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What Restaurant Employers Need to Know about the FAST Recovery Act

On Behalf of | Sep 8, 2022 | Wage And Hour Laws |

On September 5, 2022, Governor Newsom signed Assembly Bill 257 into law, known as the FAST Food Recovery Accountability and Standards Recovery Act or FAST Recovery Act (the “Act”).

The Act provides for the creation of the Fast Food Council, which is a separate council within the Department of Industrial Relations dedicated to the oversight of the fast food industry, including the establishment of sector-wide minimum wage rates, working hours, and other working conditions related to the health, safety, and welfare of fast food restaurant workers. Notably, the Fast Food Council will be comprised of 10 unelected members appointed by the Governor, the Speaker of the Assembly, and the Senate Rules Committee.

The Act Stems from Concerns Over Working Conditions for Restaurant Employees

According to the legislation, fast food workers are one of the fastest growing low-wage earning groups in the state. The industry has historically seen problems with wage and hour law violations, discrimination claims and rising health and safety concerns, which were exacerbated by the COVID-19 pandemic. The ultimate conclusion of the Legislature was that a specialized body familiar with the restaurant industry is necessary to protect these restaurant workers.

The Act has been heavily criticized by business groups out of concern that it threatens the small business franchise model often established by women and minority owners, and a misconception regarding the involvement of the Franchisor in day-to-day operations. Notably, while prior versions of the bill provided for joint liability of the Franchisor for failure to comply with the Act, the most recent version that was passed by the Senate, removed this protection, meaning that Franchisees may be solely liable for non-compliance. Additional criticism of the Act includes that the Fast Food Council is unelected and therefore not accountable to the voters of California.

Who Is Covered by the Act?

The Act targets national chains and franchisees, and applies to fast food restaurants consisting of 100 or more establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services.

A fast-food restaurant includes any establishment in the state that is part of a fast-food chain and that regularly and primarily provides food or beverages in the following manner:

  • For immediate consumption either on or off the premises.
  • To customers who order or select items and pay before eating.
  • With items prepared in advance, including items that may be prepared in bulk and kept hot, or with items prepared or heated quickly.
  • With limited or no table service. Table service does not include orders placed by a customer on an electronic device.

The Act provides specific exemptions including for example bakeries, that as of September 1, 2022, produce bread on the premises for stand-alone sale. Employers who think an exemption may apply should consult with Labor and Employment Counsel.

What The FAST Recovery Act Means for Employers

Most immediately, the Act provides the Fast Food Council with authority to increase the minimum wage in 2023, up to $22.00 per hour. After 2023, the Act provides for only incremental increases. Therefore, it is likely that covered employers will see a drastic increase to the minimum wage next year.

If a rule created by the Fast Food Council conflicts with an existing state law or regulation issued by a separate state agency, the rule established by the Fast Food Council would apply to covered fast food restaurant workers and fast-food restaurant franchisees and franchisors, instead of the conflicting rules or regulations of the other state agency (with the exception of OSHA standards). Meaning that employers should be careful in determining whether they must comply with state law or the rules of the Fast Food Council, to avoid non-compliance.

In summary, it is likely covered employers will see an increase in new industry-specific rules created by the Fast Food Council. Regardless of whether you are a cover employer, the Act will likely create confusion in the restaurant industry regarding which rules apply to your business. Employers should work closely with Labor and Employment Counsel to determine whether they are covered by the Act and ensure they are following the correct guidelines.