Update Applicable to:
All fast-food industry employers
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:
- 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.
- 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.
- 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.
- 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.
- 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 This move had been a contingency plan in case the FAST Act was repealed by voters in 2024.
- 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.
- 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:
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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