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September 25, 2022

Political advertising and public relations firms in California owe Governor Gavin Newsom a huge favor. That’s because by signing the so-called Rapid Recovery Act on September 5, he opened the door to what could be hundreds of millions of dollars in spending by fast food companies to bring it down.

The law, formally the Fast Food Standards and Accountability Recovery Act, or AB 257, creates an appointed board that could set wages and other working conditions for fast food workers.

The council would be empowered to set a minimum wage of up to $22 an hour in 2023, though there is reason to doubt wages will reach that limit.

Fast food corporations are seeking to buy their way out of a law aimed at raising wages for their workers, ensuring their stores are safe and healthy, and improving the industry for all.

— Mary Kay Henry, president of the Service Employees International Union

(The state minimum wage, currently $15 an hour for employers of 26 or more workers, and $14 for smaller businesses, will increase to $15.50 for everyone on Jan. 1.)

The restaurant industry has already taken steps to introduce the law to voters through a ballot measure.

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If the industry can collect about 623,000 valid voter signatures by the first week of December, the referendum would move to the November 2024 ballot and the law would be suspended until then. If the referendum qualifies, voters can expect McDonald’s, Burger King, KFC and others to spend huge sums to overturn the law.

We have witnessed this spectacle before. It has long been apparent that California’s initiative and referendum system has become a playground for wealthy corporations.

In 2020, concert companies spent some $205 million to pass Proposition 22, a measure designed to circumvent AB 5, the state law that designates app-based drivers and other concert workers as employees of parent companies. , not independent contractors.

Spending by Uber, Lyft and other gig companies set a national record for a ballot measure campaign, swamping the $19 million raised to defeat the measure.

For proponents of Proposition 22, this was money well spent.

Uber’s revenue came to about $17.5 billion last year and Lyft’s more than $3.2 billion. Neither company has posted a profit, and their path to the black ink would be even more tortuous if they had to pay their drivers a living wage along with benefits like health care, retirement, workers’ compensation and unemployment insurance.

(Proposition 22 has been on hold since a state judge ruled it unconstitutional in August 2021. Its fate now rests before a state appeals court.)

Corporate spending on a Quick Act election fight could make those concert companies look stingy.

Fast food franchisors and franchisees have a lot more money than Uber and Lyft. McDonald’s, which says it grossed $23 billion corporately in 2021 and its franchisees grossed $102 billion, reported a corporate-level profit of $7.5 billion last year. Yum Brands, owner of the KFC, Taco Bell and Pizza Hut brands, made a corporate profit of $1.58 billion and Restaurant Brands, the parent company of Burger King in Canada, of $1.23 billion.

Regardless of what one may think about the virtues or sins of AB 257, the main question facing California voters is whether we want to place legislative power in the hands of corporations determined to write laws specifically for the benefit of their executives and shareholders, and approve them through unprecedented campaigns of dishonesty.

The Proposition 22 campaign was a perfect example: concert companies claimed that their alternative to AB 5 would be a boon to their drivers and other frontline workers. As soon as Proposition 22 passed, it was abundantly clear that they had been lied to and that workers were much worse off.

It’s a fair bet that the fast food industry’s plan to overturn the Fast Act at the polls will resemble the Prop 22 campaign.

Service Employees International Union president Mary Kay Henry calls their plan “an act of extraordinary greed and cowardice” in which “fast food corporations seek to buy their way out of a law intended to raise the wages of their workers, ensuring their stores are safe and healthy, and improving the industry for everyone… This is not how companies act when they are proud of their business model.”

Fast food businesses are sure to take advantage of concerns from restaurant operators across the state that the Fast Act will increase costs not just for the big chains but for all food categories. That’s the fear expressed by Blair Salisbury, owner of Pasadena’s El Cholo Mexican restaurant and a member of the family that operates half a dozen El Cholo locations in the Southland. It is not unreasonable.

“If my cook makes $18 or $19 an hour,” Salisbury told me, “he’s going to go work for one of these fast-food chains that has to pay $22 an hour. Everyone is going to lose their cooks or have to increase their salaries. So it will affect small family restaurants, not just the chains.”

Salisbury recently signed an agreement to open a Southern California location for the fledgling Daddy’s Chicken Shack chain and line up franchisees for 19 other regional locations. But he says there is little interest in launching the chain in California, unlike in Texas, Florida and Arizona, in part because of laws like AB 257. With inflation taking a toll on restaurant revenues, one law raises the prospect of higher costs. labor. “It couldn’t have come at a worse time.”

Before we examine the details of the Fast Act, let’s examine the conditions that led to its enactment. In all, fast food franchises employ more than half a million workers in California, according to the Service Employees International Union, which sponsored AB 257.

As I reported earlier, the fast food industry has long been a dark corner of the American workplace.

Much of the problem stems from the franchisor-franchisee relationship, through which “powerful global corporations like McDonald’s…extract profits” while cutting costs to smaller business owners who operate franchised locations, Catherine L. Fisk and Amy W. Reavis of UC Berkeley’s law school observed in a 2021 report. “They control prices and much of the power over quality, hours, and other operations, and the franchisee … has no other way to raise their profits than to reduce labor costs.

The result, they wrote, is that “operators fail to pay the wages workers are entitled to, deny sick leave, ignore harassment, safety risks or disease transmission; their franchisors put so much pressure on them that there is little incentive to comply.” law.”

David Weil, a former Labor Department official whose nomination to an agency position by President Biden was thwarted earlier this year by the franchise industry and other big business interests, documented in his 2014 book, “The Fissured Workplace,” that unpaid back wages were 50% higher at franchisee locations than at company-owned locations.

The original version of AB 257 would have made large franchise companies jointly liable for any penalties and fines imposed for workplace violations at franchise locations. Labor regulators like the National Labor Relations Board have been trying to implement such a standard for years, with mixed success, and fast-food franchises like McDonald’s have been struggling for just as long.

A joint employer rule would end the ability of large companies to evade responsibility for the workplace violations that plague the fast food industry by hiding behind franchisees. But it was removed from the bill as one of several changes intended to make it more acceptable to employers, and surely the most significant.

Among other changes made before the Legislature passed the measure and Newsom signed it, the fast food council was cut from 11 to 10 members and restructured to give employers more plurality. The membership of four employee and two employer representatives was changed, along with five state regulators of agencies responsible for labor standards and occupational and public health; the final version included four worker representatives and four employer representatives, and only two regulators.

Changed the definition of fast food employers subject to the chain law with at least 30 locations nationwide to those with 100 or more. Employee scheduling, the subject of persistent worker complaints about unpredictable work hours, was explicitly removed from the council’s jurisdiction, as were benefits such as sick leave and vacation time.

Instead of unlimited authority to set the minimum wage for fast food workers, the final version capped the minimum allowable wage at $22 an hour in 2023, with increases in subsequent years of no more than the rate of inflation and in no case more than 3.5% a year, even if inflation is much higher (as it is today).

In response, the fast-food industry showed that nothing would please it short of repealing the measure in its entirety. Within days of the bill being signed by Newsom, the International Franchise Association, the National Restaurant Association. and the US Chamber of Commerce had launched their campaign under the banner of the Save Local Restaurants Coalition.

The very name shows that the industry has read the textbooks of gig firms, bail bond companies and others who have used AstroTurf methods to present themselves as grassroots avatars of everyday people.

“Restaurants are the heart and soul of the communities they serve,” said Michelle Korsmo, executive director of the National Restaurant Assn. (Question: Does anyone really consider their McDonald’s on the street corner to be the “heart and soul” of their community?)

Korsmo also referred to the “uncontrolled government council created by the FAST Act”; It doesn’t matter that the council’s authority is specifically limited by law, and any recommendations it makes would be subject to review by the Legislature, which would have up to nine months to approve or reject the council’s proposed rules.

It is not clear how the law would work in practice. The fast food council won’t even exist until a petition signed by 10,000 fast food workers is presented to state officials.

Although the panel would have the authority to raise the minimum wage for fast food workers to as much as $22 an hour in 2023, that’s probably not a reasonable expectation, since worker advocates will be a minority on the council and members at large will be aware that a full-time salary of $22 is more than a third higher than the median income in the state and close to the median starting salary for school teachers. In any case, the Legislature might as well reject any decision that seems so far from the mainstream.

If fast food companies manage to get their referendum on the 2024 ballot, California voters will get another lesson in how big business manipulates the initiative and the referendum system for their own ends. The lesson businesses learned from the Proposition 22 campaign, and fast food businesses are counting on, is that it’s always cheaper to spend money working for California’s voting public than it is to do the right thing for your workers.