On September 5, 2022, California Governor Gavin Newsom signed landmark legislation aimed at further regulating the working conditions and wages of California’s fast- food workers. This bill has immediate impact on certain employers and franchisors doing business in the Golden State.

Assembly Bill (AB) 257, also known as the Fast Food Accountability and Standards Recovery Act or the FAST Recovery Act, authorizes the creation of a Fast Food Council (Council) that will be tasked with establishing minimum standards with respect to the minimum wage, maximum hours of work, the standard conditions of labor and other working conditions for fast-food workers throughout California.

IN DEPTH

WHO IS AFFECTED BY THIS LEGISLATION AND WHO IS EXCLUDED?

The FAST Recovery Act is aimed at regulating 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. Also excluded are 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).

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.

In order to establish any standards, rules or regulations, the California Department of Industrial Relations (DIR) must first receive a petition of at least 10,000 fast-food workers approving the creation of the Council. The first Council meeting will then take place within 90 days of the approval of the petition and will continue to meet once every six months until January 1, 2029.

The Council, established within the DIR, will consist of 10 members, including:

• One representative from the DIR

• Two representatives of fast-food restaurant franchisors

• Two representatives of fast-food restaurant franchisees

• Two representatives of fast-food restaurant employees

• Two representatives of advocates for fast-food restaurant employees

• One representative from the California Governor’s Office of Business and Economic Development.

Governor Newsom will appoint the representatives of the state agencies, fast-food restaurant employees, fast-food restaurant franchisors and fast-food restaurant franchisees. The Speaker of the Assembly and the Senate Rules Committee will each be tasked with appointing one representative of fast-food employees.

The Council cannot create new paid time off benefits like paid sick leave or paid vacation, and it also will not be permitted to establish regulations related to predictive scheduling. Further, the Council will not be permitted to encroach on the jurisdiction of the Occupational Safety and Health Standards Board but is permitted to petition for the adoption, amendment or repeal of any occupational safety and health standard.

WILL AB 257 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 a Local Fast Food Council (Local Council) that must include at least one representative of a fast-food restaurant franchisor or franchisee and at least one representative who is a fast-food restaurant employee. The remaining members will include a majority of representatives from local employment, health and safety agencies. Local Councils will be allowed to hold meetings, open to the public, where fast-food employees will have the opportunity to be heard. The Local Council can further provide written recommendations to the Council and will operate independently.

ARE THERE ANY DISCRIMINATION OR RETALIATION PROTECTIONS IN THE BILL?

Yes, a fast-food restaurant cannot discharge or in any way discriminate or retaliate against any employee who (1) complains or discloses noncompliance information regarding employee or public health or safety to the media, legislature or watchdog agency, (2) participates in any Council or Local Council meeting, or (3) refuses to perform work because they have reasonable cause to believe that the practices of that fast-food restaurant would violate worker or public health and safety laws or regulations.

Any employee discharged, discriminated against or retaliated against in violation of the bill has a right of action to reinstatement, treble damages for lost wages and work benefits and attorneys’ fees.

Further, the bill includes a rebuttable presumption of unlawful discrimination or retaliation where a fast-food restaurant discharges or otherwise takes any other adverse action against an employee within 90 days following the date when the restaurant had knowledge of an employee’s complaint.

WHAT’S NEXT?

Given the ambiguity surrounding the definition of “fast food restaurant” within AB 257, more clarity is required for some employers to determine whether they fall within the scope of the bill. “Fast food restaurant” is defined as:

“any establishment in the state that is part of a fast food chain and that, in its regular business operations, primarily provides food or beverages in the following manner:

(1) For immediate consumption either on or off the premises.

(2) To customers who order or select items and pay before eating.

(3) With items prepared in advance, including items that may be prepared in bulk and kept hot, or with items prepared or heated quickly.

(4) With limited or no table service. Table service does not include orders placed by a customer on an electronic device.”

The definition creates uncertainty on whether AB 257 impacts certain chain employers that are traditionally not viewed by the public as “fast food restaurants.” For example, some businesses that solely prepare and sell beverages, such as coffee or tea shops or dessert vendors that sell ice cream, may be within the purview of the statute.

Additionally, as the Council creates an avenue for sectoral bargaining—when workers bargain with multiple employers to set standards across the industry—the impact of those standards on restaurants that are not covered by the law remains to be seen but will be closely watched as the Council creates basic minimum standards for workers that are sure to reverberate throughout the food and hospitality industry.

WHAT IS AHEAD?

This legislation was heavily backed by various labor organizations, most notably the Service Employees International Union (SEIU), and is viewed as a significant victory for over half a million nonunionized workers in California. Many labor leaders, including SEIU President Mary Kay Henry, view this legislation as a watershed moment—permitting covered workers to participate in concert in another form of collective bargaining without having to endure the process of forming a union in an industry that has been difficult to organize as a result of high turnover and franchise ownership. On the other side, many practitioners opposing the bill believe it leaves open several preemption arguments, including that the law is preempted by the National Labor Relations Act.

The day after Governor Newsom signed AB 257, the National Labor Relations Board published a notice of proposed rulemaking seeking to modify the joint employer standard. If the proposed rule is successful, it would also ease organizing and collective bargaining for franchise workers who are often linked to multiple employers.

We anticipate several legal challenges to this bill and will continue to monitor any further clarifications and developments concerning AB 257.