Restaurant Chains Will Withdraw Their Referendum on Assembly Bill (AB) 257
In a compromise with unions, fast-food brands have agreed to drop their 2024 ballot referendum that aimed to scuttle a law affecting the restaurants’ wages and working conditions. The agreement will result in a minimum wage of $20 an hour for employees of fast-food restaurants with more than 60 locations; that pay floor will take effect next April, according to a Los Angeles Times report. Before the compromise, Assembly Bill (AB) 257 could have resulted in fast-food workers’ minimum pay increasing to as much as $22 per hour in 2024 for employees of chains and franchises with more than 100 restaurant sites.
The compromise reached over the weekend will result in the formation of a nine-member council of representatives for workers and companies to consider future pay increases, the Times said, citing sources involved in negotiations on the matter. The council will be made up of two representatives of the fast-food restaurant industry, two franchisees or restaurant owners, two restaurant employees, two advocates for fast-food restaurant employees, and one member of the public who is not affiliated with either side and will serve as chair. In addition, the Times reported, the council will have two non-voting members from the state’s Department of Industrial Relations and the Governor’s Office of Business and Economic Development.
That nine-member Fast Food Council, similar to the one originally outlined in Assembly Bill (AB) 257, will oversee fast-food restaurants’ minimum standards on wages, working hours and working conditions in coordination with state agencies. Its first meeting is scheduled for March 15. Under the compromise, the council may annually raise workers’ pay either 3.5% or an amount based on average changes to the Consumer Price Index each year, whichever is lower, that could apply to fast-food workers statewide or in specific regions. The Times said the new $20 minimum wage will affect 500,000-plus employees.
This agreement is in the best interest of workers, local franchise restaurant owners and brands.Matt Haller, IFA
Reaction from IFA
Matt Haller, president and CEO of the International Franchise Association, praised the compromise in a news release. “This agreement is in the best interest of workers, local franchise restaurant owners and brands,” Haller said in a statement released by the IFA. He added that it “protects the franchise business model that has provided opportunities for thousands of Californians to become small business owners. It provides meaningful wage increases for workers, while at the same time eliminates more significant – and potentially existential – threats, costs, and regulatory burdens targeting local restaurants in California.”
Sean Kennedy, National Restaurant Association executive vice president for public affairs and co-chair of the IFA-led Save Local Restaurants coalition, also supports the amended AB 257. “This agreement protects local restaurant owners from significant threats that would have made it difficult to continue to operate in California,” Kennedy said in the IFA news release. “It provides a more predictable and stable future for restaurants, workers, and consumers.”
Why the Battle Began
The furor regarding AB 257, which is also called the Fast Food Accountability and Standards Recovery Act or FAST Act, erupted in 2022 when Democrats in the legislature – with backing from the Service Employees International Union – passed it. Restaurant owners complained that passage of the bill would cripple them financially unless they increased menu prices, which would then hurt consumers.
If the fast-food coalition’s ballot initiative had succeeded, Democrats had a backup plan. They had resurrected the defunded Industrial Welfare Commission (IWC), which would have had more authority to raise wages without limits and to enact workplace conditions for fast food and other California industries. Compromise terms call for the IWC to remain defunded.
Under a separate bill, AB 1228, unions would have held fast-food franchisors legally liable for labor violations committed by franchisees. In the unions’ concession under the compromise, they will cease efforts to hold franchisors liable for franchisees’ infractions, the Times said. Another stipulation of the compromise is that localities will not be permitted to further hike wages regionally for fast-food workers.
The compromise creates amendments to AB 257, and those amendments – published Monday – will need to be approved by the California Legislature. Unions are encouraging lawmakers to pass it. They have until Thursday to do so, Calmatters.org reported.
The agreement was negotiated with input from Democratic Gov. Gavin Newsom’s top advisers. The compromise will expire in 2029 unless it is extended, Politico reported.
Expensive, Prolonged Fight Averted
The Times report stated that restaurant companies will avoid an expensive fight – one that could have cost them $100 million – with labor unions. By last December, fast-food companies had secured enough signatures to qualify for the 2024 state ballot referendum on the AB 257 in hopes of nullifying it. The effort didn’t come cheap: Calmaters.org noted that McDonald’s, In-N-Out, Chick-Fil-A, IFA and the National Restaurant Association had made an “initial contribution” of $50 million to support it.
Ballot referendums have become a common way that businesses battle progressive agendas in California. But unions have reported instances in which people who gathered signatures had sometimes given misleading descriptions of their petitions’ goals. So pro-union factions introduced a bill to make it easier for voters to understand the aims of petitions. That bill, AB 421, which Newsom signed last Friday, changes the yes or no options on referendums to “keep the law” or “overturn the law” to clarify the language on ballots. AB 421 also provides a way for campaigns to pull their referendum off the ballot after it qualifies, which the fast-food restaurant coalition will be required to do.