After years of debate, and a looming referendum, a compromise between labor and business representatives has resulted in a final law regulating the fast-food industry. On September 28, 2023, California Governor Gavin Newsom signed Assembly Bill (“AB”) 1228 into law. AB 1228 is a compromise version of the Fast Food Accountability and Standards Recovery Act, a law that initially became effective on January 1, 2023, but them became the subject of a referendum which halted enforcement.  Now that AB 1228 has been enacted, the referendum on the Fast Food Accountability and Standards Recovery Act will be removed from the 2024 ballot.

The law creates a new $20 per hour minimum wage for fast food workers, which will go into effect on April 1, 2024.  The new minimum wage will apply to all national fast-food chains, defined as limited-service restaurants with more than 60 establishments that share a common brand. Grocery stores and bakeries are exempt from this definition.  Beginning in 2025, the minimum wage may be increased by the lesser of 3.5% or the average change in the U.S. Consumer Price Index.

AB 1228 creates a Fast Food Council within the Department of Industrial Relations with nine voting members, consisting of two representatives of the fast food industry, two representatives of fast food franchisees or restaurant owners, two representatives of fast food employees, two representatives of advocates for fast food restaurants, and one unaffiliated member of the public who will be the chairperson.  The Governor will appoint the representatives of fast food restaurant employees, fast food restaurant franchisees or restaurant owners, the fast food restaurant industry, and the member of the public. The Speaker of the Assembly and the Senate Committee on Rules shall each appoint one representative of an advocate for fast food restaurant employees.  There will also be two nonvoting members, one from the Department of Industrial Relations and one from the Governor’s Office of Business and Economic Development.  Members will be appointed to four-year terms.

The Fast Food Council will have the power to establish minimum standards for fast food workers, including standards for working hours, working conditions, and health and safety. As with most legislation sponsored by organized labor, any standard promulgated by the council will not supersede a standard covered by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and a regular hourly rate of pay not less than 30 percent more than the state minimum wage for those employees, and if the agreement provides equivalent or greater protection than the standards established by the council and state law on the same issue authorizes an exception for employees covered by a collective bargaining agreement.  The Fast Food Council must convene for its first meeting by March 2024.

As we reported earlier, AB 1228 was very much a compromise between the Service Employees International Union of California and employers, among others.  In addition to limiting certain powers of the Fast Food Council and taking what promised to be an expensive referendum process off of the 2024 ballot, the new law also removes controversial joint employer liability provisions between franchisors and franchisees.  Further, until January 1, 2029, AB 1228 prohibits local cities and counties from enacting a higher minimum wage which targets the fast food industry.  Additionally, the Industrial Welfare Commission will not be revived because funding has been eliminated as part of the AB 1228 compromise.

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