On Wednesday, June 3, 2021, after three votes in the California Assembly, State Assemblywoman Lorena Gonzalez’s “Fast Food Accountability and Standards Recovery Act” (the “FAST Act”) was defeated….for now. The bill was introduced in January 2021 and had the support of the Service Employees International Union and Fight for $15. The bill was three votes shy of the 41 votes needed. Asssemblywoman Gonzalez has filed a motion to have the bill reconsidered. The FAST Act can come back before the legislature in January 2022.
The FAST Act would have established a Fast Food Sector Council (council) to establish industrywide minimum standards on wages, working hours, and other working conditions. The council would establish these standards with a focus on the health, safety, and welfare of “fast food” restaurant workers. The standards are also intended to supply “the necessary cost of proper living to the workers.”
The bill would define the characteristics of a fast food restaurant, including that the establishment be part of a set of fast food restaurants consisting of 30 or more establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services. The definition in the FAST Act of a “fast food restaurant” would include some “chain” restaurants in addition to stereotypical fast food restaurants. The FAST Act defines these restaurants as part of a chain that provides its food and beverages in the following manner: (1) in disposable containers; (2) for immediate consumption either on or off the premises; (3) with limited or no table service; and (4) to customers who order or select items and pay before eating. This definition would capture not only the typical fast food restaurant, but, unless systems implement operational changes, many “fast casual” restaurants. Consider the typical “fast casual” restaurant – it likely serves the salad, bowl, or other item in a disposable container or wrapping; the food is for immediate consumption and is not served by the staff at a table; and customers pay before eating. These restaurants, although not “fast food” would be subject to the law.
The council was to be made up of 11 members as follows: (1) One representative from the State Department of Public Health; (2) One representative from the Division of Occupational Safety and Health; (3) One representative from the Division of Labor Standards and Enforcement; (4) Two representatives from the Department of Industrial Relations; (5) One representative of fast food restaurant franchisors; (6) One representative of fast food restaurant franchisees; (7) Two representatives of fast food restaurant employees; and (8) Two representatives of advocates for fast food restaurant employees. The Governor appoints the representatives of the state agencies. The Speaker of the Assembly appoints the representative of fast food restaurant franchisors, one representative of fast food restaurant employees, and one representative of an advocate for fast food restaurant employees. The Senate Rules Committee appoints the representative of fast food restaurant franchisees, one representative of fast food restaurant employees, and one representative of an advocate for fast food restaurant employees.
The FAST Act makes franchisors responsible for ensuring compliance by their franchisees. A franchisor would be jointly liable for any penalties or fines for the violation. More significantly, if the franchise prevents or creates a barrier to compliance, including because the franchise does not provide for funds sufficient to allow compliance, the franchisee may sue the franchisor for monetary or injunctive relief necessary to ensure compliance.
According to published reports, if California implements such a council structure for fast food workers, it would be a unique arrangement within the industry. Supporters of the FAST Act see it as a way to transform an industry, a potential model to take to other states and in implement in other states. Initially, the FAST Act is a substitute for unionization in an industry where unionization was difficult. But in an era where the Federal Government is considering law to make it easier to unionize (the PRO Act), the FAST Act could easily be a step on the road to unionizing the workers covered by the act.
Opponents of the bill argue that it takes decisions about the terms of labor relationships out of the hands of the employer and worker and puts them in an unelected council. Under this construct, the government would control one of the largest cost centers and most fundamental parts of a restaurant business – the terms of its labor arrangements and the conditions of employment. It would do so on an industrywide basis – ignoring the differences in employment terms in urban and suburban California. Opponents also point out that it ignores the franchise relationship between the franchisor and franchisee. It removes the autonomy of the individual franchisee to determine what is best for its business and substitutes the council’s opinion. One could view the results of the FAST Act as reducing intra-brand competition for labor assuming the minimum standards increase current costs and, in effect, establish the standard wage rates and terms for the entire brand.
The FAST Act does not control adaptation or the weight of new costs on business. For example, Chipotle announced earlier this year that it will be increasing prices to offset increasing wages. Another national brand announced that it is testing automated drive-thru ordering. It had already implemented other technology to help save on labor costs. The risk to labor is job loss, either because of increased consumer prices reducing demand or job loss due to increased costs. Ultimately, the real minimum wage that may be created for some by the FAST Act is zero. Economist, Thomas Sowell, describes it as follows:
“Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they lose their jobs or fail to find jobs when they enter the labor force. Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed.”
As noted above, the FAST Act can come before the legislature again and if it does, there are only a few additional votes needed to move it forward.