Executive Summary
Governor Newsom signed AB257 into law. Unless there is legal action, it will go into effect in 2023.
Analysis
On Labor Day, September 5, 2022, Governor Newsom signed AB257 into law. As part of his signing statement, Governor Newsom stated the following:
“California is committed to ensuring that the men and women who have helped build our world-class economy are able to share in the state’s prosperity… Today’s action gives hardworking fast-food workers a stronger voice and seat at the table to set fair wages and critical health and safety standards across the industry. I’m proud to sign this legislation on Labor Day when we pay tribute to the workers who keep our state running as we build a stronger, more inclusive economy for all Californians.”
The bill will take effect on January 1, 2023 and the Fast Food Council is expected to be officially established in short order after 10,000 fast food restaurant employees sign a petition approving its creation.
Looking Forward
AB257 will do the following:
- Establish a 10 member Fast Food Council with only two members from fast food franchisors and two members from fast food franchisees. That council will amend, repeal, or even create “standards on wages, working conditions, and training, as are reasonably necessary and appropriate to protect and ensure the welfare, including the physical well-being and security, of fast food restaurant workers.”
- Allow any county or city with 200,000 or more residents to establish their own fast food council who have a complicated mix of advisory powers to the Statewide Fast Food Council and police powers over their own jurisdictions.
As innocuous as these councils may sound, they are not.
These councils allow labor to place their thumbs on the scale of their relationships with California’s franchisees and franchisors with little to no checks or balances on their pseudo-legislative powers. Indeed, the bill is purposefully vague about numerous issues related to the councils’ power–so much so that their constitutionality is questionable at best–and it has several passages that practically incentivizes labor organizations to abuse the councils and create self-serving laws. Indeed, the following is likely to occur within next year if AB257 is not challenged:
- The SEIU will lead the signature gathering necessary to establish the Fast Food Council. While AB257 only requires 10,000 verified signatures to establish the Fast Food Council, the SEIU will use this as an opportunity to create a statewide contact list for a future unionization drive.
- Once established, franchisors and franchisees do not have the votes on the Fast Food Council. It is almost certain that the Fast Food Council will immediately vote to raise minimum wage for fast food workers to $22.00–a potential increase of $6.50 in a single year–and use local Fast Food Councils in metropolitan cities to seek even higher wage increases.
- With a kangaroo council of unelected and unaccountable representatives, the labor friendly Fast Food Council can put in place the joint-employer standard that the legislature ultimately chose not to adopt.
These are just a few examples of what the SEIU and the Fast Food Council is likely to do in just AB257’s first year if left unchecked. Fortunately, a referendum is already in the works and several legal challenges are as well. Their success will ultimately have a profound impact on franchising in the State of California going forward.
Update: A referendum was filed on September 6, 2022.
As always, our team stands ready to assist your business with all of its franchising needs. If you have questions or need assistance, please contact the authors listed below.
Thomas O’Connell – Tom O’Connell is a Shareholder at Buchalter APC, where he serves as Chair of the firm’s Franchise Law Practice and Chair of Litigation for the firm’s San Diego office.
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