Updates on California’s Pro-Employee Legislation

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September has been a significant month for pro-employee legislation in Sacramento. In early September, Governor Newsom signed Assembly Bill 257, the Fast Food Accountability and Standards Recovery Act, which provides for the establishment of a council to set standards for working conditions in the fast-food restaurant industry. Additionally, the Governor will have until the end of the month to either sign or veto Senate Bill 951, which, now has passed through the California Senate and Assembly. If enacted, SB 951 would expand paid family leave benefits for low-wage workers.

The FAST Recovery Act (AB 257)

Signed into law on September 5, 2022, the Fast Food Accountability and Standards Recovery Act, or “FAST Recovery Act,” authorized the creation of a new regulatory body within the Department of Industrial Relations, the Fast Food Council, which will set the state standards for wages, hours, and working conditions for California employees of large fast-food establishments with one hundred or more locations across the country.

The Fast Food Council will be comprised of ten members: four fast-food restaurant franchisees/franchisors, two fast-food restaurant employees, two fast-food restaurant employee advocates, and two government representatives – one from the Department of Industrial Relations and one from the Governor’s Office of Business and Economic Development. Pursuant to the FAST Recovery Act, the Fast Food Council must hold public hearings every six months and meet every three years to review the adequacy of health, safety, and employment standards in the fast-food restaurant industry.

Having fallen short by just three votes the year prior, the FAST Recovery Act passed the House in January of 2022, and the Senate in August of 2022, before arriving on Governor Newsom’s desk in early September.

“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,” said Governor Newsom, when signing the legislation on September fifth. “I’m proud to sign this legislation on Labor Day when we pay tribute to the workers who keep our state running as we build a stronger, more inclusive economy for all Californians.”

While proponents of the Act, including labor unions, hail it as necessary state action to address long-standing issues in the fast-food industry, critics have expressed concern that the Act will harm the fast-food restaurant franchise model, ultimately passing increased operational costs on to the consumer that further fuel inflation and hurt low income consumers, and reducing employment opportunities as franchising activity declines.

Expanded Paid Family Leave (SB 951)

If enacted, beginning in 2025, Senate Bill 951 will increase wage replacement for Paid Family Leave and/or State Disability Insurance to 90% for workers making up to 70% of the statewide average weekly wage. This comes in contrast to current California law, which initially provided for 55% income replacement during qualifying leave, and was temporarily increased to between 60% and 70% income replacement (depending on income). If SB 951 is vetoed, Paid Family Leave wage replacement will return to 55% beginning in 2023; if it is signed into law, 60% to 70% wage replacement will continue through the end of 2024 until SB 951 comes into effect.

Under SB 951, the criteria for qualifying leave remains unchanged. Employees are eligible for partial wage replacement for leave taken to care for a seriously ill family member, bond with a minor child within one year of birth or placement, or tend to their own long-term medical condition.

Senate Bill 951 is estimated to cost California an additional $3-4 billion annually – a substantial increase in expenditure from the $8.5 billion paid out in benefits under the existing program in fiscal year 2020-2021. It was for precisely this reason Governor Newsom vetoed a similar proposal in 2021, citing budgetary constraints. Significantly, SB 951 accounts for this concern by including a provision eliminating the cap on payroll tax contributions, ensuring that higher-income workers contribute more to the program.

CDF will keep readers updated on the status of SB 951 and continue to monitor California’s employment-related bills. In addition, in November 2022, CDF will be conducting a complimentary webinar discussing all of the new employment law legislation that was enacted during the year. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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