Fox Rothschild LLP

On Labor Day, with support from prominent unions, California Gov. Gavin Newsom signed the Fast Food Accountability and Standards Recovery Act (FAST Recovery Act), which will significantly affect fast-food restaurants in the state, including franchise operations. What starts in California often moves to other states, so even if FAST (AB 257) does not impact your business – yet – take note.

AB 257 authorizes the California Department of Industrial Relations to create a Fast Food Council if the Department receives a petition signed by at least 10,000 fast-food employees. If the Council is created, it will have the authority to set minimum standards for employees in the fast-food industry, including wages, health and safety conditions, workplace security, workplace training, the right to take time off from work for protected purposes and protection from workplace discrimination and harassment.

The Makeup of the Council, Its Purpose and What It Does

The Council will be composed of 10 political appointees, including representatives from:

  • Department of Industrial Relations (1)
  • Fast-food restaurant franchisors (2)
  • Fast-food restaurant franchisees (2)
  • Fast-food restaurant employees (2)
  • Advocates for fast-food restaurant employees (2)
  • Governor’s Office of Business and Economic Development (1)

The governor will appoint the representatives of the state agencies, fast-food restaurant employees, fast-food restaurant franchisees and fast-food restaurant franchisors. The Speaker of the Assembly and the Senate Rules Committee will each appoint one representative as “advocates” for fast-food restaurant employees.

The purpose of the Council is to establish sector-wide minimum standards on wages, working hours and other working conditions related to the health, safety and welfare of fast-food restaurant workers. Any such labor and employment standards set by the Council will be the minimum standard for the fast-food industry in California. However, the Council may not mandate employee health and safety standards that fall under Cal-OSHA jurisdiction, nor, in a nod to union support, supersede a standard covered by a valid collective bargaining agreement. Accordingly, any standards established by the Council may be more employee-friendly than current California law requires.

If It Looks Like a Fast-Food Restaurant and Smells Like a Fast-Food Restaurant, Is It a Fast-Food Restaurant?

AB 257 defines a “fast food restaurant” as any establishment in the state that is part of a fast-food chain and that, in its regular business operations, primarily provides food or beverages in the following manner:

  • For immediate consumption either on or off the premises.
  • To customers who order or select items and pay before eating.
  • With items prepared in advance, including items that may be prepared in bulk and kept hot, or with items prepared or heated quickly.
  • With limited or no table service. Table service does not include orders placed by a customer on an electronic device.

In addition, the establishment must be part of a set of fast-food restaurants consisting of 100 or more establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products and services.

Bakeries that produce bread for sale on the premises are not considered fast-food restaurants. However, this exemption applies only where the bakery sells its bread as a standalone menu item, and does not apply if the bread is only available for sale as part of another menu item such as a sandwich.

Moreover, when a restaurant is located and operates within a grocery establishment, and the grocery establishment directly employs the individuals working in the restaurant, the restaurant is “a fast food restaurant” for the purposes of AB 257.

Key Takeaways for Fast-Food Employers

1. Allows for an Increased Minimum Wage

The Council may increase the minimum wage for fast-food workers up to $22.00 per hour as of Jan. 1, 2023 through Dec. 31, 2023. On Jan. 1, 2024, and annually thereafter, the maximum hourly minimum wage that may be established by the Council shall increase by no more than the lesser of one of the following, rounded to the nearest ten cents: 3.5% or the percentage increase in the Consumer Price Index.

  • Get ready for minimum wage increases.

2. Allows for Creation of Local Fast Food Councils

AB 257 permits any county or city with a population of greater than 200,000 to establish a Local Fast Food Council, operating independently from the statewide Council. Any such Local Fast Food Council shall be composed of at least one representative who is either a fast-food restaurant franchisor or a fast-food restaurant franchisee and at least one representative who is a fast-food restaurant employee, and a majority of representatives from local employment, health and safety agencies. A Local Fast Food Council may provide written recommendations to the statewide Council regarding minimum state health, safety and employment standards, including training, that the Local Fast Food Council finds are reasonably necessary to protect the health, safety and welfare of fast-food restaurant workers.

  • Consider lobbying efforts to get the right representatives on statewide or local Councils.

3. Potential Lawsuits

AB 257 provides that the Labor Commissioner “shall enforce this part, including investigating an alleged violation, and ordering appropriate temporary relief to mitigate the violation or to maintain the status quo pending the completion of a full investigation or hearing… including by issuance of a citation against an employer, fast food restaurant operator, fast food franchisee, fast food franchisor, or any other liable person under this part, and by filing a civil action.” Thus, the power to enforce alleged violations of AB 257 and the Council’s edicts lies with the Labor Commissioner.

Moreover, AB 257 also creates a private right of action for any employee of a fast-food restaurant discharged or otherwise discriminated or retaliated against for the following protected actions:

  • Making a complaint or disclosing information regarding employee or public health or safety
  • Instituting, testifying or participating in a proceeding relating to employee or public health or safety, or any Council or Local Fast Food Council proceeding
  • Refusing to perform work in a fast-food restaurant because the employee had reasonable cause to believe that the practices or premises of that fast-food restaurant would violate worker or public health and safety laws and/or regulations, or would pose a substantial risk to the health or safety of the employee, other employees or the public

In addition, there is a rebuttable presumption of unlawful discrimination or retaliation for purposes of this section if a fast-food restaurant operator discharges or takes any other adverse action against one of its employees within 90 days following the date when the operator had knowledge of that employee’s protected activity.

AB 257 provides that the employee shall have a right of action for, and shall be entitled to, reinstatement, and treble the lost wages and work benefits caused by the discrimination or retaliation, and the employee’s reasonably incurred attorney’s fees and costs.

  • Brace yourself for more fast-food industry lawsuits.

Can It Be Stopped?

The day after the FAST Recovery Act was signed into law, a referendum effort was launched in a bid to stay the law until voters can weigh in. Signatures must be collected by April 1, 2023 to qualify for the November 2024 ballot.

In addition, there may be some legal challenges brewing. Only time will tell whether such challenges materialize or succeed.

Next Steps and Recommendations for Employers

The complex and lengthy nature of AB 257, and its potentially far-reaching implications, makes it essential that you consult counsel about any questions regarding how this new law impacts your business. Your attorneys can review your labor and employment practices and policies to ensure they comply with California law.

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