Over the past few weeks, California has been making national headlines for the unusual coupling of labor with business owners. At issue is the proposed California Senate Bill 610, which purports to “level the playing field” between franchisees and franchisors (or, as some might characterize it, small business and big business). Examples of the national discussion on SB 610 can be found here, here, and here.
SB 610 would alter California’s franchise laws by imposing a “good faith” requirement in a franchisor’s dealings with its California franchisees. The bill also enumerates remedies for franchisees such as injunctive relief and recovery of attorneys’ fees and costs in the event the franchisee prevails during litigation. On its face, and in part due to the national coverage, one would assume that SB 610 drastically changes the franchise law landscape in California.
While SB 610 is certainly something of which to be conscious, it actually alters little pre-existing California law. For example, the bill’s requirement that parties deal with each other in “good faith in the performance and enforcement of the franchise agreement” is simply not a new requirement (nor should it be). The language instead codifies California’s longstanding implied common law duty of good faith and fair dealing between parties to contractual agreements. With or without SB 610, wronged franchisees are able to litigate bad faith claims against a franchisor and seek that such behavior be enjoined.
So, what’s the national noise really about? It’s possible that SB 610 is being viewed by interested parties as a test vehicle for more aggressive amendments to franchise and labor laws that are coming down the pike. Stay tuned.
As of the drafting of this update, SB 610 passed the California assembly by a vote of 41 to 27, and awaits approval by the State Senate.