McDonald’s, In-N-Out and Chipotle are spending millions to freeze wages for their workers

New York

California voters will decide next year on a referendum that could overturn a landmark new state law that sets working conditions and minimum wages up to $22 an hour for fast-food workers in the nation̵[ads1]7;s largest state.

Chipotle, Starbucks, Chick-fil-A, McDonald’s, In-N-Out Burger and KFC owner Yum! Brands donated $1 million each to Save Local Restaurants, a coalition opposing the law. Other top fast food companies, business groups, franchise owners and many small restaurants have also criticized the legislation and spent millions of dollars opposing it.

The measure, known as the FAST Act, was signed last year by California Governor Gavin Newsom and was set to take effect on January 1. On Tuesday, California’s secretary of state announced that a petition to stop the law’s implementation had gathered enough signatures to qualify for a vote on the state’s 2024 ballot.

The closely watched initiative could transform the fast-food industry in California and serve as a bellwether for similar policies in other parts of the country, supporters and critics of the measure argued.

The first of its kind in the United States, the law authorized the formation of a 10-member Fast Food Council made up of worker, employer and government representatives to oversee standards for workers in the state’s fast food industry.

The council had the authority to set industry-wide minimum standards for wages, health and safety protection, time off policies and compensation for workers at fast food restaurants with more than 100 locations nationally.

The council could raise the minimum wage for the fast-food industry as high as $22 an hour, against a minimum of $15.50 for the rest of the state. From there, this minimum will rise annually based on inflation.

California’s fast food industry employs more than 550,000 workers. Nearly 80% are people of color and about 65% are women, according to the Service Employees International Union, which has supported the law and the Fight for $15 movement.

Advocates of the law, including unions and labor groups, see it as a groundbreaking model for improving wages and conditions for fast-food workers and overcoming obstacles to unionization of workers in the industry. They argue that success in California could lead other work-friendly cities and states to adopt similar councils regulating fast food and other service industries. Less than 4% of restaurant workers nationwide are unionised.

Labor law in the United States is structured around unions that organize and bargain in an individual shop or facility. This makes it almost impossible to organize workers in fast food and retail chains with thousands of stores.

California’s law would bring the state closer to sectoral bargaining, a form of collective bargaining in which labor and employers negotiate wages and standards across an entire industry.

Opponents of the law say it is a radical measure that will have harmful effects. They argue that it unfairly targets the fast-food industry and will raise prices and force companies to lay off workers, citing an analysis by economists at UC Riverside that found that if restaurant worker compensation increases by 20%, restaurant prices will increase by about 7% . If compensation for restaurant workers increased by 60%, prices for limited services would jump up to 22%, the study also found.

“This law creates a food tax on consumers, kills jobs and pushes restaurants out of communities,” the Save Local Restaurants coalition said.

On Wednesday, McDonald’s U.S. president Joe Erlinger blasted the law as one driven by struggling unions that would lead to “an unelected board of political insiders, not local business owners and their teams,” making key business decisions.

Opponents have turned to a similar strategy used by Uber, Lyft and gaming companies that sought to overturn a 2020 California law that would have required them to reclassify drivers as employees, not “independent contractors,” which would have given them benefits such as e.g. minimum wage, overtime and paid sick leave.

In 2020, Uber, Lyft, DoorDash, Instacart and others spent more than $200 million to successfully persuade California voters to pass Proposition 22, a ballot measure that exempted the companies from reclassifying their workers as employees.

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