California Passes Bill on Fast-Food Employment Standards

​Editor's Note: Gov. Gavin Newsom signed the Fast Food and Standards Recovery Act on Sept. 5.

California lawmakers just passed the first bill in the nation that aims to enact specific workplace rules and standards for fast-food employees. The Fast Food Accountability and Standards Recovery Act, also known as the FAST Recovery Act (or AB 257), will establish a 10-member Fast-Food Sector Council, tasked with establishing standards on minimum wages, maximum working hours, training, and other working conditions applicable to industry workers.

The bill was endorsed by the Service Employees International Union.

Council Details

The most obvious impact of this bill is the formation of a 10-member council that would be controlled by a combination of worker advocates and state representatives. Four of the seats will be reserved for industry representatives: two representatives of fast-food restaurant franchisors and two representatives of fast-food restaurant franchisees. Another four will be reserved for worker advocates: two representatives of fast-food restaurant employees and two representatives of advocates for fast-food restaurant employees. The final two members will be comprised of one representative from the state Department of Industrial Relations and one representative from the Governor's Office of Business and Economic Development. All members of the council will be appointed by government officials with the chairperson of the council appointed by the governor.  

The council will convene public hearings every six months to hear public comment on fast-food restaurant health, safety, and employment conditions. It also will hold sessions every three years to review and establish minimum standards concerning pay and working conditions like safety and training. From these meetings, the council will form recommendations.

These recommendations will be sent to the California Legislature and will automatically become effective as new state regulation, unless lawmakers specifically enact legislation preventing them from taking effect. If the legislature does nothing with respect to a specific proposal, it would go into effect the following Oct. 15.

New Avenue to Sue

AB 257 provides employees with yet another avenue to sue employers. It specifically authorizes fast-food restaurant workers to bring causes of action for discharge, discrimination or retaliation for exercising rights established by the FAST Recovery Act.

Employers face an uphill battle in defending against these claims. The law creates a rebuttable presumption of unlawful discrimination or retaliation for any adverse action taken against the worker within 90 days of a restaurant operator acquiring knowledge of the worker exercising their rights.

The bill permits cities or counties with populations greater than 200,000 to establish a local council authorized to provide recommendations to the state council. There are at least 20 such cities and nearly 30 such counties in California, so you can expect numerous smaller councils to spring up across the state.

The bill's requirements only apply to fast-food establishments consisting of 100 or more locations nationally that:

• share a common brand or that are characterized by standardized options for decor, marketing, packaging, products, and services; and
• provide food or beverage for immediate consumption on or off premises to customers who order and pay for food before eating, with items prepared in advance or with items prepared or heated quickly, and with limited or no table service.
  

Possible Consequences

There are three troubling consequences we expect to see as a result of AB 257.

AB 257 permits the council to set the minimum standards for minimum wages, maximum hours of work, and other working conditions for fast-food restaurant employees, and requires that these standards be enforced by the California Division of Labor Standards Enforcement.

Moreover, AB 257 permits the council to increase minimum wage for fast-food workers above the state minimum wage. The only limit would be that the minimum wage cannot rise above $22 an hour in 2023, which is nearly $7 more than the state minimum wage in 2023. After being raised, it would thereafter increase at a rate of 3.5 percent or the rate of change in the Consumer Price Index into perpetuity.

The minimum standards imposed on the fast food industry will inevitably increase operational costs. AB 257 does not dictate how restaurants are to adapt to those increases. Therefore, restaurants may have no choice but to pass those cost increases on to customers, on the heels of similar moves driven by the COVID-19 pandemic. As a result, employers run the risk of decreasing demand, especially in low-income areas. 

To offset the cost increases, employers are likely to turn to technological efficiencies and innovations, such as automated drive-through ordering, self-order kiosks, and automated fryers and other kitchen equipment. The very employees AB 257 seeks to protect are at risk of losing their jobs.

We expect to see legal challenges to the law filed by industry advocates. It is difficult to determine whether such a maneuver could temporarily block the law from taking effect or derail it altogether.

It will be vitally important to ensure that all of your ducks are in a row with respect to your labor and employment practices. Accordingly, we recommend an immediate review of your employment handbooks, training, timekeeping, and scheduling policies to ensure they are all 100 percent up-to-date and compliant with current California law. You would do well to conduct a full-scale labor and employment audit of your business practices.

Steven M. Bernstein is an attorney with Fisher Phillips in Tampa, Florida. Benjamin M. Ebbink and Alden J. Parker are attorneys with Fisher Phillips in Sacramento, Calif. Tyler Woods is an attorney with Fisher Phillips in Irvine, Calif. © 2022. All rights reserved. Reprinted with permission.