Industry wonders what’s next as Newsom signs fast food council bill

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California Governor Gavin Newsom signed AB 257 Monday, establishing a council of labor, industry, and state representatives to set wages and conditions for the state fast food sector. The bill was supported by the Service Employees International Union (SEIU), which was an integral part part of Newsom’s campaign to defeat a recall election last year. AB 257 faced widespread opposition from industry groups, including the National Restaurant Association.

Sean Kennedy, NRA vice president for public affairs, said the governor’s signature did not end the political fight over the bill.

“The National Restaurant Association will consider all available remedies in the state on behalf of the 100,000 restaurants proud to have Californians at their tables,” Kennedy said in a statement emailed to Restaurant Dive on Monday.

A previous sweeping California labor law change, AB 5, was signed by Newsom but rejected in a referendum organized by carpooling and food delivery services. Almost three years after its adoption, which would have required employers to reclassify gig workers as employees, The status of AB 5 is still disputed.

AB 257 passed the California State Senate by the narrowest possible majority, and only after a series of amendments weakened it, raising questions about the council’s longevity and regulatory power.

The 10-member fast food council will not be able to issue rules until 10,000 California fast food workers sign a petition endorsing its existence. But the most important constraint on the council is its limited existence. By 2029, the state legislature we must make a law extend the life of the board.

Restaurants fear inflation

With its future far from certain, AB 257 has already drawn criticism from the restaurant industry and praise from labor unions.

Joe Erlinger, US President of McDonald’s, called the bill a mistake on Wednesday in a letter shared on the company’s website. Erlinger said the bill was “lopsided, hypocritical and short-sighted” because it targeted a segment of the state’s economy for wage increases. Such an approach, according to Erlinger, was tantamount to the government picking winners and losers.

Erlinger’s comments on AB 257 align with broader industry sentiment. Michelle Korsmo, President and CEO of the NRA, said in a press release last month that the bill would increase costs and jeopardize profits for franchises and brands pinched by inflation.

“The FAST Act threatens businesses already facing a 16% increase in wholesale food prices and persistent supply chain challenges,” Korsmo said. “[Forty-five percent] of California restaurant owners report that their business conditions are worse today than three months ago.

The International Franchise Association called Newsom veto the bill. A key member of Stop AB 257the coalition of industry groups formed to oppose the legislation, the IFA called the law a discriminatory policy that sets arbitrary standards for one group of workers.

Franchisees with lower unit volumes would be affected by the bill’s wage-raising provisions in the fast-food industry, said Leena Mann, a franchisee operating two Subways and a Del Taco.

“Minimum wage should be set by California as a standard because there are many other people working in many other industries who are in the same boat as people fighting for $15,” Mann said. Housing costs and other major cost-of-living factors in California, Mann said, would not be addressed by sectoral bargaining or wage increases in an industry. In other words, AB 257 is not a panacea for the problems facing low-wage workers in the state, according to Mann.

Mann said it would be difficult for franchisee representatives to negotiate under the proposed fast food council, because workers and franchisees often have competing interests.

“Not everyone at this table is investing in my business, they don’t have their house on the line or their credit cards on the line,” Mann said. “We’re going to be put in a pinch at this table.”

Jesse Lara, regional manager at Peglion LLC, an El Pollo Loco franchise company co-owned by his father, said he fears the bill will increase franchisee operating costs and ultimately erode the traffic by forcing menu prices up. Significant price increases, Lara said, could weaken consumer demand. Inflationary pressure has already forced some consumers to reduce expenses or switch to more value-oriented options.

Sustained price increases, Mann said, could challenge the very purpose of fast food as an industry and could push chains to embrace automation as a way to reduce labor costs.

“As franchisees, we offer value-type foods. It’s not a value if a Big Mac is now $12,” Mann said. “We are going to lose customers.

Labor sees a revival of political fortunes

For the SEIU, AB 257 is a big win. The union, one of the largest private sector labor organizations in the United States, has waged a decade-long series of corporate campaigns in the fast-food industry to pressure employers to raise wages. wages. The fight for $15 is the most famous of these campaigns, but SEIU Local 32BJ is responsible for a multi-year pressure campaign against Chipotle in New York, which recently resulted in a major week of fair labor settlement in this city. Workers aligned with SEIU affiliate Workers United have been organization in Starbucks stores for the past year.

SEIU International President Mary Kay Henry called the bill an inflection point in the political fortunes of unions and a kind of return to sectoral bargaining.

“AB 257 is one of the most important pieces of labor law to pass over generations,” Henry said at a news conference celebrating the passage of AB 257. did in the early 20th century, corporate giants like Starbucks, McDonald’s, Wendy’s, Burger King, Amazon and Delta Airlines can come to a national bargaining table and hear their workers’ demands.

Angelica Hernandez, a McDonald’s employee, told the press conference that working conditions at fast food restaurants were degrading and that she had been sexually harassed at work. Hernandez spoke in Spanish, with a translator interpreting his words into English.

“We are at the mercy of our employer, facing violence from angry customers and other dangers,” Hernandez said. “My son actually said he wanted to work at McDonald’s like me one day. And I said, ‘No. I don’t want you to be humiliated at work and treated like I’ve been treated for so long. ‘”

Workers were particularly excited about a provision that gives the board the ability to raise the industry minimum wage to $22 an hour and tie wage growth to inflation. Sandro Flores, who works at a Carl’s Jr. restaurant, said inflation had already eaten up wage gains and wage increases needed to be in line with inflation.

“Hopefully with AB 257 we get the constant review to make sure the minimum wage is a living wage, because we thought $15 was going to be enough, and it wasn’t enough,” Flores said at the conference. SEIU press release.

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