California enacts sweeping restaurant law AB 257

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On August 29, the California Legislature passed the Fast Food Accountability and Standards Recovery Act (FAST Recovery Act or AB 257), a sweeping proposal to micro-manage the fast food industry, like this blog reported Last week. After its passage, the bill was submitted to Governor Gavin Newsom for consideration, and despite urging from the business community to veto the bill and opposition of his own Ministry of Finance, the Governor sign enacted on Labor Day, September 5.

As passed, AB 257 establishes a 10-member “Fast Food Board” whose members will be appointed by the Governor, the Speaker of the Assembly and the Senate Rules Committee. The board will be empowered — indeed, obligated — to dictate various terms of employment for all fast food restaurants whose brands have more than 100 locations nationwide.

According to Legislative Counsel digest“the purpose of the council would be to establish [sic] minimum standards on wages, hours of work and other working conditions related to the health, safety and welfare of fast food workers, and the provision of the cost of a decent living…” .

In other words, AB 257 essentially creates a form of sectoral negotiation more common in other countries. This concept is anathema to American labor policy, which is generally covered by the National Labor Relations Act (NLRA), the 1935 federal law that contemplates bargaining between individual companies and unions.

A key element of the NLRA includes the fact that to serve as the bargaining representative of the employees of a given company, unions must gain the support of the employees they hope to represent. Sectoral bargaining, on the other hand, generally involves bargaining between unions and employers’ associations, but it omits the kind of democratic representation that the NLRA seeks to protect.

To the extent that the law essentially obviates the need for unions to garner such support or negotiate with employers, the enactment of AB 257 represents yet another concession to organized labor, which put pressure difficult for legislation. Instead, it will allow unelected bureaucrats to impose conditions on corporations by fiat, and the fact that these bureaucrats even understand the implications, economic or otherwise, of their dictates hardly seems like a professional qualification.

Meanwhile, the council will be tasked with ‘providing the necessary cost of a decent life for…fast food workers’, but what does that actually mean? Some observers project that this could mean wages as high as $22 an hour, which, in an industry with tight profit margins, will do one of the following: drive up prices dramatically for consumers; force employers to use technology that requires fewer actual employees (i.e. increase unemployment); or forcing employers to close their doors – none of that sounds particularly palatable.

As if experiences in central planning never was has tried-and lack– before, the California legislature once again passed another piece of destructive legislation. One could be forgiven for predicting that AB 257 will also bring another economic calamity.

About the authors

Sean P.Redmond

Vice President, Labor Policy, United States Chamber of Commerce

Sean P. Redmond is Vice President, Labor Policy at the US Chamber of Commerce.

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