Executive Summary: On September 5, 2022, California Governor Gavin Newsom signed A.B. 257, the Fast Food Accountability Recovery Act or FAST Recovery Act. The law was strongly supported by unions and will impact more than 500,000 fast food workers in California, their employers, and consumers.

The law establishes a 10-member Fast Food Council that will be part of the California Department of Industrial Relations (DIR) and will be in place until 2029. The Fast Food Council is to be composed of:

  • One representative of DIR;
  • One representative of the Governor’s Office of Business and Economic Development;
  • Two representatives of advocates for fast food restaurant employees;
  • Two representatives of fast food restaurant employees;
  • Two representatives of fast food restaurant franchisors; and
  • Two representatives of fast food restaurant franchisees.

The governor will appoint the representatives of state agencies, fast food restaurant employees, fast food restaurant franchisors, and franchisees. The speaker of the state Assembly and the state Senate Rules Committee will each appoint one representative of an advocate for fast food restaurant employees. Prior to the Fast Food Council issuing new rules or standards, 10,000 or more California fast food restaurant employees must sign a petition supporting its creation. It is anticipated that will be easily achieved.

“Fast food chain” is defined as a set of restaurants consisting of 100 or more establishments nationally that share a common brand, or that are characterized by standardized options for décor, marketing, products, and services.

“Fast food restaurant” means 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.

Establishments that operate within bakeries and grocery stores are not considered fast food restaurants. This definition creates uncertainty regarding whether the law impacts certain restaurant chains.

The Fast Food Council will have broad powers to establish sector-wide minimum standards on wages, working hours, and other working conditions adequate to ensure and maintain the health, safety, and welfare of, and to supply the necessary cost of proper living to, fast food restaurant workers and to ensure and effect interagency coordination and prompt agency responses regarding issues affecting the health, safety, and employment of fast food restaurant workers. The Fast Food Council is not permitted to promulgate regulations creating new paid time off benefits, such as paid sick leave or paid vacation, or regulations regarding predictable scheduling.

On January 1, 2023, the Fast Food Council can raise the hourly minimum wage for fast food workers to as much as $22, almost 50 percent higher than the state minimum wage. On January 1, 2024 and annually thereafter, the minimum wage may increase by the lesser of 3.5 percent or the rate of change in the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers.

The law also provides that any county or city with a population of at least 200,000 people may establish a local fast food council and may make recommendations to the Fast Food Council regarding minimum state health, safety, and employment standards.

The standards established by the Fast Food Council will be enforced by the state labor commissioner and the Division of Labor Standards Enforcement. Neither the Occupational Safety and Health Board nor local health departments are required to enforce standards promulgated by the Fast Food Council; however, the Fast Food Council may petition the Board for changes in safety and health standards.

A fast food restaurant operator may not discharge or in any manner discriminate or retaliate against any employee for any of the following reasons:

  • Making a complaint to the media, the legislature, a watchdog or community-based organization, or governmental agency about working conditions;
  • Participating in a Fast Food Council or local fast food council proceeding; and
  • Refusing to perform work in a fast food restaurant because the employee had reasonable cause to believe that the practices or premises of the restaurant would violate worker or public health and safety laws.

Any employee of a fast food restaurant operator discharged or otherwise discriminated or retaliated against in violation of the law shall have a right of action for reinstatement, treble damages for lost wages and benefits, and attorney’s fees. There is a rebuttable presumption of unlawful discrimination or retaliation if a fast food operator takes adverse action against one of its employees within 90 days following the date when the operator had knowledge of the employee’s protected activity.

The proposed legislation was fought by restaurant chains, restaurant associations, the International Franchise Association, and other business groups which were able to get some amendments passed before the bill became law. Business groups have already proposed a ballot measure to undo the law. Legal challenges to the law also are expected.

Employers’ Bottom Line:

This new law will complicate employment law compliance for fast food restaurants in California which already are required to follow multiple standards by other agencies. The anticipated much higher wages and other working conditions will drive up labor costs, likely accelerating the movement toward automation. The higher costs, at least in part, will be passed on to consumers in higher prices, which might adversely impact sales. There likely will be a trickle-down effect on smaller restaurants not covered by the law to increase wages and other working conditions to compete for workers in a tight labor market. The law also strengthens the hand of labor unions and their related organizations to set wages and other working conditions for an entire sector of the economy. The law also might ease organizing and collective bargaining for restaurant workers in California. Finally, other states will follow these developments and might consider implementing similar regulations.