In a significant development for California's fast-food industry in 2024, the Fast Food Accountability and Standards Recovery Act (AB 257), which was signed into law last year, is no more. Initially, AB 257 sought to establish a 10-person council appointed by the Governor with the authority to set comprehensive standards for fast-food workers. However, a successful referendum effort has led to the emergence of AB 1228, which not only replaces AB 257 but also introduces a minimum wage increase for workers to $20 an hour starting next year.

Governor Newsom signed AB 257 into law in September 2022 with the vision of creating a powerful "Fast Food Council." This envisioned council, comprising 10 members appointed by the Governor, was intended to have the authority to establish wide-reaching standards covering minimum wages, health and safety conditions, workplace security, and protection against discrimination and harassment for fast-food workers.

Almost immediately, however, AB 257 faced significant challenges. Concerns from industry groups prompted a successful signature-gathering campaign, leading to a referendum to place the bill on the November 2024 ballot. Towards the end of 2022, a coalition of California small business owners, restaurateurs, franchisees, and related entities filed a lawsuit to block enforcement of the law, pending the Secretary of State's determination on the referendum's qualification. Earlier this year, the coalition secured a preliminary injunction against enforcement, introducing uncertainty and triggering behind-closed-doors negotiations to seek a legislative compromise.

The outcome of these negotiations is AB 1228, a bill that replaces and repeals provisions of AB 257. This revised legislation retains the concept of the "Fast Food Council" but introduces modifications to its functions and authority. Notably, AB 1228 empowers the council to propose standards for wages, working conditions, and training while entrusting the enactment of these standards to relevant state agencies, such as the Labor Commissioner, Cal/OSHA, or the California Civil Rights Department.

The redefined Fast Food Council will now comprise nine voting members, including representatives from the fast-food restaurant industry, franchisees or restaurant owners, fast-food restaurant employees, advocates for fast-food restaurant employees, and one unaffiliated member of the public. It will require five votes to pass any resolution or take action, with council members limited to serving two four-year terms. The Council is mandated to convene its first meeting by March 15, 2024.

Notably, AB 1228 introduces a $20 per hour minimum wage for fast-food workers, starting on April 1, 2024, with provisions for annual increases. The legislation also includes a "sunset date," signifying that its provisions will expire in 2029 unless extended by future legislation.

AB 1228 will apply to national fast food chains, defined as "limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services, and which are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service." Bakeries and grocery stores will be exempt from this definition and are not included as fast-food restaurants.

With AB 257 repealed, the referendum set to go to California voters in November of 2024 will be withdrawn. With California's fast-food industry poised for transformative changes in the coming year, we strongly urge both employers and employees to stay informed as this landscape evolves.