ALEXANDRIA, Va.—California Governor Gavin Newsom has signed the FAST Recovery Act, which sets wages for fast-food workers in the state, reports the Wall Street Journal. The law 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%.
“California is committed to ensuring that the men and women who have helped build our world-class economy are able to share in the state’s prosperity,” said Governor Newsom in a statement. “Today’s action gives hardworking fast-food workers a stronger voice and seat at the table to set fair wages and critical health and safety standards across the industry.”
Fast-food operators and franchisees were against the bill and urged the governor to veto it. The groups said the legislation impacts restaurants’ ability to thrive, as many restaurants will have to bear the cost of increasing workers’ pay.
The International Franchise Association said in a statement that Newsom sided with special interests by signing a bill “designed to hurt the franchise business model in California.”
The group called the bill “a fork in the eye to franchise owners and customers at a time when it hurts most.”
McDonald’s President Joe Erlinger wrote in a statement that the bill picks “winners and losers, which is not the appropriate role of the government.
Erlinger explained that a small business owner who runs two restaurants that are part of a national chain, such as McDonald’s, are included under the law and could be forced to raise their minimum wage up to $22, if the panel sets it that high. However, if someone owns 20 restaurants that are not part of a large chain, the law does not apply to them, and brands with fewer than 100 locations are excluded. The law also does not apply to restaurants that bake bread.
The Journal reports that restaurant owners may have a hard time affording a wage hike so quickly, as the state’s minimum wage is $15 an hour and will go up by 50 cents in January.
“You can’t charge enough for food to offset what will happen from a labor perspective,” Greg Flynn, president of Flynn Restaurant Group, which operates franchise brands in 44 states and owns 105 restaurants in California, told the Journal. “California is already the most difficult state in the nation to operate as a restaurateur. This just makes it more difficult and less attractive.”
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.
Mary Kay Henry, president of Service Employees International Union, said the law is one of the most significant pieces of labor legislation in a generation.
“California fast-food workers have set a new model for workers having more power across their industry,” Henry told the Journal. Henry also said similar lobbying efforts are happening in other states.
Some fast-food restaurants are considering adding table service to their establishments so that they would be exempt from the law. The law applies to fast-food restaurants that are part of a chain, with limited or no table service, and where customers order and pay before receiving their food.
A franchise owner of El Pollo Loco locations said she has put their expansion plans on hold due to the passage of the law, and if she is forced to increase wages, she may eliminate cashier positions and use kiosks instead.
We’ve gone too far here,” she told the Journal. “It’s just really discouraging.”