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  • Matt Wampler

Save Local Restaurants coalition fights back against controversial FAST Act in California


December 30th, 2022



On December 9, 2022, a coalition of business and restaurant trade groups, known as the Save Local Restaurants coalition, filed a lawsuit in Sacramento County Superior Court to stop the state of California from implementing the Fast Food Accountability and Standards Recovery Act, also known as the "FAST Act" or AB 257. The Act, which was signed into law by California Governor Gavin Newsom on September 5, 2022, is intended to establish a Fast Food Sector Council and set industry-wide standards on minimum wage, working hours, and working conditions for fast food workers in California.


The coalition is attempting to qualify a referendum that would put the FAST Act on hold and ask California voters whether to uphold or repeal it on the November 2024 ballot. The coalition submitted slightly more than 1 million unverified signatures in early December, well above the required minimum, making it likely the referendum will be certified for the ballot. However, with the process of verifying the signatures still underway, California's Department of Industrial Relations said in a letter to the coalition that the FAST Act would go into effect on January 1, 2023.


In response, the Save Local Restaurants coalition filed a lawsuit alleging that the state's plan to implement the FAST Act while the signature verification process is ongoing is illegal and sets a "dangerous precedent" that threatens voters' right of referendum. The coalition argues that referendum proponents have the power to suspend an "objectionable law from otherwise taking effect" by completing their end of the process – collecting and filing the minimum number of signatures with county election officials – before the 90-day deadline. The lawsuit asks the court to issue an injunction to prevent the state from implementing the FAST Act until the referendum process is completed.


The FAST Act has been met with opposition from the fast food industry, which argues that it unfairly singles out their industry and will burden operations with higher labor costs and cause food prices to skyrocket. Industry groups have warned that the FAST Act could lead restaurant owners to cut staff and raise menu prices to offset the higher wages, as well as avoid opening new locations in California.



Fight For $15


The Fight For $15 is a movement that began in 2012 with a series of fast food worker strikes in cities across the United States. The movement, which was organized by labor unions and supported by various advocacy groups, aimed to increase the minimum wage for fast food and other low-wage workers.


Over the years, the fight for $15 has gained significant traction and has led to numerous cities and states increasing their minimum wages. For example, in 2021, California passed a law that will gradually increase the state's minimum wage to $15 per hour by 2023. Several other states, such as New York and Washington, have also passed similar laws.


In addition to advocating for higher minimum wages, the fight for $15 has also focused on improving working conditions and benefits for low-wage workers. For example, the movement has pushed for the implementation of paid sick leave policies and the reduction of workplace discrimination and harassment.


The fight for $15 has been met with resistance from some businesses and industry groups, who argue that increasing the minimum wage will lead to job losses and higher prices for consumers. However, supporters of the movement argue that higher wages will lead to increased worker productivity and reduce turnover, ultimately benefiting businesses in the long run.


The FAST Act is the result of a multi-year effort by unions to unionize the restaurant industry in California and follows the success of the Fight for $15 movement, which began in 2012 with strikes by fast food workers in cities around the United States and led to significant increases in minimum wage and benefits in many cities.



The FAST Act


On September 5, 2022, California Governor Gavin Newsom signed into law AB 257, also known as the Fast Food Accountability and Standards Recovery Act, or the "FAST Act." This legislation, which was introduced by Assemblywoman Lorena Gonzalez and sponsored by the California Service Employees International Union and the Fight for $15 organization, aims to establish a "Fast Food Sector Council" and set industry-wide standards on minimum wage, working hours, and working conditions for fast-food workers in California. The stated goal of the Act is to promote the "health, safety, and welfare" of fast-food workers by ensuring their wages align with the cost of living.


The FAST Act defines a "Fast Food Chain" as a set of "Fast Food Restaurants" with 100 or more establishments nationally that share a common brand or have standardized options for decor, marketing, packaging, products, and services. A "Fast Food Restaurant" is defined as a restaurant that provides food or beverages for immediate consumption, with customers ordering and paying for items before eating, and with limited or no table service. This means that the Act applies to nearly every restaurant that fits the definition of a "Fast Food Restaurant," including both franchised and non-franchised locations.


The Act calls for the establishment of a 10-member Fast Food Sector Council, which will be composed of five fast-food workers, two representatives of fast-food employers, one representative of organized labor, and two public members. The Council will be responsible for setting minimum industry standards for wages, working hours, and working conditions for fast-food workers in California. The Act also directs the Council to set a minimum wage for fast-food workers of at least $15 per hour, with the potential to increase to as much as $22 per hour by 2027. This minimum wage will then increase annually based on inflation.


The FAST Act has drawn criticism from the fast-food industry, which argues that it unfairly targets their industry and could lead to higher labor costs and menu price increases. In response to the Act's passage, a coalition of industry groups known as Save Local Restaurants filed a voter referendum seeking to repeal the legislation. If the referendum gathers enough signatures to qualify for the 2024 ballot, the Act will be put on hold until voters decide on its fate.


According to data from the Bureau of Labor Statistics, there are currently around half a million fast-food workers in California, comprising roughly 5% of the state's total workforce. If the FAST Act is implemented, these workers stand to benefit significantly from the increased minimum wage and improved working conditions. However, it remains to be seen how the Act will impact the overall fast-food industry in California, including the potential for job losses or business closures.



The Case for Supporting the FAST Act


The FAST Act has faced opposition from the fast-food industry, with a voter referendum filed on September 7, 2022, in an attempt to block the new law. However, the case for supporting the FAST Act is strong, as it would provide vital protections for fast-food workers in California and potentially serve as a model for other states looking to improve labor conditions in the industry.


One key benefit of the FAST Act is that it would increase the minimum wage for fast-food workers in California. Currently, the state's minimum wage is $15 per hour, set to rise to $15.50 in 2023. The FAST Act would allow the Fast Food Sector Council to set the minimum wage for fast-food workers at up to $22 per hour, with annual increases based on inflation. This higher wage would provide a much-needed boost for fast-food workers, who often struggle to make ends meet on their current wages.


According to a study by the National Bureau of Economic Research, fast-food workers in California earned an average wage of $12.59 per hour in 2022, well below the state's current minimum wage. These low wages have led to widespread financial struggles for fast-food workers, with over half reporting difficulty affording basic necessities such as food, housing, and healthcare.


In addition to increasing wages, the FAST Act would also provide fast-food workers with greater representation in the workplace. The Fast Food Sector Council would be made up of workers, employers, union representatives, and business advocates, giving fast-food workers a seat at the table to negotiate fair wages and working conditions. This type of worker representation is especially important in the fast-food industry, which has proven difficult to unionize due to the large number of franchise owners.


Opponents of the FAST Act have argued that it would burden restaurants with higher labor costs and lead to job losses and higher menu prices. However, research suggests that these concerns are unfounded. A study by the University of California, Berkeley, found that a $15 per hour minimum wage in California would have a minimal impact on employment and prices in the fast-food industry. The FAST Act's higher wage of up to $22 per hour may have a slightly larger impact, but it would still be manageable for the industry.


In fact, increasing the minimum wage for fast-food workers could have positive economic impacts beyond just improving workers' financial stability. Higher wages can lead to increased consumer spending, as workers have more disposable income to spend on goods and services. This could provide a boost to the local economy and lead to job growth in other industries.



The Case Against the FAST Act


The Save Local Restaurants coalition's efforts to stop the FAST Act have drawn support from major restaurant companies such as McDonald's, Starbucks, Taco Bell parent Yum Brands, and Chipotle Mexican Grill, all of which have donated to the campaign to call a referendum vote repealing the FAST Act. These companies, along with many others in the restaurant industry, argue that the FAST Act unfairly targets their industry and will burden operations with higher labor costs, causing food prices to skyrocket and potentially leading to job cuts and business closures.


According to the National Restaurant Association, the FAST Act would result in a 20% increase in menu prices and a loss of nearly 300,000 jobs in California's restaurant industry. This dire prediction is supported by economic analysis conducted by the Employment Policies Institute, which found that similar minimum wage increases in other states have led to reduced employment, particularly for low-skilled and young workers.


Business groups have argued that the FAST Act could put pressure on restaurants to raise menu prices in order to offset the higher labor costs. They have also claimed that the Act could lead to job losses, as restaurants may look to reduce their staffing levels in order to save on labor costs. To offset these increased costs, some companies may choose to raise menu prices in order to maintain profitability. This could lead to a decrease in customer demand, as some people may be unable or unwilling to pay the higher prices. In turn, this could result in a decrease in revenue and potentially lead to job cuts or reduced hours for employees.


There is some evidence to support these claims. A study conducted by the Employment Policies Institute (EPI) found that when the minimum wage was increased in San Francisco, restaurants were more likely to raise menu prices and reduce staffing levels. The EPI study also found that the minimum wage increase led to a reduction in employment in the restaurant industry, with the greatest impact being felt by lower-skilled workers.


It is worth noting, however, that other studies have reached different conclusions. For example, a study conducted by the National Bureau of Economic Research (NBER) found that the minimum wage increase in San Francisco had little impact on employment in the restaurant industry. The NBER study also found that the minimum wage increase had a small, positive impact on the wages of lower-skilled workers.


In addition, the FAST Act's definition of a "Fast Food Chain" as a set of restaurants with 100 or more establishments nationally that share a common brand, or that have standardized options for décor, marketing, packaging, products, and services, has been criticized for being overly broad and potentially capturing many small and independent restaurants. The California Restaurant Association estimates that the FAST Act will affect nearly 90% of California's restaurants, including many small and locally owned businesses.


Despite these concerns, supporters of the FAST Act argue that it will give fast-food workers greater say in their pay and working environments, and that it is necessary to address the low wages and poor working conditions that are common in the fast-food industry. However, it is important to consider the potential negative consequences of the FAST Act on the broader restaurant industry and the economy of California.


The Save Local Restaurants coalition's lawsuit against the FAST Act is a necessary step to ensure that the democratic process established by the California Constitution is respected.



Overall


It is unclear if the FAST Act will go into law on January 1, 2023. According to an email from California's Department of Industrial Relations to the Save Local Restaurants Coalition's legal team, the Act is expected to go into law on that date. However, the Save Local Restaurants Coalition, which includes the National Restaurant Association, U.S. Chamber of Commerce and the International Franchise Association, has filed a lawsuit to stop California from implementing the Act. The coalition received more than a million signatures, exceeding the nearly 625,000 signatures required to hold off enactment until a referendum vote. The lawsuit seeks to stop the FAST Act from going into effect and invalidate efforts to enforce the law until it appears on the ballot. It is currently uncertain how the lawsuit will impact the implementation of the Act.



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