How Fast Food Operators Are Pushing Back Against California's New Wage Law

It's a piece of legislation that promised to revolutionize California's fast food industry. Assembly Bill 257, or the FAST Act, aims to establish a 10-member tripartite council with representatives from fast food companies, its workers, and the government that would meet to discuss matters regarding the industry, from wages to standards and practices per The Sacramento Bee. But there are limits to the committee's reach: any ruling to set industry standards would only apply to any fast food company with at least 100 locations around the country. The act passed California's State Senate earlier this week with a vote of 21 to 12. All it needs now is a signature from Governor Gavin Newsom to make the bill a law — but things aren't as simple as they seem.

Even before the bill was passed, the National Franchisee Leadership Alliance was calling on members of the State Senate to think twice about supporting the bill, saying: "All of us have a stake in this. It would utterly devastate the businesses of our owner/operators in California and could set a precedent for other states to introduce similar legislation," per The Wall Street Journal. And now that the bill has cleared one hurdle, California Restaurant Association's president Jot Condie has said, "Every resource at our disposal will be used to ensure our entire membership is asking the governor to veto this bill."

A bill that would, among other things, require minimum wages for fast food workers to be set at $22 instead of $15 was bound to be divisive. While California Democratic State Senator Maria Elena Durazo called the FAST Act "innovative" and a "very, very well-balanced method of addressing both the employers, the franchisees, and the workers, per PBS News Hour, business owners and restaurant operators don't see it that way. Matthew Haller of the International Franchise Association tells Fortune that the proposed legislation "arbitrarily applies to these small business owners who just happen to operate in a licensing agreement with a brand like McDonald's or Burger King, or Chick-fil-A," and that "it's discriminatory on the basis of the business model that these franchise owners have chosen to operate in."

Even fast food giant McDonald's, which says it rarely picks a side when it comes to legislation, chose to do so this time, with the company's U.S. President Joe Erlinger calling the law a "lopsided, hypocritical and ill-considered legislation that hurt everyone," per Fortune. He added, "It imposes higher costs on one type of restaurant, while sparing another," per Fortune. He adds: "That's true even if those two restaurants have the same revenues and the same number of employees."

While the Service Employees International Union's international president Mary Kay Henry, has told The Wall Street Journal she is confident Governor Newsom will sign the bill into law, others aren't so certain because the FAST Act has already divided members of the Newsom administration.

In an analysis, the governor's own Department of Finance said it was opposed to the bill because "it creates significant ongoing costs" for the department, and it "creates a sector-specific rule making body" within the Department of Industrial Relations, "which could lead to a fragmented regulatory and legal environment for employers. The UC Riverside Center for Economic Forecast and Development's director Christopher Thornberg also said the bill would trigger: "a very sharp increase in food costs from the affected restaurants, and that could push these families to the breaking point, given the financial pressures working families already feel from rising rents, gas and other necessities," per The Sacramento Bee.

Food Dive reports Governor Newsom has until the end of September before he needs to decide on whether to approve or veto the bill.