandemic has given many blue-collar workers new frustration and visibility as they continue to operate in grueling, often deadly conditions.

The fractured nature of the franchise arrangement — in which an establishment owned as a small business pays royalties and is contractually bound to its corporate franchiser — means that although a corporation holds the reins regarding how the store operates, it can abdicate responsibility for wages and working conditions.

Franchising has also long hampered collective bargaining in the fast-food industry.

That has led to numerous fast-food walkouts over the years, on issues including the handling of sexual harassment claims, wage theft, safety and pay, such as the "Fight for $15" movement, organized by the Service Employees International Union.

This week, McDonald's workers in some cities in the Midwest and on the East Coast protested what they say is continued sexual harassment of employees. The walkout was prompted by a lawsuit filed against McDonald's and a franchise in Pittsburgh alleging negligence after a manager at the location was accused of raping a 14-year-old worker.

"This is not a group of workers who are suddenly becoming aware that they're underappreciated or underpaid. I would say they've led other workers," said Assemblywoman Lorena Gonzalez (D-San Diego), who authored AB 257.

The walkouts raise awareness but don't necessarily halt operations. Often workers are afraid to speak up, fearing retaliation, said Crystal Orozco, who works as a shift supervisor at a Jack in the Box in Folsom, Calif. Orozco said that for three years she worked the graveyard shift from 10 p.m. to 6 a.m. five days a week without allocated breaks.

"They would expect us to take breaks in between cars [ordering at the drive-through], and we would not punch out or get penalty pay for that," Orozco said.

Orozco said she's been threatened with reduced hours for voicing a grievance. With assistance from SEIU, Orozco, 36, filed an unfair labor practice complaint alongside her co-workers in Folsom alleging the establishment's regional manager retaliated against workers who complained or spoke with union organizers by threatening to call immigration enforcement authorities.

Fast-food workers are more likely to be women, Latino or low-wage earners. California’s fast-food workforce is nearly 80% people of color and more than 60% Latino, according to a report prepared by labor researchers at UCLA and UC Berkeley. The same study found that two-thirds of California's fast-food workers rely on safety net programs to support their families.

AB 257, dubbed the Fast Food Accountability and Standards Recovery Act, failed a June floor vote in the Assembly, having fallen two votes short. Shortly after, the bill was approved to be taken up again by the Assembly in January.

Business interests have voiced strong opposition to the bill, saying that establishing a commission with the power to decide wages and health and safety measures is an overstep. Matthew Haller, president of the International Franchise Assn., said the association has heard from members who say they would not expand in California with new franchises if AB 257 were to become law.

"For people in California that may want to open a franchise business in the future, that opportunity won't exist at all," Haller said.

There are approximately 76,000 franchise establishments in California with a combined 728,900 jobs, according to a report by the International Franchise Assn. Members of minority groups have been able to benefit from owning and operating franchises, and the proposed legislation will stunt the growth of those businesses, opponents of the bill have emphasized. Asian-owned chains in the San Francisco Bay Area have thrived, and Black business owners operate many McDonald's locations in South Los Angeles.

Thirty-three percent of all franchises across the country are operated by members of minority groups, compared with 18% of non-franchise businesses, according to a letter jointly submitted to the Legislature by the International Franchise Assn., the California Restaurant Assn. and the California Chamber of Commerce.

Proponents of the bill argue it could empower franchisees and reduce the pressures they face. Franchisees often operate under tight constraints, with regular monitoring from corporate owners to ensure compliance with rules that dictate the time it takes to prepare food and even the vendor from whom they can purchase supplies. Royalties and marketing fees can eat up 12% or more of franchisees' revenue.

If a franchisee is found to have violated state laws, the bill would give the owner of that location the opportunity to seek monetary or injunctive relief if compliance with its contract with its corporate franchiser contributed to its rule-breaking.

AB 257 was among a slate of bills tackling employment law this past legislative season. Gov. Gavin Newsom signed a slew of them, including a bill that sought to address safety concerns in Amazon fulfillment centers across the state, where workers experience high injury rates related to closely tracked productivity goals, and legislation that expanded fashion brands' liability for labor violations in their supply chains.

Chris Rhomberg, a professor of sociology at Fordham University who researches labor history, said a trend toward increasingly layered arrangements between workers and employers — including franchising, outsourcing to subcontractors and reliance on independent contractors — insulates employers from having to comply with labor laws.

"Because it's hard to get into a workplace to establish a union, workers and unions are exploring other venues to try to get some control over their work and find other ways of regulating health and safety," Rhomberg said.

This story originally appeared in Los Angeles Times.