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Will California Really Implement A $22 Minimum Wage?

Originally published in Forbes Advisor

A new California bill could impact the wages of more than half a million fast food workers.

On Labor Day 2022, California Governor Gavin Newsom announced he had signed the FAST Recovery Act (AB 257) into effect, which will establish a council to regulate wages and working conditions for employees in the fast food industry.

The new council will have the authority to set an industry-wide minimum wage as high as $22 per hour.

While labor union SEIU calls the bill “a significant victory in fast-food workers’ decade-long fight for fair pay and a voice on the job,” AB 257 faces well-funded opposition from major fast food chains and a handful of business associations.

What is AB 257?

The Fast Food Accountability and Standards Recovery Act, or the FAST Recovery Act (AB 257) was introduced as a response to reports of safety violations affecting fast food workers during the pandemic.

In one such incident, a McDonalds in Oakland, California settled a lawsuit from a group of employees who claimed they were forced to work during the pandemic and told to wear dog diapers and coffee filters as masks.

According to the bill, AB 257 is an effort to improve rights for the “largest and fastest growing group of low-wage workers in the state.”

“For years, the fast food sector has been rife with abuse, low pay, few benefits, and minimal job security, with California workers subject to high rates of employment violations, including wage theft, sexual harassment and discrimination,” the bill says.

The main function of the FAST Recovery Act is to create a council who will set minimum employment standards for the fast food industry. The council will include advocates and representatives for fast food employees, alongside an equal number of representatives from the industry.

The bill also authorizes any city or county with more than 200,000 residents to establish its own local fast food council.

How Will Workers Be Affected by AB 257?

The structure of the fast food industry creates challenges for labor organizing in California. For example, employers are only required to negotiate with unions on a location-by-location basis, and franchise owners have limited power to change employment rules. But AB 257 removes that roadblock by allowing the Fast Food Council to set and enforce new standards, without requiring union effort.

Here’s what the FAST Recovery Act does for workers:

  • Increases the minimum wage: The Fast Food Council can increase the minimum wage up to $22 per hour for 2023 (California minimum wage is currently $14-$15), and the bill allows for an increase of 3.5% each subsequent year. The council will also investigate employees’ wage-related claims.

  • Stops retaliation: The bill prohibits employers from firing or discriminating against employees as a form of retaliation, and requires job reinstatement and payment of lost wages for workers who were fired in acts of retaliation.

  • Improves workplace health and safety: The council will review health and safety standards every 3 years (at minimum) and create and enforce new standards.

By some estimates, the results of the bill could be life-changing for workers and their families. UC Berkeley Labor Center Chair, Ken Jacobs, says the impact of the bill will ultimately depend on the decisions of the fast food council.

“Likely outcomes are improved wages for the 550,000 fast food workers in the state, greater worker voice in addressing working conditions in the industry, and reductions in injury and violence on the job,” Jacobs says.

“Higher wages and safety standards can be expected over time to lead to improvements in worker health, improved health and educational outcomes for workers’ children, fewer work days lost to illness and increased worker productivity. It may also result in small price increases in the fast food industry in the state,” he adds.

Who Will Be Impacted?

According to the SEIU, the majority of California’s fast food workers are people of color and women. A union survey of fast food workers found that 85% of these employees in California reported experiencing wage theft, or being denied their rightfully earned wages by an employer

Improved standards and accountability could impact every worker in California’s fast food industry, and could eventually affect workers in other states, too.

‘If the policy is successful, other states can be expected to pass similar policies—not just in fast food, but in other low-wage industries,” says Jacobs.

On the other hand, representatives of the fast food industry warn that consumers could lose out. The California Restaurant Association, which calls the bill “reckless,” says it will result in a 20% increase in costs for customers. That figure comes from a 2019 University of California Riverside study, and is based on a predicted 60% increase in worker pay.

The Society for Human Resource Management (SHRM) says AB 257 could lead to more employee lawsuits against employers, increased costs passed on to consumers, and automation of fast food jobs. SHRM declined Forbes Advisor’s request for comment.

In an economic impact survey by the Employment Policies Institute, a nonprofit group with restaurant industry ties, economists predicted that the FAST Recovery Act will have a negative impact on franchise owners and force restaurant chains out of California.

There are an estimated 30,000 fast food franchise locations throughout the state.

When Will AB 257 Go Into Effect?

The FAST Recovery Act is set to go into effect on January 1, 2023. However, the bill could be delayed by a coalition called Save Local Restaurants, which had received nearly $13 million in funding from major chains like McDonalds, Chipotle and Starbucks.

“Fast-food corporations are phenomenally profitable and do not want to see any legislation that would require them to share power with their workers in setting industry standards,” explains Jacobs.

U.S. consumers spent more than $300 billion at fast food restaurants in 2021 and McDonalds, Chipotle and Starbucks reported increased revenues in 2021 from 2020.

The coalition is collecting signatures to force a referendum on the bill. If 623,000 voter signatures are collected by December 4, AB 257 will be put on hold until the November 2024 election.

“If the initiative is on the ballot, [AB 257] could be delayed until late 2025 or be eliminated altogether,” explains Jacobs, “but if the companies fail to qualify the referendum, workers could see raises some time later next year.”

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