The Fast Food Accountability and Standards Recovery Act

The Fast Food Accountability and Standards Recovery Act has been signed by California Governor Gavin Newsom and it could be just a matter of time before similar laws pop up elsewhere in the U.S. The act would create a council of 10 made up of fast food franchisors, franchisees, employees, union representatives, and state officials that would decide on regulations for all counter service restaurants with 100 or more locations. All members of the council except the employees would be appointed by the state. The council has yet to be formed, though the specifics, or lack thereof, of the bill have been very divisive.

The major focus of the act is to raise the minimum wage for fast food employees. The current minimum wage in California is $15 an hour for employers with over 25 employees; however, the new council could raise the number to $22 an hour for these employees in 2023. Wages would then be subject to an annual increase that matches the consumer-price index, up to a maximum of 3.5%. Major corporations in this segment, spearheaded by McDonald’s, have vehemently condemned the act in part due to the sharp wage increase. Inflation has caused operating costs to rise, and some companies fear that operators will have to close when the new wages take effect, while others have claimed that menu prices could rise by 20%.

The act also allows the council to set standards for working hours and other conditions related to health and safety. While the process for raising the minimum wage is outlined in the bill, the verbiage relating to working conditions and hours is less defined and has drawn the ire of restaurants. Additionally, the bill will only target fast food companies defined as a restaurant with 100 or more locations that share a common brand or are characterized by standard options for products and services. Other descriptors of fast food restaurants are food & beverage that is prepared in advance for immediate consumption and features “limited or no table service” with payment being received first. Based on these parameters, there will certainly be some debate over who exactly qualifies.

Major fast-food chains have also taken umbrage with what they feel is discriminatory targeting by the bill. Fine dining and other table service establishments are excluded from the bill and from any representation on the council. One argument is that it’s unfair to only target a subset of an industry and that this act will disproportionally damage some restaurant chains over others based on an arbitrary designation. The other argument is that while the bill will only raise the minimum wage for fast food restaurants, it will in fact rise for all restaurants and possibly other industries as well. It would be difficult for a fine dining restaurant to hire a server at $15 an hour when they can make $22 an hour at a McDonald’s across the street. If a fine dining restaurant’s employees, customers, and operation costs will be affected by this, should they have a say on the council?

Currently the Fast Food Act is in a holding pattern as a voter referendum was filed in September. If enough signatures are collected, then the bill would be blocked until voters decide at the ballot box. Restaurants and their associations are pushing for the referendum and unions are hoping the bill stands as is. A labor reform of this kind is unique and unprecedented, and every industry and corporation should be paying close attention. The Fast Food Act is a proving ground that will bring sweeping changes to the restaurant industry, and those changes will not be confined to California for long.