Hiltzik: Fast food chains are targeting the FAST Act

Public relations and advertising firms in California owe to Gov. Gavin Newsom a huge favor. This is because by signing the so-called Fast Recovery Act on September 5th, he opened the doors to what could be hundreds of millions of dollars spent by fast food companies to kill him.

The act – formally the Fast Food Accountability and Standards Recovery Act, or AB 257 – creates an appointed council that could set wages and other working conditions for fast food workers.

The council would have the power to set a minimum wage of up to $ 22 per hour in 2023, though there is reason to doubt wages would reach that ceiling.

Fast food companies are trying to get out of a law intended to raise pay for their workers, ensure their stores are safe and sound, and improve the industry for all.

– Mary Kay Henry, president of the International Union of Service Employees

(The state minimum wage, currently $ 15 per hour for employers with 26 or more workers, and $ 14 for small businesses, will rise to $ 15.50 for all on January 1.)

The restaurant industry has already taken steps to put the law before the voters through a ballot measure.

If the industry manages to collect about 623,000 valid voter signatures by the first week of December, the referendum would go to the November 2024 ballot and the law would be suspended until then. If the referendum qualifies, voters can expect McDonald’s, Burger King, KFC and their ilk to spend gigantic sums to overturn the law.

We have already witnessed this show. It has long been evident that the California initiative and referendum system have become a playground for wealthy companies.

In 2020, approximately $ 205 million was spent by gig companies to pass Proposition 22, a measure designed to circumvent AB 5, the state law that designates app-based drivers and other gig workers as employees of parent companies. , not independent contractors.

Spending by Uber, Lyft and other concert companies set a national record for an election campaign, drowning the $ 19 million raised to defeat the measure.

For proponents of Proposition 22, this was money well spent.

Uber’s revenue was about $ 17.5 billion last year and Lyft’s was over $ 3.2 billion. Neither company has ever made a profit, and their path to black ink would be even more torturous if they had to pay their drivers a living wage along with benefits such as health care, pension and worker benefits, and unemployment insurance. .

(Proposal 22 has been suspended since a state judge declared it unconstitutional in August 2021. Its fate is now before a state appeals court.)

Corporate spending on a Fast Act election fight could make those concert companies look stingy.

Fast food franchisees and franchisees have a lot more money than Uber and Lyft. McDonald’s, which claims to have raised $ 23 billion company-wide in 2021 and its affiliates raised $ 102 billion, reported a company-wide profit of $ 7.5 billion last year. Yum Brands, the owner of the brands KFC, Taco Bell and Pizza Hut, had a corporate profit of $ 1.58 billion and Restaurant Brands, Burger King’s Canadian parent company, $ 1.23 billion.

Whatever one might think of the virtues or sins of AB 257, the main question facing California voters is whether we want to put legislative power in the hands of companies determined to write laws specifically for the benefit of their executives and shareholders, and to approve them through unprecedented campaigns of dishonesty.

The Proposition 22 campaign was a perfect example: concert companies said their alternative to the AB 5 would be a boon to their drivers and other frontline workers. As soon as Proposition 22 was passed, it became clear that they had lied and that the workers were far worse off.

It’s a fair bet that the fast food industry’s plan to overturn the Fast Act at the polls will resemble the Proposition 22 campaign.

The president of the International Union of Service Employees, Mary Kay Henry, calls her plan “an act of extraordinary greed and cowardice” in which “fast food companies are trying to get out of a law intended to raise pay for their workers, make sure their stores are safe and healthy, and improve the industry for all … This is not how companies act when they are proud of their business model ”.

Fast food companies will surely play on the concerns of restaurant operators across the state that the Fast Act will drive up costs not just for big chains but for all categories of restaurants. That’s the fear expressed by Blair Salisbury, the owner of Pasadena’s El Cholo Mexican restaurant and a family member who runs half a dozen El Cholo locations across Southland. It is not unreasonable.

“If my cook makes $ 18 or $ 19 an hour,” Salisbury told me, “he’ll work for one of these fast food chains that has to pay $ 22 an hour. Everyone will lose their cooks or have to raise their salaries. . So it will affect little mothers and pop restaurants, not just chains. “

Salisbury recently signed an agreement to open a Southern California location for the fledgling Daddy’s Chicken Shack chain and form franchisees for 19 other regional locations. But he says there is little interest in launching the chain in California, as opposed to Texas, Florida and Arizona, in part due to laws like AB 257. With inflation taking a bite out of restaurant revenues, a law that poses the prospect of rising labor costs “could not have come at a worse time.”

Before examining the details of the Fast Act, let’s examine the conditions that gave rise to its enactment. Overall, fast food franchisees employ more than half a million workers in California, according to the Service Employees International Union, which sponsored AB 257.

As I previously reported, the fast food industry has long been a dark corner of the American workplace.

Much of the problem stems from the affiliate-affiliate relationship, through which “powerful global companies like McDonald’s … make a profit” as they push spending on small business owners who run franchises, Catherine L. Fisk and Amy W. Reavis of UC Berkeley’s law school noted in a 2021 report. “They control prices and much of the power over quality, hours and other operations, and the franchisee … has no other way to increase its profits but cut back. labor costs “.

The result, they wrote, is that “operators do not pay the wages workers are entitled to, deny sick leave, ignore harassment, safety risks or disease transmission – they are so overwhelmed by their franchisors that there is little incentive to comply with the law. “

David Weil, a former Department of Labor official whose appointment to an agency post by President Biden was sunk earlier this year by the franchise industry and other major business interests, documented in his book of 2014, “The Fissured Workplace,” that unpaid back wages were 50% higher at franchised locations than company-owned locations.

The original version of AB 257 would have made large franchisees jointly liable for any penalties and fines imposed for workplace violations in franchised locations. Labor regulators like the National Labor Relations Board have been trying to implement that standard for years, with only mixed fortunes, and fast food franchisees like McDonald’s have been fighting it for just as long.

A joint employer rule would end the ability of large companies to dodge responsibility for workplace violations that are rife in the fast food industry by hiding behind franchisees. But it was removed from the bill as one of several changes aimed at making it more attractive to employers and certainly the most significant.

Among other changes made before the measure was approved by the legislator and signed by Newsom, the fast food council was reduced to 10 out of 11 members and restructured to give employers a larger dimension. Membership was changed by four employee and two employer representatives, along with five state regulators from agencies responsible for labor and public health and labor standards; the final version included four employee and four employer representatives and only two regulators.

The definition of fast food employers subject to the law has been changed from chains with at least 30 locations nationwide to those with 100 or more. Employee scheduling, the subject of persistent employee complaints about unpredictable working hours, which has been explicitly removed from council jurisdiction, as well as benefits such as sick leave and vacation.

Instead of an unlimited authority to set the minimum wage for fast food workers, the final version set the minimum wage allowed at $ 22 per hour in 2023, with increases in subsequent years not exceeding the rate of inflation and at no time. case higher than 3.5% per annum, even if inflation is much higher (as it currently is).

In response, the fast food industry showed that it would have liked nothing but the removal of the measure in its entirety. Within days of the signing of the bill by Newsom, the International Franchise Assn., The National Restaurant Assn. and the US Chamber of Commerce had launched their campaign under the heading of the Save Local Restaurants Coalition.

The name itself shows that the industry has read the textbooks of concert companies, bond companies, and others who have used AstroTurf’s methods to present themselves as the basic avatar of ordinary people.

“Restaurants are the heart and soul of the communities they serve,” said Michelle Korsmo, managing director of the National Restaurant Assn. (Question: Does anyone really consider McDonald’s on the street corner to be the “heart and soul” of their community?)

Korsmo also referred to the “uncontrolled governing council created by the FAST Act”; it does not matter if the council’s authority is specifically limited by law, and any recommendations it makes would be subject to review by the legislator, who would have up to nine months to approve or reject the standards proposed by the council.

It is not clear how the law would work in practice. The fast food council will not exist even after a petition signed by 10,000 fast food workers is presented to state officials.

Although the jury would have the authority to raise the minimum wage for fast food workers to $ 22 an hour in 2023, that’s probably not a reasonable expectation, since worker supporters will be in the minority on the board and members. in general they will be aware that as a full-time salary, $ 22 is more than a third higher than the median state income and close to the average starting salary of teachers. In any case, the legislator could very well reject any decision that seems so far from the mainstream.

If fast food companies win the 2024 ballot referendum, California voters will receive another lesson on how big business manipulates initiative and the referendum system for their own ends. The lesson companies have learned from the Proposition 22 campaign, and which fast food companies rely on, is that it is always cheaper to spend money working for California’s voting public than to make your workers well.