Controversial fast-food bill would spur many changes
California lawmakers this month are considering a fastfood bill that would significantly shift the relationship between restaurant workers and the corporate chains whose products they sell.
If Assembly Bill 257 passes, California would be the first state to assign labor liability to fast-food corporations and not just their individual franchise owners.
The bill’s provisions would let workers and the state name fast-food chains as a responsible party when workers claim minimum wage violations or unpaid overtime at a franchise location.
The bill’s language also would allow a franchisee to sue a restaurant chain if their franchise contracts contain strict terms that leave them no choice but to violate labor law.
It’s part of a larger bill pushed by unions to more strictly regulate fast-food businesses. AB 257 also includes a measure to create a state-run, fast-food sector council to set wage and labor standards across the industry.
The bill survived the “suspense file” process, where controversial bills often are quietly killed. After clearing the Senate Appropriations Committee, the bill awaits a vote on the floor.
Gov. Gavin Newsom has not stated a position on the bill, but his Department of Finance opposes it, saying it would create “ongoing costs” and worsen delays in the state’s labor enforcement system.
If it becomes law, proponents said it could deter wage theft and other abuses in the lowwage industry.
“How you hold the companies at the top of the food chain, who are really setting the terms and conditions of employment, responsible for the lower levels — California has been way ahead on that,” said Janice Fine, professor of labor studies and employment relations at Rutgers
University. “What’s happened in California is a real effort to try to figure out the fissured economy.”
Contentious measure
The fast food bill is one of the most contentious measures the Legislature is considering during its final weeks in session.
The California Chamber of Commerce and the state restaurant association have lobbied hard against it, arguing the bill would upend the franchise business model and ultimately raise costs for franchise owners and consumers.
On Wednesday, a group of franchisees flooded the Capitol in Sacramento to oppose the bill.
The Service Employees International Union and its Fight for $15 campaign led a series of strikes this summer to rally for the bill’s passage, including an overnight rally at the Capitol last week.
Currently, most workers who allege wage theft, say, at a McDonald’s, Burger King or a Jack in the Box can only name the owner of their specific franchise location as responsible for paying them back — even as they work under the banner of a multibillion-dollar fast-food corporation.
In other industries, California already has done some of what AB 257 proposes to do for fast food. In some cases, the state has expanded responsibility for employment conditions beyond the subcontractor or supplier level to the larger companies they do business with, even though they don’t directly employ the workers.
For instance, in 2014 the Legislature made businesses that use contract workers liable for wage theft committed by those workers’ agencies. Lawmakers later did the same for contractors in the janitorial, gardening, construction and nursing home industries.
Last year, the Legislature passed a measure putting major fashion brands on the hook for wage theft by garment manufacturers in their supply chains.
Wage theft legislation a key component
Fast food is the latest industry attracting such regulation, and it is one of the largest and most visible.
Restaurants such as fastfood joints, takeout businesses and cafes employed more than 700,000 workers across the state, according to June federal data.
Proponents of the bill estimate that 80% of the workers are Black, Latino or Asian and two-thirds are women.
SEIU and Fight for $15 say the industry is rife with labor violations. The union released a survey of 400 workers this year in which 85% said they were victims of wage theft.
Business groups said the bill targets fast food unnecessarily. The Employment Policies Institute, a national think tank with restaurant ties, published a report this month showing the percentage of wage claims filed against this segment of business is lower than its share of the California workforce.
If approved, the proposed legislation could mark a turning point in American labor law.
Typically under the franchise model, fast-food corporations strike agreements with franchisees that dictate a variety of standards for selling food under their brand — but leave wages, hours and labor conditions up to the franchisee.
The model has provided inroads to business ownership for many minority entrepreneurs, supporters point out.
But critics say companies like McDonald’s and Domino’s have been allowed to profit while distancing themselves from any responsibility for how restaurant employees are treated.
Joint employers?
The question of franchisors’ relationship to workers remains unsettled at the federal level. Across three presidential administrations the National Labor Relations Board has gone back and forth on whether to automatically consider franchisors and franchisees “joint employers.” The courts, including the California Supreme Court, have generally rejected that idea under current laws.
“These franchise models have been an avenue and way for companies to avoid responsibility for being employers,” said Emily Andrews, director of education, labor and worker justice at the Center for Law and Social Policy, a national, left-leaning anti-poverty organization.
Studies have found franchisors can exert a significant amount of pressure and control over franchise business owners.
In a paper published last year, law professors at the University of Miami and Cornell University examined 44 franchise contracts from 2016 and found that more than three-quarters gave the chain exclusive power to terminate contracts, putting a franchisee “in a position of economic dependence.”