This week, DDIFO joined the International Franchise Association (IFA), the Asian American Hotel Owners Association (AAHOA) and the Supercuts Franchisee Association in filing a federal lawsuit challenging California Assembly Bill 5 (AB5) law. Filed in the US District Court for the Southern District of California, the lawsuit contends that AB 5 is preempted by the FTC Franchise Rule as well as the Lanham Act, both of which govern and regulate franchising. The California law applies the ABC test to determine employment status to all businesses, including franchises and in that context could lead to a determination that a franchisee is an employee of the franchisor. A background summary of the issues can be found online here. The lawsuit seeks to have the court declare California’s AB 5 preempted by federal law and permanently enjoin the enforcement of the ABC test to the relationship between franchisors and California’s franchised businesses.