Governor Newsom Signs New Fast Food Industry Law

Governor Newsom Signs New Fast Food Industry Law

The new law creates a council for the fast food industry that will set standards for minimum wages, working hours, and other working conditions in fast food restaurants.

Governor Newsom recently signed Assembly Bill 257, the Fast Food Accountability and Standards Recovery Act or FAST Recovery Act. This new legislation creates a Fast Food Sector Council to regulate California’s fast food restaurants and provide greater protections to fast food employees.

Employers in the fast food industry in California should closely examine the new legislation to determine whether their establishments are covered by the Act.

What Does the Establishment of a Fast Food Sector Council Entail?

The new state council will be composed of 10 industry, worker, and government representatives to set minimum wage, safety, and employment and training standards for workers in large fast food chains and their franchises. The council members will be appointed by the Governor, Speaker of the Assembly, and the State Rules Committee.

The make-up of the 10 council members will be as follows:

  • One member will be from the DIR;
  • Two representing fast food restaurant franchisors;
  • Two representing fast food franchisees;
  • Two representing fast food restaurant employees;
  • Two advocates for fast food restaurant employees; and
  • One from the governor’s Office of Business and Economic Development.

The governor can appoint all members—including the council chair—but for the advocates for fast food restaurant employees. These two members are to be appointed by the speaker of the Assembly and the Senate Rules Committee.

Significantly, the state’s open meeting laws apply to the state council, so all meetings are open to members of the public and all materials prepared for or by the council are accessible by the public. Furthermore, the Public Records Act is applicable, so anyone is able to request council records and documents. As such, any document submitted by franchisors or franchisees for the council’s review in ascertaining whether a rule shall be adopted is likely to be available to the public. Given this prospect, many corporations may not provide certain materials to the council.

The state council does not have subpoena power; as a result, documents will have to be voluntarily provided. This also means that if a franchisee provides a proprietary contract, that agreement may become part of the council’s public record.

The Recommendation of Regional Councils

AB 257 also encourages counties or cities with 200,000 or more residents to create their own Local Fast Food Council. The bill prescribes the powers and requirements for the composition of a Local Fast Food Council. The bill would authorize a Local Fast Food Council to provide recommendations to the state council.

This creates the potential for two dozen councils all recommending their own standards to the statewide council. Moreover, every county can have a council; as a result, there is the potential for another 58 county councils. Again, each local and county councils can make recommendations to the state council on minimum state, health, safety, and employment standards. This means that the state council could get recommendations from 82 different councils. The bill also states that “[n]othing in this section shall restrict local jurisdictions’ exercise of police powers to establish more protective local standards.”

This could mean that the state may anticipate the passage of city ordinances that create their own minimum wage standards for the fast food industry—which may or may not conflict with the state standards.

The Rulemaking Process

Any standard promulgated by the Fast Food Sector Council must adhere to the rulemaking process in the Office of Administrative Law (OAL). AB 257 requires the application of the Administrative Procedure Act to the enactment of all standards, rules, and regulations.

Do These New Rules Apply to All Fast Food Restaurants?

The Fast Food Accountability and Standards Recovery Act or FAST Recovery Act defines “fast food chain” 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 decor, marketing, packaging, products, and services if the restaurant provides food or beverages in the following ways:

  1. For immediate consumption either on or off the premises;
  2. To customers who order or select items and pay before eating;
  3. With items prepared in advance, including items that may be prepared in bulk and kept hot, or with items prepared or heated quickly; and
  4. With limited or no table service (This doesn’t include orders placed by a customer on an electronic device).

Bakeries

The bill also states that an establishment that, on September 1, 2022, operates a bakery that produces for sale on the establishment’s premises bread isn’t considered a fast food restaurant provided it continues to operate such a bakery. This exemption applies only where the establishment produces for sale bread as a stand-alone menu item and doesn’t apply if the bread is available for sale solely as part of another menu item.

Grocery Establishment

When a restaurant is located and operates within a grocery establishment, and its employer employs the individuals working in the restaurant, the restaurant won’t be considered a fast food restaurant.

Collective Bargaining

The bill also explains that a standard promulgated by the council pursuant to section 1471(d) shall not supersede a standard covered by a valid collective bargaining agreement provided the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and a regular hourly rate of pay not less than 30% more than the state minimum wage for those employees…

  • If the agreement provides equivalent or greater protection than the standards established by the council and
  • If state law on the same issue authorizes an exception for employees covered by a collective bargaining agreement.

Nothing the law is to be construed to allow a collective bargaining agreement to waive any occupational health and safety protections.

What Agency has the Power of Enforcement?

The California Labor Commissioner is bestowed with the power of enforcement. Section 1471(k)(2) reads:

[T]he Labor Commissioner shall enforce this part, including investigating an alleged violation, and ordering appropriate temporary relief to mitigate the violation or to maintain the status quo pending the completion of a full investigation or hearing, through the procedures set forth in Chapter 4 (commencing with Section 79) of Division 1 and Section 1197.1, including by issuance of a citation against an employer, fast food restaurant operator, fast food franchisee, fast food franchisor, or any other liable person under this part, and by filing a civil action.

That section also notes that if a citation is issued, the procedures for issuing, contesting, and enforcing judgments for citations and civil penalties issued by the Labor Commissioner are the same as those set out in §§ 98.74 or 1197.1. Moreover, in any successful civil action to enforce this section by the Labor Commissioner or an employee, the court may grant injunctive relief to obtain compliance and may award costs and reasonable attorney’s fees.

AB 257 Creates a Private Right of Action

The Act prohibits a fast food restaurant operator from discharging or in any way discriminating or retaliating against any fast food restaurant employee in any of the following situations:

  1. Where the employee makes a complaint or disclosed information or the fast food restaurant operator believes the employee disclosed, or may disclose, information to the franchisor, to a person with authority over the employee or another employee who has the authority at the fast food restaurant to investigate, discover, or correct the violation or noncompliance, to the media, to the state legislature, or to a watchdog or community based organization, or a governmental agency regarding employee or public health or safety;
  2. Where the employee instituted, caused to be instituted, testified in, or otherwise participated in a proceeding relating to employee or public health or safety, or any council or Local Fast Food Council proceeding; or
  3. Where the employee refused to perform work in a fast food restaurant because the employee had reasonable cause to believe that the practices or premises of that establishment would violate worker or public health and safety laws, regulations, or any other section in the Labor Code, including Section 6400, any occupational safety and health standard, or any safety order of the division or standards board, or would pose a substantial risk to the health or safety of the employee, other employees, or the public.

Further, any employee of a fast food restaurant operator discharged or otherwise discriminated or retaliated against in the terms and conditions of employment in violation of the situations stated above has a right of action for, and shall be entitled to, reinstatement, and treble the lost wages and work benefits caused by the discrimination or retaliation, and the employee’s reasonably incurred attorney’s fees and costs.

Finally, the law provides a rebuttable presumption of unlawful discrimination or retaliation if a fast food restaurant operator discharges or takes any other adverse action against one of its employees within 90 days following the date when the operator had knowledge of that employee’s action or actions described above.

Bottom Line

There is much to unpack in AB 257 for fast food employers including how to comply with the evolving standards for the California fast food industry which will impact wages, health and safety conditions, workplace security, protected leave and protection from discrimination, retaliation and harassment.

Danielle G. Eanet can be reached at Eanet, PC in Los Angeles, CA at danielle@eanetpc.com.

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