What's the New Fast Food Accountability and Standards Recovery Act All About?
Everyone's talking about California's new fast food legislation and what it could spell for the foodservice industry, both in and out of the state. Here's the lowdown on this imminent law.
What is the FAST Act?
A new pro-worker bill that promises to put fast food employees in the state of California on a firmer footing has moved closer to being turned into a law. However, it has been vehemently opposed by businesses that want it toned down.
The Fast Food Accountability and Standards Recovery (FAST) Act, also called AB 257 in reference to its bill number, seeks to give employees of quick service restaurants (QSRs) in California a significantly strong and direct say in deciding workplace rules, including those related to wages and work hours. The bill has now moved towards voting by the full state Senate, Restaurant Business Online reports.
The bill had already been given the thumbs up by the California Assembly in January, and a third legislative panel cleared it earlier this month. However, considering the groundswell of opposition, the proponents of the bill had to amend it to remove several sticking points.
The Senate has time till the end of August to examine the bill, and it might amend it further to strike a balance between the interests of the workers and business owners, to make it politically viable.
Labor Laws in California
The Fair Labor Standards Act (FLSA) requires employers to pay a minimum hourly wage of $7.25 to tipped employees. Different states in the US, however, may have laws specifying minimum wages that vary from this federally-fixed figure. Employees under both federal and state wage rules will be entitled to the higher wage rate.
From January 1, 2022, employees in California are to be paid $15 per hour if the company has a staff strength of 26 or more. The hourly wage for employees in organizations with a staff strength of 25 or less is $14. The wages are set to increase further from January 1, 2023.
Therefore, the minimum wage rate in California is substantially higher than the federally-fixed rate and takes precedence over the federal rates. Also, according to the website of the US Department of Labor (DOL), California employees are to receive their wages entirely in cash. Workers such as restaurant waiters, who get a large part of their total earnings in the form of tips, are also covered by California's state-specific minimum wage rules and must be paid the same minimum rates as other workers in the state.
What's more, some counties and cities in California have their own minimum wage rates, which may be even higher than the state rate. For example, Berkeley and San Francisco pay a minimum wage of $16.99, Mountain View pays $17.10, and so on.
As far as overtime pay in California is concerned, Labor Code 510 mentions that workers must be paid one and a half times their regular wage rate for work done beyond eight hours in a workday, beyond 40 hours in a workweek, or for the first eight hours on the seventh day of a workweek. If the employees work beyond eight hours on the seventh day of the workweek, or if they work more than 12 hours in a day, they are to be paid twice their regular wage.
Therefore, as is evident, the wage and overtime rates in California are far more employee-friendly than in some of the other states in the country. Apart from these, provisions for meal and rest breaks and sick leaves in California are pro-worker too.
For instance, employees get a rest period of 10 minutes for every four hours of work. Moreover, at least half an hour of meal break is to be given to employees who work over five hours a day. Full-time employees are also entitled to 24 hours of paid sick leaves (PSL) every year. Apart from the regular PSLs, through September 30, 2022, employees in organizations with a staff strength of 26 and more would be entitled to 80 hours of PSL for Covid-related reasons.
Labor Law Violations
Employers occasionally violate labor laws by not paying employees their minimum wages, or flouting overtime wage rate rules, both practices resulting in wage theft. Employees may also be forced to work off the clock, that is before they clock in, after they clock out, or during unpaid breaks. Labor law violations can also happen in the form of denial of meal breaks and rest breaks, misclassification of workers as exempt from hour and wage rules, or falsely identifying them as independent contractors.
Worker rights are also trampled when they are sacked without proper notice. Giving workers no time to find alternative employment is inhuman, and jeopardizes their means of sustenance and their ability to take care of themselves and their families.
Discriminating against employees at the workplace based on their race, color, gender, religion, age, disability, and nationality is another serious offence.
Not maintaining correct employee records is also an unjust practice, and organizations are required by law to keep records covering wage data, hours worked, and so on.
Original Features of the FAST Act
The bill envisages a council made up of employees, union advocates, government regulators, and employers. The council would be tasked with reviewing and updating workplace operating standards for QSRs in California every six months.
The council was initially designed to comprise 13 members, including two fast food worker representatives, and two union members, or other labor group representatives. Businesses would have had two representatives from the restaurant franchisor panel, and two representatives from the franchised QSR employers. Other members on the council would have included delegates from regulatory bodies such as the California Division of Occupational Safety and Health (Cal/OSHA), the State of California Department of Industrial Relations, and the Division of Labor Standards Enforcement (or the California Labor Commissioner's Office).
The council was designed to be chaired by the Secretary of the California Labor and Workforce Development Agency (LWDA). The approval of the LWDA secretary was made necessary for any labor standard that the council promulgated.
The council, therefore, would have consisted of four labor representatives, with just six votes required to approve a policy recommendation. Employers, on the other hand, would have had four members, and could not by themselves block proposals, nor be certain about mobilizing support from the representatives of regulatory bodies to stop unfavorable legislation.
The council's recommendations could, however, be amended or rejected by the state legislature within a given timeframe. Likewise, the Cal/OSHA could strike down council recommendations if they were found to contradict the existing rules of the regulatory body.
Under the FAST Act, any California municipality with at least 200,000 people living under its jurisdiction would be entitled to set up its own council on the lines of the state version. This local council could determine labor standards for the local QSR sector.
The bill also sought to make QSR franchisors the joint employers of the workers of the franchisees.
Why Are Businesses Anxious?
Employers are opposed to the FAST Act because they fear they will be easily outvoted in the council. Although management and worker groups have four representatives each, delegates from regulatory agencies are expected to tilt the scales in the workers' favor. In California, which is progressive in terms of labor laws, members of regulatory bodies are not expected to side with the management.
Businesses argue that the rules of employment are already heavily stacked in favor of the workers in the state, and the proposed council will make employers subservient to the will of the worker bloc on critical matters like minimum wage rate and overtime rate, maximum work hours, and so on.
Businesses are also concerned that fresh burdens on employers would mean higher operating costs, which will have to be passed on to consumers. To put things in perspective, labor generally constitutes the biggest expense for restaurants, with costs making up 30-35% of a restaurant's revenue. Higher wages will mean even higher labor costs. At a time, when restaurants are just about setting their house in order following the Covid onslaught, arm-twisting them to make greater concessions for workers may come as a hammer blow.
"Our margins, our profits have gone down from 9% to 3.5%. We're barely hanging on. And when I think about the creation of a state council that is designed specifically to add more costs, I don't know if we can make it," Greg Flynn, a prominent California restaurant franchisee said, according to a Restaurant Business Online report. California Restaurant Association (CRA) CEO Jot Condie echoed a similar sentiment.
The International Franchise Association (IFA) warned that food costs could see a 20% hike if the Senate passed the bill.
Another major concern of businesses is the bill's proposal to make franchisors the joint employers of the staff of franchisees. Franchisors fear that this would expose them to a barrage of lawsuits by workers wronged by their franchised employers. These workers may look to force a settlement with the franchisors themselves, given the latter's deep pockets. Franchisors warn that this could dissuade them from expanding.
"AB 257 also would fundamentally alter the franchise business model, a model that has existed for more than 150 years in the United States," said Glenn Spencer, Senior Vice President (Employment Policy Division), US Chamber of Commerce, in a letter to the state Senate. "Inasmuch as franchisors are not willing to bear such liability, some may simply opt not to open additional locations in California or, worse, may cease operating there at all," he added.
Amended Bill Offers Employers Relief
A number of these concerns have now, however, been addressed by the proponents of the bill themselves, and an amended version has been prepared for the Senate's consideration.
Accordingly, the hourly minimum wage rate has been capped at $22 as of now. It has, however, been proposed that the minimum wage which is allowable for California's QSR workers would increase every year post-2023 by a rate of 3.5%, or the rate at which the federal consumer price index changes. The lower rate, in this regard, will be considered for setting wages.
The amended bill also seeks to allay business owners' fears that they would be virtually turned into ciphers in the council. This has been done by reducing the size of the council from 13 to 10 members and doing away with many of the seats reserved for regulatory bodies, which are considered to be pro-labor.
Moreover, in a big relief for franchisors, the amended bill no longer requires them to be joint employers of the staff of the franchisees.
The ambit of the bill has also been narrowed. The bill will now be applicable to brands with a minimum of 100 units across the US. Earlier, if a business had a minimum of just 30 branches, it came under the purview of the bill.
An exception is also provided for certain unionized QSR establishments. Accordingly, the council's wage recommendations would not be applicable in a situation where a collective bargaining deal has been able to set hourly wages payable at an establishment at 30% or more than the base rate payable in the state.
Furthermore, the bill's revised definition of 'fast food' excludes businesses baking bread on-premise for making sandwiches and for selling by the loaf. This may mean that bakery-cafe concepts like Panera Bread would not be covered by the bill.
Still, the amendments have not been able to please representatives of the management. The IFA called it "lipstick on a pig", and its CEO Matt Haller said that the bill can be stopped from hurting the interests of the employees, consumers, and small businesses by rejecting it totally.
Conclusion
The FAST Act promises to be landmark legislation, which makes QSR employees in California masters of their destiny.
Captains of businesses, however, have pointed out that laws in the state are already more employee-friendly than anywhere else in the country. For instance, California provides higher wages than the federally-fixed rate. Overtime pay, and break and leave provisions are also employee-friendly. Moreover, violation of wage and hour rules by employers may lead to litigation under the California Labor Code.
Employers guilty of wage theft may be required to compensate employees in the form of back wages, providing the unpaid balance of wages and overtime pay workers had been denied, interest on back wages, and reasonable litigation costs. Employers failing to provide proper rest breaks and meal breaks would have to pay an hour's wage for every day that the breaks were denied.
Apart from individual lawsuits, there may also be class action lawsuits, whereby a number of aggrieved employees join forces to sue the employer. This makes it easier for workers to employ the services of top lawyers.
Businesses have called for the enforcement of California's existing labor laws, rather than introducing new ones that offer even greater rights to workers and impose even greater burdens on employers.
Following an intense and acrimonious back-and-forth between worker and management groups over the proposed Act, advocates of the legislation have finally ceded ground by removing several controversial provisions in order to make the bill more acceptable to the state Senate. The amended version seeks to find a middle ground between competing interests, though employers are pushing for a complete rejection of the bill.
While employees do need to be protected from inhuman work practices, ease of doing business also has to be safeguarded. Restaurants are also to be protected and helped to stand back on their feet following the Covid mayhem. Legislators should make their decisions accordingly.
Healthy Eating
Reduce Labor
Fast Food
Restaurant Association
