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Breaking Down Calif.’s Controversial FAST Act Bill

man wearing brown cap in across menu board

California’s FAST Recovery Act – the first bill of its kind to take on the fast-food industry – could prove a boon for workers and labor unions but a burden to the mom-and-pop restaurants that ostensibly are excluded from its provisions.

The measure, adopted by narrow margins in both houses of the Legislature, could push minimum wage at fast-food restaurants to $22 an hour next year. It was unclear whether Gov. Gavin Newsom would sign the measure. He has until Sept. 30 to decide.

Opposition, including the National Restaurant Association, pledged to do everything at their disposal to get Newsom to veto the bill.

“It’s rare that a state legislature passes a bill that would hurt small businesses, their employees, and their customers, but California’s FAST Act does just that,” NRA President & CEO Michelle Korsmo said in a statement.

“Nine in 10 restaurants are small businesses that employ fewer than 50 people. This bill sends a clear message that the state legislature doesn’t understand the importance of these employees to the small business owners operating not just franchise restaurants, but also bakeries, juice bars, pizzerias, delis, salad shops and so many other quick-service establishments.”

But Service Employees International Union President Mary Kay Henry said the bill represents a “watershed moment for working people,” the Times of San Diego reported (Aug. 30).

“We’re looking to give workers a voice on the job, and for workers in the fast-food industry, which will continue to try to organize, it’s tough,” former legislator Lorena Gonzalez, who wrote the original version of the bill, told The Los Angeles Times (Aug. 29). “They’ve never had a voice on the job, and traditional organizing hasn’t worked.”

The bill targets large fast-food corporations and excludes bakeries, grocery store fast-food counters and chains with fewer than 100 locations nationally. But those smaller operations still would be competing for the same labor pool and likely will see their labor costs rise as well.

“To sustain this level of labor costs, restaurants will have to make changes: They can increase prices for consumers or make operational changes, which negatively impact the customer experience and are unsustainable in the long run,” Sam Zietz, CEO of Grubbrr, told The Food Institute. “As an alternative, they can invest in automation to run their business more efficiently and generate more revenue with fewer employees who can then be compensated more.”

Supporters of the measure say it will give fast-food workers a chance to make a decent living. Savor Training Co. owner Reese Jackson said as a consultant to the restaurant industry she has seen first-hand how low wages affect families.

“We have to keep in mind that these people are working 60 hours a week minimum as managers, they have to pay extra for childcare, and they have to work holidays. The least we can do is pay them for their time,” Jackson said.

But attorney Anthony Zaller told Restaurant Business (Aug. 31) that once minimum wage is increased at the larger chains, there will be a ripple effect across the industry.

“I can see it trickling outside the fast-food industry, as well,” Zaller said.

In addition to wages, the bill also requires changes that ensure worker safety. The International Franchise Association predicted the bill would force a 20% increase in menu prices and also lead to job cuts.

“Governor Newsom must veto this bill — it’s not the way to help workers, consumers or businesses thrive,” Alex Johnson, who owns 11 fast-food franchises, said in a statement.

The bill itself doesn’t set wages. It provides for a stakeholders council with that power as well as the ability to establish management dos and don’ts. It also would allow any community with more than 200,000 residents to set up a similar council. Forty percent of the council seats are allocated to fast-food workers and union representatives – two each.

California’s current minimum wage is $15 and is set to go to $15.50 on Jan. 1.

Henry predicted the bill will become law.

Newsom “has met and heard stories of these workers,” she told a news conference.