A two-year standoff between the fast food industry and labor unions ended this week as stakeholders announced a deal that will increase the minimum wage to $20 for California workers at fast food chains with more than 60 locations nationwide.

As we previously reported, in September 2022, California passed A.B. 257, which created a 10-member fast-food council with authority to set wage, hour, and working condition standards for fast food workers in California. The law was vehemently opposed by the fast-food industry, who claimed the law would devastate the industry.  Opponents raced to gather enough signatures to qualify for a referendum on the November 2024 ballot to repeal the law, and on January 13, 2023, a Sacramento judge issued a preliminary injunction that prevented the law from taking effect until California voters decided the fate of the referendum.

In response to the referendum, the Legislature introduced a separate bill in February 2023, A.B. 1228, that would make fast food franchisors jointly liable for labor violations committed by their franchisees, potentially upending the franchise model that dominates the industry. A.B. 1228 was passed by the State Assembly in June but has not yet been approved by the Senate.  Over the summer, California lawmakers also attempted to revive the Industrial Welfare Commission (“IWC”), which was defunded almost two decades ago.  A revived IWC would have the authority to pass regulations to protect fast food workers in the event A.B. 257 was repealed.

Last week’s compromise, detailed in changes to A.B. 1228, appears to put an end to this legislative arms race for now.  Pursuant to the deal, the $20 fast food minimum wage will take effect April 2024, and the referendum to repeal A.B. 257 will be withdrawn.  In exchange, the franchisor joint liability provision will be taken out, the IWC will remain unfunded, and certain modifications will be made to the fast-food council created in A.B. 257 to give it less sweeping powers and ensure it has representatives from industry and franchisees.

The bill was approved by the California legislature on Thursday and is expected to be signed into law by Governor Gavin Newsom.  When their wage rate increases to $20 per hour in April 2024, fast food workers will have the highest minimum wage in California.