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California Fast Food Industry Agreement Reached

26 Oct


Update Applicable to:

All fast-food industry employers

What happened?

An agreement between labor and fast-food companies in California, documented in a Term Sheet dated 9/11/2023, proposes significant changes to the FAST Act, specifically related to the fast-food industry.

What are the details?

The California fast-food industry is poised for significant transformation through a recent agreement between labor and fast-food companies (dated 9/11/2023). If finalized, this pact will profoundly affect workers, employers, and the sector at large. Here’s a concise breakdown:

  1. Minimum Wage Increase: Starting April 1, 2024, all limited-service restaurants belonging to chains with over 60 nationwide locations will be required to pay a minimum wage of $20.00 per hour.
  2. Joint Employer Provisions: The joint employer provisions of AB 1228, also known as the Fast-Food Franchisor Responsibility Act, will be removed. This provision would have held fast food franchisors jointly liable for franchisee violations of employment laws.
  3. No More Referendum on AB 257: Businesses supporting the referendum challenging the FAST Act have agreed to withdraw their challenge by January 1, 2024, as part of the agreement.
  4. Repeal of the FAST Act: The agreement proposes the repeal of AB 257, known as the FAST Act. This act had shifted regulatory power in the fast-food industry to an appointed council of unelected members, away from the legislature.
  5. Elimination of the Industrial Welfare Commission: The budget allocation for the Industrial Welfare Commission (IWC) and its regulatory powers have been eliminated under this agreement. This move had been a contingency plan in case the FAST Act was repealed by voters in 2024.
  6. Establishment of the Fast-Food Council: A new council within the Department of Industrial Relations will be created, representing various interests, including employers, employees, and advocates. The council will have the authority to adjust the minimum wage annually from 2025 to 2029, with certain limitations.
  7. Limitations on Local Municipalities: Local governments will not be able to set higher minimum wages for fast food employees than what is mandated by the council.

For more information, please see the links below:

Official Term Sheet

News: Article 1, Article 2

What do employers need to do?

While this agreement offers potential benefits such as increased wages and improved working conditions for employees, franchisees will be confronted with challenges, including rising labor costs, potential annual cost escalations, and evolving regulatory frameworks. The elimination of the “joint liability” provision also serves to alleviate concerns expressed by the restaurant industry regarding the initial proposed language. As this agreement advances through the California legislature, fast-food chains and franchisees will vigilantly monitor its progress and adapt their strategies to ensure the continued viability of their businesses in light of these transformative changes.

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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