‘Should Raise Alarm Bells Across The Country’: California Paves Road To 40% Minimum Wage Increases For Certain Restaurants
Drive through McDonalds on The Highway on 24th February 2020 in London, United Kingdom. A drive-through or drive-thru is a type of take-out service provided by a business that allows customers to purchase products without leaving their cars. The format was pioneered in the US and which has since spread to other countries. (photo by Mike Kemp/In PIctures via Getty Images)
Mike Kemp/In PIctures via Getty Images

California lawmakers passed legislation on Tuesday establishing a council with the power to raise fast food minimum wages for certain restaurants.

AB 257 creates a “Fast Food Council” responsible for drafting “sectorwide minimum standards on wages, working hours, and other working conditions,” according to a summary of the bill, which Governor Gavin Newsom (D-CA) is expected to sign.

The legislation — backed by the powerful Service Employees International Union — applies only to restaurants with 100 or more establishments across the United States, with the exception of restaurants that operate a bakery that “produces for sale bread as a stand-alone menu item.”

Councilmembers are permitted to raise minimum wages up to $22 per hour — representing an increase of over 40% from the $15.50 minimum wage slated to take effect next year.

The bill comes one year after a sizable portion of California restaurants were forced to close their doors following aggressive government lockdowns. In a letter denouncing the legislation, McDonald’s USA President Joe Erlinger noted that the provisions impose “higher costs on one type of restaurant, while sparing another.”

“If you are a small business owner running two restaurants that are part of a national chain, like McDonald’s, you can be targeted by the bill,” Erlinger explained. “But if you own 20 restaurants that are not part of a large chain, the bill does not apply to you.”

Erlinger postulated that “backroom politicking” could explain the carveout for restaurants with a bakery. “This is a clear example of picking ‘winners’ and ‘losers,’ which is not the appropriate role of government,” he commented.

An analysis from the California Department of Finance said that the legislation introduces a “fragmented regulatory and legal environment for employers” that could “raise long-term costs across industries.” There are more than 40,000 McDonald’s restaurants as of 2021, according to the company’s most recent federal filings, with 93% of locations constituting franchises.

“This should raise alarm bells across the country,” Erlinger said of the legislation. “But this isn’t just a cautionary tale for California’s customers, workers, and business owners. Proponents of this bill have made it clear they want to see it expand across the country, regardless of whether Governor Newsom signs the bill into law. That would be terrible.”

California has implemented multiple restrictive labor laws in recent years. In 2019, Newsom approved AB 5 — a piece of legislation that claimed workers are “exploited” through their classification as independent contractors instead of employees. Although a California court granted Uber and Lyft an emergency stay in 2020 over a lawsuit that would have pressed the companies to conform to the law, the Supreme Court recently declined to hear the case, leading to the end of the stay and provoking independently employed truckers to shut down major ports in protest.

Newsom’s office said in a statement that AB 5 was enacted with “sufficient time for affected parties to understand the requirements of the law” and urged the trucking industry to “move forward” in supporting the change.

“California is committed to supporting our truck drivers and ensuring our state’s truck drivers receive the protections and compensation they are entitled to,” the statement added. “This administration has employment tax incentives, small-business financing, and technical assistance resources to support this essential industry.”

The new minimum wage legislation also comes days after the California Air Resources Board issued new rules requiring 35% of new vehicles to produce zero emissions by 2026 — a standard that will rise to a 68% benchmark by 2030 and a 100% level by 2035. Researchers have warned that the state’s electric grid will require significant upgrades to manage a rapid transition away from internal combustion vehicles — a reality reflected by the California Independent System Operator urging residents this week to avoid charging their electric vehicles in the interest of not overwhelming the grid.

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