Agreement is struck to kill Calif.'s Fast Act, joint-employer proposal

Advocates for the fast-food industry, the franchising community and organized labor have agreed to a compromise on the controversial measures. A wage-setting council is part of the deal.
The deal calls for passage by California's legislature, above, by Sept. 14. | Photo: Shutterstock

Representatives of the restaurant and franchise businesses have secured an agreement to kill California’s controversial Fast Act in exchange for accepting one of the law’s most contentious provisions, the creation of a panel to set wages and working conditions for California fast-food restaurants.

The agreement also calls for shelving a legislative proposal currently under consideration that would have held restaurant franchisors accountable for the employment policies and practices of their franchisees, a measure blasted as an existential threat to restaurant franchising.

The call for legislating a joint-employer standard is contained in a pending piece of legislation, AB 1228. The joint-employer provision would be killed, and the bill would be amended to include the various provisions of the new pact between industry, organized labor and pro-labor members of California’s legislature.

Although restaurant and franchising representatives accepted the creation of a Fast Food Wage Council as part of the deal, several concessions were won on that front for the restaurant industry.

The Council will still retain the power to set wages and working standards for fast-food restaurants in the state. Indeed, the pact calls for raising the minimum wage for fast-food workers in California to $20 an hour next April.

But the composition of the panel will be tweaked. Instead of having 10 seats, the council will be reduced to nine voting members. Four seats will still be reserved for fast-food workers and union advocates, and four others will still be awarded to restaurant franchisors and franchisees. But the ninth voting member will be a neutral party from outside the industry, who’ll serve as chairman.

If employer and employee representatives are deadlocked on a proposal, the neutral chairman would have the deciding vote.

In addition, the Council will be expected to hold open feedback sessions where fast-food employers and employees could provide input on matters under consideration.

The agreement also addresses a major criticism big chains voiced about the Fast Act, which has been suspended pending a referendum scheduled for Nov. 2024.

The Fast Act specifies that it applies only to fast-food employers and employees from chains with at least 100 units nationwide. The agreement would drop that threshold to 60 units, meaning regional challengers to the big brands would face the same wage and workplace requirements.

The pact would also prevent other areas within the state from establishing their own Fast Food Wage Council. The Fast Act grants the power to set up a local version to any municipality with at least 200,000 residents.

"This agreement protects local restaurant owners from significant threats that would have made it difficult to continue to operate in California,” Sean Kennedy, EVP of public affairs for the National Restaurant Association (NRA), said in a prepared statement. “It provides a more predictable and stable future for restaurants, workers, and consumers." 

“This agreement is in the best interest of workers, local franchise restaurant owners, and brands and protects the franchise business model that has provided opportunities for thousands of Californians to become small business owners,” Matt Haller, CEO of the International Franchise Association (IFA), said in the statement.

“The amendments to AB 1228 put aside valid concerns about the franchisor-franchisee relationship in favor of bringing stakeholders from across the industry together with workers to solve common problems and build a better future,” Joseph Bryant, EVP of the Service Employees International Union, said in a statement issued by the union, the restaurant industry’s largest.

The agreement was technically signed on behalf of restaurants and the franchise community by the Save Local Restaurants coalition, a collaboration of the NRA, the IFA and the U.S. Chamber of Commerce.

The revised version of AB 1228 has yet to be approved by the California legislature. The agreement calls for passage by both the Assembly and the Senate by Thursday.

The surprise development spares the various stakeholders from a contentious and likely extremely costly battle for the sympathies of California voters leading into the Nov. 2024 election. Estimates of the fight over the referendum have ranged as high as $145 million for the industry coalition, without any guarantee on the outcome.

On Friday, California Gov. Gavin Newsom signed a bill that might have made the repeal of the Fast Act via referendum a tougher task. The legislation changes the language on referendum. Instead of voting "Yes" or "No" on a proposal included on the ballot, residents would be asked to choose either "Keep the law" or "Overturn the law." 

Correction: An earlier version of the story misstated the estimate of how much a referendum lobbying effort might have cost the restaurant and franchising industries. The correct figure is $145 million. 

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