California Establishes Council to Set Wages and Other Working Conditions in Fast-Food Industry

California Governor Gavin Newsome signed the FAST Recovery Act (AB 257), which would establish a council to promulgate statewide standards on “wages, working hours, and other working conditions related to the health, safety, and welfare of, and supplying the necessary cost of proper living to, fast food restaurant workers.” 

The Council will include two fast food franchisors, two fast food franchisees, two fast food restaurant employees, two labor advocates, one representative from the state’s Department of Industrial Relations, and one representative from the governor’s Office of Business and Economic Development. Notably, the governor can appoint all members of the council with the exception of the labor advocates. 

The state Council will have the authority “to issue, amend, and repeal any other rules and regulations, as necessary to carry out its duties,” which would override any conflicting existing rules or regulation issued by another state agency. With respect to health and safety standards that fall under CalOSHA jurisdiction, the Council must petition CalOSHA for repeal, adoption, or amendments of any CalOSHA standard. The Council will have the authority to raise California’s $15 minimum wage by 47% next year to $22/hour for fast food workers.

The measure also allows any local jurisdiction with over 200,000 residents to create its own fast-food council, each of which can make recommendations to the state Council on minimum state, health, safety, and employment standards. 

Despite reports, the council does not amount to true “sectoral bargaining,” in which labor unions negotiate industry-wide standards with the major employers in a sector, such as in the recent agreement tentatively reached between major freight rail companies and unions. The Railway Labor Act, which governs relations between railway and airline carriers and labor organizations, allows and encourages national sectoral bargaining. However, the National Labor Relations Act, which covers nearly all other private sector industries including restaurant chains, governs union elections and bargaining at individual work sites or companies. Therefore, while not sectoral bargaining per se, the FAST Recovery Act amounts to a significant boon for labor unions in the fast-food sector in California. 

Support for the idea has been fragmented. The California Department of Finance opposed the measure, noting it will “lead to a fragmented regulatory and legal environment for employers and raise long-term costs across industries.” The Washington Post called the legislation a “ham-handed attempt” to improve conditions for fast food workers. 

The passed measure excluded previous provisions which would have held fast food companies jointly liable with their franchisees for labor violations and allowed the council to set predictive scheduling standards, among other items. 

More to come? According to a study by the UC Riverside School of Business, fast-food prices in California could rise as much as 22% due to the Fast Recovery Act. In the meantime, the California measure could already be headed to a referendum ballot, which would suspend the law’s provisions until a statewide vote in 2024 if 623,000 signatures can be gathered by December 4 of this year.