With the assistance of California governor Gavin Newsom, fast food companies that supported a referendum to reverse the 2022 Fast Food Accountability and Standards Recovery Act (“AB 257”) struck a deal with several labor unions, including the Service Employees International Union, to revise some of AB 257’s most controversial provisions.  In exchange for an agreement on this new bill (“AB 1228”), fast food companies agreed to withdraw the referendum that was set for a vote in 2024.

AB 257 set new statewide minimum pay rates for an entire sector of employees regardless of restaurant location or the impact on local markets.  It also required the creation of a statewide Fast Food Council comprised of labor and employer representatives that had the authority to set sector-wide minimum wages and working conditions, and included a minimum wage pay increase up to $22 per hour for employees of restaurants with more than 100 locations.  AB 257 also provided for the creation of regional councils that could set additional pay rates based on local conditions.  In contrast, the statewide minimum wage for all other hourly employees increases to only $16 per hour on January 1, 2024. 

In comparison, while AB 1228 also seeks to increase fast food workers’ minimum wage rate, starting April 1, 2024, wages would increase to $20 per hour in restaurants that have at least 60 locations nationwide.  If passed, local authorities would be unable to further increase hourly wages for fast food workers in their region until the expiration of the agreement in 2029.  The bill creates an exception for restaurants that currently make and sell their own bread as a “stand-alone menu item.” 

Like the previous version, AB 1228 maintains the creation of a Fast Food Council but, unlike AB 257’s version, any recommendations on working conditions promulgated by the Council would be subject to the rulemaking process as required by the Administrative Procedure Act.  “Working conditions” include such subjects as wages, fast food restaurant employees’ health and safety conditions, workplace security, the right to take time off work for protected purposes, and the right to be free from discrimination and harassment in the workplace. 

The Fast Food Council is to be housed under the Department of Industrial Relations (“DIR”), with additional jurisdictional oversight by the Occupational Safety and Health Standards Board and the Civil Rights Department.  The Council’s nine members would be broken down as follows:  two members from the fast food industry; two fast food restaurant franchisees or owners; two fast food restaurant employees; two representatives of advocates for fast food restaurant employees; and one unaffiliated member of the public.  In addition to the voting members, the Council would have two nonvoting members, one from the DIR and one from the Governor’s Office of Business and Economic Development.

Part of the deal reached by the two sides includes an agreement to kill the three million dollars that had been set aside for the Industrial Welfare Commission, which has gone unfunded for almost 20 years, and to eliminate portions of the bill that had sought to impose liability on franchisors for a franchisee’s violations of various employment laws.

AB 1228 must pass both houses of the California legislature and be signed by the governor before it would take effect.