California Lawyers Association

Business Law Franchise Law Committee

Updates from the BLS Franchise Law Committee

The Franchise Law Committee presents the following case update. In 2018, the California Supreme Court issued a landmark decision in the matter of Dynamex Operations West, Inc. v. Superior Court of Los Angeles. The court rejected a previous test for determining whether workers should be classified as either employees or independent contractors. Read more
In light of the COVID-19 pandemic, several states that require annual Franchise Disclosure Document (FDD) renewals made recent changes to their filing deadlines, fees and/or submission requirements. Read more
The members of the BLS Franchise Law Committee ("FLC") specialize in franchising, licensing and distribution law. The FLC is extremely diverse, with its members representing both franchisees, franchisors and distributors in both disputes and deals. The FLC advises California practitioners about the multiple laws and regulations that govern franchises throughout California and sometimes in other states. On December 12, 2019, the Franchise Committee held a webinar on Assembly Bill 5 (classification of workers as independent contractors or employees) with a… Read more
Assembly Bill 5 (Worker Status: employees and independent contractors) (“AB 5”) is the proposed codification of the ABC Test for the California Labor Code and California Unemployment Insurance Code based on the California Supreme Court decision of Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903 (2018). AB 5 replaces the current common law analysis under S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989), for determining the status of a worker as either an employee or independent contractor. Read more
On February 13th, the Federal Trade Commission (the “FTC”) announced that it is seeking public comment on its Trade Regulation Rule entitled, "Disclosure Requirements and Prohibitions Concerning Franchising" (the “Rule”). As part of the FTC’s periodic regulatory review, the agency is requesting comments to thirteen specific questions to address whether franchisors, franchise sellers and franchisees have benefited from the Rule, what modifications are needed to the Rule, the costs of compliance and what amendments might be needed to address changes in relevant technology and economic conditions. Read more
A district court sitting in California was recently asked to address the enforceability of an out-of-state forum selection clause in a franchise agreement in light of the U.S. Supreme Court’s landmark decision in Atlantic Marine Constr. Co., Inc. v. United States Dist. Court for W. Dist. of Texas, 134 S. Ct. 568 (2013). As discussed below, the district court circumvented Atlantic Marine by finding that the California Franchise Relations Act (the “CFRA’), at Bus. & Prof. Code § 20040.5, renders the out-of-state forum selection… Read more
The Associate General Counsel for the National Labor Relations Board (“NLRB”) recently issued an Advice Memorandum finding that a franchisor was not liable as a “joint employer” for the alleged unfair labor practices of one if its franchisees. While the memo does not set legal precedent, it does represent a deviation by the NLRB to its recent aggressive treatment of franchisor-franchisee relationships as reflected in the landmarkMcDonald’s, USA, LLC case and in the amicus brief submitted by the NLRB’s General Counsel in… Read more
On May 14, 2015, the California state Assembly passed AB 525, a bill that would amend the existing California Franchise Relations Act (Business and Professions Code §§ 20000 – 20010) (“CFRA”) by expanding the protections for existing franchisees. As currently written, AB 525 would amend the CFRA in the following ways: “Good Cause” Restricted to Substantial Compliance. Under the CFRA, a franchisor is permitted to terminate a franchise prior to the expiration of its term only for “good cause,” which… Read more
Contractual forum selection clauses have historically been favored in California so long as they are entered into “freely and voluntarily, and their enforcement would not be unreasonable.” (Smith, Valentino & Smith, Inc. v. Superior Court of Los Angeles County, 17 Cal. 3d 491, 495-96 (Cal. 1976); America Online, Inc. v. Superior Court, 90 Cal. App. 4th 1, 11 (Cal. App. 1st Dist. 2001); Verdugo v. Alliantgroup, L.P., 2015 Cal. App. LEXIS 466, *5-6 (Cal. App. 4th Dist. May 28, 2015)(To be reasonable,… Read more
Late last summer, the California Supreme Court refused to find Domino’s Pizza vicariously liable for the alleged wrongdoing of its franchisee’s employee. The closely divided 4-to-3 decision in Patterson v. Domino’s reflected the Court’s attempt to reconcile the franchise business model with the traditional legal doctrines of agency and vicarious liability. (Patterson v. Domino's Pizza, LLC, 60 Cal. 4th 474 (Cal. 2014).) Recognizing the universal benefit of systemwide consistency, the Court applied the “means and manner” control test to Domino’s franchise system… Read more

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