Landmark California Fast Food Wage Bill Close to Final Passage

Governor Newsom is widely expected to sign the controversial legislation. | Photo: Shutterstock

A California law establishing a new way to set wages and labor standards in fast food is headed to Gov. Gavin Newsom’s desk for near-certain enactment after passing both houses of the state legislature Thursday evening. State.

The measure raises the minimum wage for fast food workers employed by one unit of a chain with at least 60 outlets nationwide to $20 an hour starting April 1.

A change to the wage floor and working conditions will then be reviewed at most every six months by a Fast Food Wage Council, a panel that includes four representatives of fast food workers and an equal number of proxies for restaurant employers fast. The law calls for giving a ninth council seat to an unaffiliated person, likely to break a tie if worker and employer representatives are deadlocked on an issue.

The bill presented to Newsom would remove the requirement that franchisors be held accountable for the employment practices of their franchisees in California. Ironically, the legislation – AB 1228 – was originally written to adopt this definition of joint employer as law.

It was virtually rewritten as part of a compromise between industry groups and labor advocates who were pushing the bill. The employer parity component was removed and a provision creating the Fast Food Wage Council was inserted.

The rewritten bill technically overrides the Fast Act, the original legislation creating the Council. Although passed last September, its application was halted after restaurant and franchise groups obtained enough signatures from California residents to put the Fast Act to a referendum in November 2024. Residents would have essentially been asked to vote yes/no to preserve the Fast Act. Act.

The industry had planned to launch a campaign to convince voters that the Fast Act would dramatically raise menu prices, eliminate jobs and drive businesses to states where such legislation was not in place. This effort was expected to cost the industry well over $100 million to sway public opinion.

But the trade’s chances of success were reduced when Governor Newsom signed a bill on September 8 changing the language Californians would see in the referendum. Instead of voting yes/no to put the burden of the Fast Act on employers, the new language essentially asks whether the law should be continued or eliminated, without any explanation as to why it should be repealed.

Days later, a deal was announced between a business coalition called Save Local Restaurants and union representatives. The collaborating industry groups – the National Restaurant Association, the International Franchise Association and the United States Chamber of Commerce – agreed to accept the creation of the Fast Food Wage Council, albeit with some adjustments, in exchange for rejecting the call of AB 1228 to define restaurant franchisors and franchisees as joint employers.

The industry obtained some concessions. For example, the Fast Act allowed any California municipality with a population of at least 200,000 to create its own wage board, increasing the possibility for employers to face a patchwork of wage and work requirements on the most large catering market in the country.

Labor supporters have strongly defended a provision of the Fast Act to significantly raise the statewide minimum wage for fast food workers. The compromise measure specifies that the minimum wage will increase to $20 an hour in April for covered workers. The minimum is currently $15.50. Labor advocates had initially called for a $22 wage, but reduced their demand by 10 percent during compromise negotiations.

The original legislation would have imposed this minimum wage on any fast food restaurant in the state that is part of a chain with at least 100 locations nationwide. The rewritten AB 1228 bill extends this scope to any quick-service restaurant in California that has at least 59 sister units nationwide.

The deal came as a surprise – and not a pleasant one for California’s fast-food restaurants who funded and supported the petition to get the Fast Act on next November’s ballot. Union officials said the restaurant industry spent at least $20 million to get the referendum green light, only to find that the wage council would become a reality in the short term despite the investment.

Nevertheless, the business community presented the agreement in a positive light.

“This agreement creates the best possible outcome for workers, local restaurant owners and brands, while protecting the franchise business model in California,” Matt Haller, CEO of the International Franchise Association (IFA), said in a statement.

The IFA has been the strongest opponent of legislating an interemployer standard on a state and national basis. He argues that redefining the franchisor-franchisee relationship to a joint-employer situation would destroy the franchise business and significantly slow chain expansion.

Although this provision is now dead in California, the National Labor Relations Board is widely expected to set the standard at the federal level by changing its interpretations of long-standing labor laws. This reinterpretation is expected in a few weeks or months.

The IFA also played a leading role in forming the coalition that successfully secured an up-or-down vote on the Fast Act in the 2024 referendum.

Sean Kennedy, vice president of public affairs for the NRA, added in a statement: “This agreement provides a predictable future for California restaurant owners and includes a significant investment in the QSR workforce, while eliminating regulatory threats and legislative measures endangering their businesses.»

Governor Newsom is widely expected to sign the revised AB 1228.

The measure passed with flying colors in the State Assembly and Senate.

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