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The hotly debated and highly contentious AB 257, The Fast Food Workers Act, which creates a Fast Food Sector Council in California, was signed into law this past Monday, Labor Day.  The bill was strongly opposed by the California Chamber of Commerce and businesses across the country, but pro-union special interests prevailed.

 Joint Liability Rejected

The bill originally faced an uphill battle until one of its more controversial provisions was removed.  This provision would have held franchisors responsible for all conduct by individual franchisees. Such a law would destroy franchising as we know it in the United States. Its removal is important but what remains is still a bill wrought with concern for QSR’s.  The bill establishes a Fast Food Sector Council that will have unprecedented authority to write its own labor and employment laws for fast food restaurant employees, circumventing the California Legislature (and federal law).

An Unnecessary and Unfair Act

AB 257 is an unnecessary Act.  The restaurant industry already had to abide by California’s labor and employment laws. Moreover, the QSR industry did not have disproportional employment and labor violations (when compared to other industries) which would have justified the need to create an exclusive QSR sectoral council.

Finally, the law only applies to QSR’s that are part of a “chain” that includes at least 100 restaurants. Thus, two stores, operating side by side, will be subject to different wage and employment mandates even though they are practically identical; the only difference being one is part of a chain and the other is not. This could force chain QSR’s to leave California. 

Delegation of Legislative Powers Could Undue this Law

Of all the objections to the legality of this law, the unlawful delegation of Legislative Powers is the most likely to succeed. The Fast Food Sector Council will have authority to impose entirely new and different labor, employment, and wage and hour laws which will apply exclusively to counter-service restaurant chains.  These laws will supersede those already established by the state, which employers in every other industry must follow!  This may be illegal because it delegates the authority that is reserved to the California Legislature to a council of unelected persons who have no accountability to voters. We expect to see such challenges in the near future.

Raises Costs

AB 257 creates a sectoral council that will raise the cost to operate chain QSR’s in California. These increased costs will be passed on to consumers or strip QSR’s profitability. All this taking place when inflation has increased grocery prices by over 10% in the past 12-months and restaurant prices by nearly 8% on average. If the chain QSR raises prices, it may not be able to compete with other local non-chain QSRs.  If it doesn’t raise prices, it may go out of business: a Hobson’s choice.

What’s Next?

This quasi-governmental union council has been given broad discretion to impose entirely new laws on the Food Fast Sector, including the right to raise the minimum wage to as high as $22.00 per hour starting in 2023.  Accordingly, California QSR’s should expect significant and costly changes in the near future.  As for QSR owners outside of California, they should be keenly aware of what is taking place in their state legislatures to make sure a Fast Food Workers Act is not heading in their direction. Pro-union supporters of this bill have already indicated their desire is to have AB 257 like bills across the country.

Brody and Associates regularly advises management on all issues involving unions, staying union-free, complying with the newest decision issued by the NLRB, and training management on how to deal with all these challenges.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.