California Fast-Food Operators Fight Wage Bill

The recently passed legislation sets wages for hourly fast-food workers of up to $22 an hour.

August 31, 2022

ALEXANDRIA, Va.—Fast-food restaurants in California have banded together against a bill passed by the state legislature that would set wages for fast-food workers in the state, reports the Wall Street Journal. The bill has been sent to California Governor Gavin Newsom for signature, but it has not been confirmed if he will sign it.

The bill, known as the Fast Act, creates a government panel that would set hourly wages for fast-food workers of up to $22 beginning next year. The wages can increase annually by the same as the consumer-price index, up to a maximum of 3.5%.

Fast-food franchise owners are behind the effort to persuade the governor to veto the bill, and groups representing restaurant companies and owners plan to run ad campaigns against the bill. The groups say the legislation impacts restaurants’ ability to thrive, as many restaurants will have to bear the cost of increasing workers’ pay.

“Every resource at our disposal will be used to ensure our entire membership is asking the governor to veto this bill,” Jot Condie, president of the California Restaurant Association, told the Journal, and also said he is concerned that wage-setting could be expanded outside the fast-food industry.

According to the Journal, the bill could impact chains such as Starbucks, Chipotle and In-N-Out that operate their own locations as opposed to franchise-heavy chains. A Jack in the Box representative told the Journal that any increased labor costs would lead to increased prices. Jack in the Box has 972 franchisee-owned stores and 338 company-owned locations in California, according to Citigroup.

“The small owner who wants to go into business will be negatively impacted,” Sid Feltenstein, a former Dunkin’ executive who is now a partner with private-equity firm DIA Equity Partners, told the Journal.

The National Franchisee Leadership Alliance said in an email to the Journal that McDonald’s owners and supporters sent more than 11,000 emails to California Senate members opposing the bill.

“All of us have a stake in this,” wrote leaders of the group in the email viewed by the Journal. “It would utterly devastate the businesses of our owner/operators in California and could set a precedent for other states to introduce similar legislation.”

The bill would also create an unequal playing ground, because it would apply to larger restaurant chains and not smaller ones, they wrote in the email.

Labor unions in the state back the bill, saying that the government-set minimum wages would make sure that fair wages and other protections are set in place for hourly workers.

“We want California to be the first in the nation as it is in so many fronts, and to be able to spread this to other states,” Mary Kay Henry, international president of the Service Employees International Union, told the Journal.

Henry told the Journal her organization is confident Newsom will sign the bill.

“He’s met and heard stories of these workers,” Henry said during a news conference after the bill’s Senate passage Monday night. California activists have met with workers in New York and Illinois about passing legislation similar to the Fast Act, she said.

The Journal reported that a spokesperson for the governor declined to comment on whether Newsom would sign the bill. However, according to the Journal, top officials in his administration negotiated final language in the bill, and they removed a provision that would have made restaurant chains jointly responsible with franchisees for the treatment of workers.

The governor has until the end of September to sign the bill.

California recently passed a plan that requires all new passenger cars and light trucks sold in the state to be electric vehicles or plug-in electric hybrids by 2035.

In May, NACS filed a petition in federal court in Washington, D.C., challenging the Environmental Protection Agency’s grant of a waiver that would allow California to impose a zero-emission vehicle mandate and related limits on greenhouse gas emissions.

“Our members are accelerating investments in electric vehicle chargers to serve that market, but different states setting technology mandates will not work,” said Doug Kantor, NACS general counsel. “The track record of policymakers deciding what technologies will be best for future Americans is a poor one.”

Seventeen states have adopted some or all of California’s emission standards, which are stricter than federal rules. California is allowed to have more stringent rules under the federal Clean Air Act. Together, the states represent roughly one-third of America’s vehicle market.