On September 5, 2022, California Governor Gavin Newsom signed the Fast Food Accountability and Standards (FAST) Recovery Act (AB 257), bringing significant reforms to the state's fast food industry. The bill's provisions aim to allow workers and the state of California to hold fast food chains accountable for issues such as wage theft and overtime pay, and establish a council responsible for establishing minimum standards for fast food workers. The regulations will apply to any chain in California that has at least 100 stores nationwide that share a common brand.
Who is affected by the legislation?
The FAST Recovery Act applies to fast food chains, defined as a set of restaurants consisting of 100 or more establishments nationally that share a common brand or are characterized by standardized options for décor, marketing, packaging, products, and services. Eateries that operate within grocery stores and bakeries are not considered fast food restaurants and are excluded from the legislation. Additionally, any employees whose employment is covered by a valid collective bargaining agreement that expressly provides for the wages, hours of work, and working conditions of the employees, and a regular hourly rate of pay that is no less than 30% more than the state minimum wage for those employees (if the agreement offers equivalent or greater protection than the Council's standards) are also excluded.
What is the Fast Food Council and what will it do?
The purpose of the Council is to establish statewide minimum standards with respect to wages, working conditions, and training. If there is a conflict between rules issued by the Council and another state agency, the Council's rules will apply. The Council, established within the California Department of Industrial Relations (DIR), will consist of 10 members, including representatives from the DIR, fast food restaurant franchisors, fast food restaurant franchisees, fast food restaurant employees, advocates for fast food restaurant employees, and the California Governor's Office of Business and Economic Development. The Council will meet once every six months until January 1, 2029.
Will the FAST Recovery Act affect the minimum wage?
While the bill does not establish a new minimum wage for fast food workers, it does establish a minimum wage cap for fast food workers in California. Accordingly, any minimum wage established by the Council may not exceed $22.00 per hour in 2023. Thereafter, the highest hourly wage may increase by the lesser of 3.5% or the rate of change of the US Consumer Price Index for Urban Wage Earners and Clerical Workers. Local jurisdictions are still permitted to establish a higher minimum wage.
What are local Fast Food Councils and what power do they have?
Any county or city with a population of more than 200,000 will be permitted to establish its own Fast Food Council to establish standards with respect to wages, working conditions, and training for fast food workers within the jurisdiction. These local councils will have the same powers as the state Fast Food Council, but their standards will only apply within the jurisdiction.
Pros & Cons
From an economist’s perspective, the FAST Recovery Act has both pros and cons. One pro is that the act addresses the issue of wage theft, which is a significant problem in the fast food industry. A study by UCLA and UC Berkeley found that over 67% of fast food workers in California had experienced a wage theft violation, and 25% of those who complained about it faced retaliation. By establishing minimum standards for wages and working conditions, the act provides a measure of protection for fast food workers and ensures that they are paid fairly.
Another pro of the act is that it could help to reduce income inequality in California. The fast food industry has a reputation for low wages and poor working conditions, and many fast food workers rely on government assistance to make ends meet. By raising the minimum wage and establishing minimum standards for working conditions, the act could help to improve the financial well-being of fast food workers and reduce their reliance on public assistance.
However, there are also some potential cons to the FAST Recovery Act. One concern is that the act could increase costs for fast food chains, which could lead to higher prices for consumers. Fast food chains may pass on the cost of complying with the act’s regulations to consumers in the form of higher menu prices, which could put a strain on household budgets. In addition, some critics argue that the act could lead to job losses as fast food chains may decide to cut labor costs by automating certain tasks or reducing the number of employees.
Also, opponents of the act argue that it will increase labor costs for fast food businesses, leading to higher prices for consumers and potentially decreased demand for fast food. This could lead to a decrease in profits for fast food businesses and potentially even force some restaurants to close their doors. There is also the possibility that the act could lead to a decrease in the number of franchised fast food businesses in the state, as franchisors may be hesitant to enter or expand in the California market due to the added liability and potential costs associated with the FAST Act.
Overall, it is difficult to determine with certainty the net impact the FAST Act will have on employment and business outcomes in the fast food industry in California. It is likely that there will be both winners and losers as a result of the act, and the true impact will depend on a variety of factors such as the specific provisions of the act and how they are implemented, the responsiveness of businesses and consumers to changes in prices and working conditions, and other economic and market forces.