New bill seeks to exempt more fast-food restaurants from $20 minimum wage

California is set to have the highest minimum wage for fast-food workers in the nation, starting from April 1, 2024. Under a law signed by Governor Gavin Newsom in September 2023, known as the Fast Act, all fast-food restaurants that are part of a chain with at least 60 branches nationwide will have to pay their employees at least $20 an hour, up from the current state minimum wage of $15. This will affect an estimated 500,000 fast-food workers in the state, who currently earn an average of $16.21 an hour.

The Fast Act was a compromise between the fast-food industry and the labor unions, who had initially proposed a more radical bill that would have created a Fast Food Council, a body composed of workers, employers, union representatives, and government officials, to set wages and working conditions for the sector. The industry opposed this bill, arguing that it would increase their liability, costs, and bureaucracy, and threatened to challenge it by a referendum in the November 2024 election. The governor intervened and brokered a deal that replaced the Fast Food Council with a simpler wage increase.

However, the Fast Act still faces criticism and resistance from some fast-food operators, who claim that the $20 minimum wage is too high and will hurt their profitability, competitiveness, and ability to hire and retain workers. They also argue that the law is unfair and arbitrary, as it does not apply to other types of restaurants or businesses that employ low-wage workers.

The proposed exemptions

In response to these concerns, Assemblyman Chris Holden, the author of the Fast Act, has introduced a new bill, AB 610, that would expand the exemptions to the $20 minimum wage for certain fast-food restaurants. The bill would exclude from the definition of “fast-food restaurant” the following types of establishments:

  • Restaurants in airports, hotels, event centers, theme parks, museums, and certain other locations
  • Contractor-run restaurants in noncommercial settings, such as office buildings and state-owned beaches or recreational facilities
  • Restaurants that are part of a chain with fewer than 60 branches nationwide (this exemption already exists in the Fast Act)
  • Restaurants that were also functioning as a bread-selling bakery on Sept. 23, 2023 (this exemption, known as the Panera Exemption, already exists in the Fast Act)
  • Restaurants within supermarkets (this exemption already exists in the Fast Act)

The bill would allow the exemptions to take effect immediately upon enactment, without waiting for the April 1 deadline. The bill’s sponsor did not explain the rationale behind the exemptions, but his office said that he was open to feedback and amendments.

The reactions and implications

The bill has drawn mixed reactions from the stakeholders and observers of the fast-food industry. Some operators welcomed the bill as a relief and a recognition of the diversity and challenges of the sector. They said that the exemptions would help them survive and compete in a tough market, especially amid the pandemic and the labor shortage.

Others, however, criticized the bill as a betrayal and a loophole that would undermine the purpose and impact of the Fast Act. They said that the exemptions would create an uneven playing field and leave many workers behind. They also questioned the logic and consistency of the exemptions, which seemed to be based on location rather than on need or merit.

The bill’s fate is uncertain, as it will have to pass both chambers of the legislature and be signed by the governor, who has not indicated his position on the bill. The bill could also face legal challenges, as some experts have suggested that it might violate the equal protection clause of the state constitution.

The bill’s outcome could have significant implications for the fast-food industry and the labor market in California and beyond. It could affect the wages, working conditions, and well-being of hundreds of thousands of workers, as well as the profitability, competitiveness, and sustainability of thousands of businesses. It could also set a precedent and a model for other states and sectors that are considering or implementing similar wage increases.

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