A fight between fast-food chains and unions in California is over, for now – what to know

by | Sep 15, 2023 | Business

In this articleCMGYUMQSR-CAMCDFollow your favorite stocksCREATE FREE ACCOUNTFlags are flown at a car caravan and rally of fast food workers and supporters for passage of AB 257, a fast-food worker health and safety bill, on April 16, 2021 in the Boyle Heights neighborhood of Los Angeles, California.Mario Tama | Getty ImagesFast-food workers in California are set to receive pay hikes next year after the restaurant industry and unions reached a compromise over a controversial bill.The deal, brokered with the help of Gov. Gavin Newsom’s office, also creates a nine-person council that will decide on future wage hikes for the fast-food industry in California through 2029. The agreement ends a fight between the two sides that threatened to stretch out for years. The restaurant industry was gearing up to spend more than $100 million on the battle.The deal will mean a wage floor of $20 for California workers at fast-food chains with at least 60 locations nationwide, starting April 1. And from 2025 through 2029, the appointed council will have the authority to raise the hourly minimum wage annually by whichever is lower: 3.5% or the annual change in the consumer price index.The council will include four representatives from the fast-food industry, four from the workers’ side and one neutral party who will serve as chair.While fast-food operators will have to cope with paying higher wages, the agreement thwarts more dire consequences, according to industry analysts.”I certainly wouldn’t say it’s catastrophic, and certainly not as bad as it could have played out over the next year or two,” said Mark Kalinowski, CEO of Kalinowski Equity Research.California lawmakers rushed to conclude the matter before the legislative session ends midnight Friday. The state senate passed the bill Thursday, and the state assembly has concurred with the upper house’s amendments. Newsom, a Democrat, has already pledged to sign the bill into law.California’s fast-food fightNewsom signed AB 257, also known as the FAST Act, into law in January. The legislation would have created a 10-person council that would govern fast-food chains with more than 60 locations, including setting guidelines for working conditions and wages. The initial wage hike could have been as high as $22 an hour.But the fast-food industry was attacking the bill before it even made its way to Newsom’s desk. State records show that Chipotle Mexican Grill, Chick-fil-A, Yum Brands and Restaurant Brands International were among the chains that spent money to lobby California lawmakers to oppose the legislation.McDonald’s U.S. President Joe Erlinger wrote a letter posted on the company’s website, making a rare public statement on a political issue. Erlinger called the bill “lopsided” and “ill-considered,” attacking lawmakers for not targeting all restaurants. As of 2022, just under 10% of McDonald’s U.S. restaurants were located in California, according to Citi Research. Most are run by franchisees.A ‘Join Our Team’ sign is displayed outside a Chipotle location, listing employee benefits, on June 2, 2023 in Los Angeles, California.Mario Tama | Getty Images News | Getty ImagesThe restaurant industry retaliated, gathering enough signatures to create a referendum that would make California’s voters decide on the matter. The Service Employees International Union, which backed the FAST Act, alleged in a lawsuit that the industry misled signatories, but a judge ruled against the union. The referendum was supposed to be on November 2024 ballots.In response to the referendum, the SEIU backed another bill, AB 1228. The bill would impose joint-employer liability on franchised businesses — including the very restaurant chains that loudly decried AB 257.Under the bill, franchisors like McDonald’s would be held liable for infractions committed by their franchisees. Opponents said that the bill attacked the very nature of the franchising model. AB 1228’s provisions were originally included in AB 257 but removed before Newsom signed it into law.The California State Assembly passed AB 1228 in early June. But the state’s Senate never had the chance to vote on that version.Instead, the restaurant industry and the unions struck a deal, replacing the joint-employer provisions with the terms of their agreement, which also includes repeal …

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