California Law Aimed at Micromanaging Fast-Food Restaurants, Hiking Minimum Wage Put on Hold Pending Referendum

A California law that would have created an unelected board of bureaucrats to micromanage labor policy and wages at the state’s fast-food restaurants has officially been put on hold until voters can weigh in on the measure in November 2024.

The California secretary of state’s office announced last week that a coalition of business groups opposed to the Fast Food Accountability and Standards Recovery Act, or FAST Act, had collected more than 700,000 valid signatures from registered voters, far more than the roughly 623,000 needed to approve a referendum on the measure.

Leaders of the Save Local Restaurants coalition said in December that they had gathered more than a million signatures from Californians who disapproved of the law. The coalition was spearheaded by the International Franchise Association, the U.S. Chamber of Commerce, the National Restaurant Association, and various franchise owners and brands.

“The FAST Act was a solution in search of a problem that didn’t exist,” Matt Haller, president of the International Franchise Association, said in a prepared statement. “Fortunately, now more than one million Californians have spoken out to prevent this misguided policy from driving food prices higher and destroying local businesses and the jobs they create.”

The FAST Act – Assembly Bill 257 – was narrowly approved by Democrats in the California legislature on August 29, and signed into law by Governor Gavin Newsom on Labor Day. The law allows for the creation of a ten-member, unelected council specifically to micromanage the state’s fast-food industry. It would have had broad powers to impose new rules and regulations on thousands of fast-food and counter-service restaurants, including the ability to raise the minimum wage at most of California’s fast-food restaurants this year from $15 an hour to $22 – a nearly 50 percent jump, with cost-of-living adjustments each year. The council’s regulations would apply to any fast-food restaurant that is part of a chain with 100 or more locations.

The Service Employees International Union of California and other proponents of the FAST Act have claimed that it was needed to prevent wage theft and sexual harassment prevalent in fast-food restaurants, and to combat a general lack of compliance with existing regulations.

But business groups in California and nationally say there’s little evidence the problems the law was allegedly designed to cure are worse in the fast-food industry than in others. Instead, they say, the effort is a powerplay by the SEIU and Big Labor, which has struggled for years to organize California’s fast-food industry. Labor leaders could use their significant influence on the council as a bargaining lever with the small business owners who predominantly run the state’s fast-food restaurants, the business groups said.

Last summer, California’s own Department of Finance recommended that legislators vote against the bill. Rather than help the poor, the bill “could lead to a fragmented regulatory and legal environment for employers and raise long-term costs across industries,” according to the finance department.

Opponents of the measure say it would lead owners to reduce hours, raise prices, cut jobs, and increasingly turn to technological replacements. Other industries outside fast food would be pressured to raise their own wages – and likely their prices as well – to compete for workers, worsening already high inflation. Research by the University of California Riverside, School of Business Center for Economic Forecasting and Development estimated that food prices at impacted restaurants would likely rise by 20 percent or more.

Opponents also paint the FAST Act as a union-backed ploy to plant the seed for a form of what is known as sectoral bargaining in the U.S. In sectoral bargaining, which is common in Europe, workers negotiate compensation and working conditions across an industry, not workplace by workplace. That is not legal in the U.S., but the FAST Act comes close, allowing the council – with the SEIU’s help – to dictate workplace standards and minimum-wage rates.