A deal announced today by labor groups and the fast food industry would give workers a $20 minimum wage and pull a measure off the 2024 ballot. The Legislature has until Thursday to approve it.
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Update: The Legislature approved the deal on the last night of the session Sept. 14. Gov. Gavin Newsom signed the bill on Sept. 28.
A two-year battle between labor groups and fast food giants is culminating in a last-minute deal announced today that would give workers a $20 minimum wage starting next April if businesses agree to nix their November 2024 ballot measure to undo a landmark law regulating the industry.
The agreement, detailed in changes to Assembly Bill 1228, averts what would have been a costly campaign for both sides. And they each get a major concession: It ensures at least a modest raise for workers, while the industry gets lawmakers to back off on a controversial proposal to hold fast food corporations legally responsible for labor violations in their franchise locations.
The 2022 law would have established a state-run council with worker and business representatives to write rules regulating wages and working conditions in fast food restaurants — an industry labor organizers have long struggled to unionize. The council would have had the power to raise the fast food minimum wage to as much as $22 an hour. The statewide minimum wage rises to $16 on Jan. 1.
The law was quickly put on hold last fall when restaurant groups and major fast food corporations poured millions into a signature-gathering campaign to have voters repeal it on the 2024 ballot.
The referendum campaign in July reported amassing $50 million in an “initial contribution” from McDonald’s, In-N-Out, Chick-Fil-A and the International Franchise Association and National Restaurant Association.
The Service Employees International Union, sponsor of the law, and other labor groups said the fast food industry, which employs more than 500,000 Californians, is in particular need of regulation because of low wages, unpredictable scheduling and what they said were harsh working conditions in restaurants often controlled not by the corporations but by numerous independent franchise operators.
“For the last decade, fast-food cooks, cashiers and baristas in California have been sounding the alarm on the poverty pay and unsafe working conditions plaguing our industry,” Ingrid Vilorio, a leader in union efforts to organize fast food workers, said in a statement. “We have always known that to solve these problems, we need a seat at the table with our employers and the power to help shape better rules across our industry.”
Businesses have painted the law as an overreach, countering that restaurants have already raised wages during a period of record inflation, and said additional regulations would force fast food stores to close or hike prices. Last December, the average hourly wage of California fast food workers was about $19.
In response to the referendum, SEIU and a furious Assemblymember Chris Holden, the Pasadena Democrat who authored the fast food council law, this year introduced AB 1228, the bill to establish joint labor law liability for corporations. That provision was stripped out of the law in 2022 to gain more support for its passage.
Also, this year’s state budget included a $3 million line item to resurrect the Industrial Welfare Commission, a state board dormant since 2004 that could also write new, industry-specific regulations. Over the weekend, lawmakers in another budget bill proposed calling off that commission’s revival.
The deal, which has days to be approved before the legislative session ends Thursday, would require the fast food council convene and meet for the first time by March 15, 2024 — earlier than it would have if it had to await voter approval next November.
“Together, with both supporters and opposition, we are establishing a new standard that inspires a safe and prosperous environment within the fast food industry,” Holden said in a statement.
“It provides meaningful wage increases for workers, while at the same time eliminates more significant – and potentially existential – threats, costs, and regulatory burdens targeting local restaurants in California,” International Franchise Association president and CEO Matt Haller said in a statement.
But not all parties are happy.
John Kabateck, California state director for the National Federation of Independent Businesses, said small business owners got the worst end of the deal — having to pay higher wages and being subject to the new council’s regulations. He said those owners were not included in negotiations.
In a Tuesday statement, Kabateck asked lawmakers to reject the bill. “Quite frankly, we were looking forward to the fight for passage of the 2024 ballot referendum,” he said.
The agreement also tweaks the council’s 10-member makeup to nine by making the two state government representatives non-voting members and adding a “member of the public.” The council would still include two fast food workers, two labor representatives, two fast food industry representatives and two fast food franchise owners.
The newly proposed council also would write rules that apply to more restaurants — those that belong to a chain with at least 60 locations nationally, compared with 100 locations as outlined in the 2022 law. The deal also removes a provision by which cities and counties could convene their own fast food councils, which businesses had said could create a burdensome number of additional regulations.
As previously enacted, the council would operate for five years unless lawmakers extend it. And it has the same restrictions as the version passed last year — limited to rulemaking on wages and workplace safety, though the council would have to petition the California Division of Occupational Safety and Health to enact some of those rules. It would not be able to write rules that create new time-off benefits or dictate how restaurants schedule workers’ hours.
The fast food industry and unions were in a crunch to reach an agreement by tonight, the absolute last chance for bills to be amended this session because of a requirement they be in print for 72 hours before a final vote. This afternoon, the Senate waived another deadline rule to advance the measure.
The deal is only possible because of a brand-new law signed on Friday by Newsom. AB 421 by Assemblymember Isaac Bryan, a Culver City Democrat, creates a process for proponents of a referendum to withdraw their measure from the ballot until 131 days before the election. Such a process already existed for other statewide initiatives, but not for efforts to overturn a law passed through the legislative process.
The Legislature rushed the bill through a final series of votes last Tuesday and sent it to the governor’s desk with an urgency clause allowing it to take effect immediately. That means, for the November 2024 election, referendums can be pulled off the ballot until June 27 — potentially opening the door for another deal next session with the oil industry over a referendum they qualified challenging a 3,200-foot drilling setback around homes, schools and health care facilities.
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Proponents say AB 257 could curb wage theft, but restaurateurs say it could raise costs and prices and fundamentally change relationships with fast food chains.
The fast food and oil industries are only the latest to seek a referendum to stop, or at least delay, a law passed by the state Legislature. The return on investment can be huge — so much money that some are calling for changing the referendum rules in California.