Workforce

Landmark California fast-food wage bill is headed for final passage

The measure, which has also been passed by the state legislature, would set up a council to set wages and working conditions, starting with an increase in the minimum wage for fast-food workers to $20 an hour in April.
Gov. Newsom is widely expected to sign the controversial legislation into law. | Photo: Shutterstock

A California law establishing a new way of setting fast-food wages and workplace standards is heading to the desk of Gov. Gavin Newsom for near-certain enactment after being passed late Thursday night by both chambers of the state legislature.

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

A change in the pay floor and working conditions will then be considered at most every six months by a Fast Food Council, a panel that includes four representatives of fast-food workers and an equal number of proxies for fast-food employers. The law calls for granting a ninth council seat to an unaffiliated individual, presumably to break a tie if the worker and employer representatives are deadlocked on an issue.

The bill heading to Newsom would scrap a 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 that joint-employer definition as law.

It was virtually rewritten under a compromise between industry groups and the labor advocates who were pushing the bill. The joint employer component was killed, and a provision creating the Fast Food Council was inserted.

The rewritten bill technically reverses the Fast Act, the original legislation creating the Council. Though passed last September, its enforcement was halted after restaurant and franchise trade group secured enough signatures from California residents to put the Fast Act to a voter referendum in Nov. 2024. Residents would essentially have been asked to vote yes/no on preserving the Fast Act.

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

But the trade’s chances of prevailing were reduced when Gov. Newsom signed a bill Sept 8 that changed the language Californians would see on the referendum. Instead of voting yes/no on burdening employers with the Fast Act, the new language essentially asks if the law should be maintained or killed, without any explanation as to why it should be overturned.

Days later, an agreement was announced between a business coalition called Save Local Restaurants and representatives of organized labor. The collaborating industry groups—the National Restaurant Association, the International Franchise Association and the U.S. Chamber of Commerce—agreed to accept the creation of the Fast Food Council, albeit with some adjustments, in exchange for killing AB 1228’s call for defining restaurant franchisors and franchisees as joint employers.

The industry won a few concessions. For instance, the Fast Act permitted any California municipality with at least 200,000 residents to set up its own wage council, raising the possibility of employers having to deal with a patchwork of wage and workplace requirements in the nation’s largest restaurant market.

Labor proponents stood fast on a provision of the Fast Act to raise the statewide minimum wage significantly for fast-food workers. The compromise measure specifies that the pay floor will rise to $20 an hour in April for covered workers.  The minimum is currently $15.50. Labor advocates had initially pushed for a $22 wage, but cut their ask by 10% during negotiations on the compromise.

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

The deal was a surprise—and not a pleasant one for California quick-service restaurants who funded and otherwise supported the petition drive to get the Fast Act on next November’s ballot. Labor representatives said the restaurant industry spent at least $20 million to get the go-ahead for the referendum, only to find the wage council would become a reality near-term despite the investment.

Still, the business community cast the deal 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 staunchest opponent of legislating a joint-employer standard in the state and on a national basis. It maintains that redefinition of the franchisor-franchisee relationship as a joint-employer situation would destroy the franchise business and dramatically slow chains’ expansion.

Although the provision is now dead in California, the National Labor Relations Board is widely expected to institute the standard on a federal level through a change in its interpretations of long-standing labor laws. That reinterpretation is expected in a matter of weeks or months.

The IFA was also a leader in forming the coalition that succeeded in getting a go/no-go vote on the Fast Act on the 2024 referendum

Sean Kennedy, EVP of public affairs for the NRA, added in a statement, “This agreement provides a predictable future for California restaurant operators and includes a tremendous investment in the QSR workforce, while eliminating regulatory and legislative threats endangering their businesses.

Gov. Newsom is widely expected to sign the revised AB 1228 into law.

The measure was passed handily by both the state Assembly and the Senate.

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