On Monday, unions and restaurant industry groups announced a deal to improve employment standards for fast-food workers in California. Last year, California passed the Fast Food Accountability and Standards Recovery Act (FAST Act), which creates a Fast Food Council of employer, employee, and government representatives to set minimum wages and employment standards for the fast-food industry. But the law was suspended in January, after fast-food companies gathered enough signatures to put a referendum on the ballot in 2024. Meanwhile, legislators had been getting ready to pass another bill, AB 1228, which would have made fast-food franchisors jointly liable for labor violations at their franchisees’ establishments.

Now, through negotiations mediated by California Governor Gavin Newsom, the two sides have reached a compromise in a rewritten version of AB 1228, passed on Thursday, that would secure a $20 minimum wage for workers and establish a similar Fast Food Council, but would pare back some of the Council’s powers and ditch franchisor liability altogether. If the bill is signed into law, it will only go into effect if industry groups withdraw the referendum, which they are expected to do. Here’s what you need to know about the deal and what it means for workers.

The FAST Act

AB 257 was first introduced in January 2021 but failed on the Assembly floor by three votes. With the help of the Fight for $15 movement and the Service Employees International Union (SEIU), fast-food workers in California organized a years-long campaign to pressure lawmakers to pass the bill, filing over 300 health, safety, and wage complaints and holding over 350 strikes. An amended version of the bill finally passed in August 2022 and was signed into law by Governor Newsom on September 5, 2022.

The FAST Act creates a Fast Food Council “to establish sector-wide minimum standards on wages, working hours, and other working conditions adequate to ensure and maintain the health, safety, and welfare of, and to supply the necessary cost of proper living to, fast food restaurant workers.” The Council is composed of ten members: two representatives of the state government, two of fast-food franchisors, two of franchisees, two of employees, and two of advocates for employees, all appointed by the state. The Council’s standards cover all workers employed by a restaurant that has 100 or more establishments nationwide that share a common brand. The Council can set a minimum wage as high as $22 in 2023 and may increase wages each year by 3.5% or the rate of change of the Consumer Price Index, whichever is lower. The Council’s standards are binding and failure to abide by them is unlawful, but the Legislature may pass legislation to prevent them from going into effect. The act includes a sunset provision, ending the Council’s operation on January 1, 2029.

But the day after Governor Newsom signed the bill into law, industry groups filed a proposed referendum petition and embarked on a $20 million dollar signature gathering campaign to overturn it. The campaign was plagued by allegations that the petitioners violated state election rules by willfully misleading voters, including by telling potential signers that the petition “was for the minimum wage to go up.” Nonetheless, in January 2023, the California Secretary of State announced that the petitioners had secured enough signatures to put the referendum on the ballot in 2024.

AB 1228

Undeterred, labor advocates worked with progressive lawmakers to gather enough votes to pass two more significant pieces of labor legislation. First, AB 102, which was signed into law in July, increased funding for California’s Industrial Welfare Commission (IWC), a long-dormant century-old wage board with the power to set wages, hours, and working conditions by industry. Second, AB 1228, which would have made franchisors jointly liable for labor violations — a long sought-after provision that was taken out of the final version of the FAST Act. According to reports, Governor Newsom led negotiations between industry groups and unions over the summer, and with AB 1228 set to pass this week — the final week of California’s legislative session — industry groups finally caved, agreeing to withdraw the referendum in exchange for a rewritten AB 1228.

The new bill, which the legislature passed on Thursday, ditches joint franchisor liability entirely and officially repeals AB 257. (As part of the negotiations, legislators also agreed to defund the IWC.) But the bill largely keeps in place the Fast Food Council — with some important changes. First, the government representatives on the Council are reduced to nonvoting members, and the bill adds an independent member of the public who will serve as chairperson, presumably carrying a tiebreaking vote. The Council’s standards would apply to “limited-service” restaurants with over 60 establishments nationwide that share a common brand. But instead of promulgating standards with the force of law, the Council must now submit any standard to the Labor Commissioner, who, upon finding that it is consistent with the Council’s mandate, will then engage in a rulemaking process in accordance with California’s Administrative Procedure Act.

The bill would set the hourly wage for fast-food workers at $20 effective on April 1, 2024, and the Council may set wages annually thereafter beginning in 2025, subject to the same yearly cap. The Council can set different wages by region, but localities may not enact their own fast-food worker–specific wage ordinances. Like the FAST Act, the Council cannot set standards regarding predictable scheduling and paid time off, and it must petition the Occupational Safety and Health Standards Board regard any standard that falls within their jurisdiction. And most importantly, the bill will only take effect if the referendum on AB 257 is withdrawn by January 1, 2024.

Although the Fast Food Council may not be challenged via referendum, it could still face challenges in the courts. In fact, the bill itself seems to foresee it: the prohibition on local fast-food worker wage ordinances will not apply if the bill’s $20 minimum wage does not take effect by April 1, 2024, due to a judicial injunction or action. Restaurant industry attorneys had already floated preemption-based challenges to the FAST Act, claiming that the council creates an alternative sectoral bargaining system that is preempted by the National Labor Relations Act. AB 1228’s revised structure may give these claims less weight: the Council’s standards are simply recommendations which the Labor Commissioner will then promulgate as rules. But just because the argument is weaker doesn’t mean companies won’t make it. Moreover, forcing the standards to go through the state’s rulemaking process provides further opportunities for litigation about procedural deficiencies in particular standards.

But let’s be clear: this is a huge win for fast-food workers in California, who will now have a seat at the table in setting their wages and work standards and will see an immediate raise next April. The Council structure could also serve as a model for legislation to expand workplace protections that workers in other states can organize around and pressure state and local governments to adopt. The bill now heads to Governor Newsom’s desk for his signature, but it remains to be seen how fast-food companies will respond. If history is any indication, we would be wise not to count them out yet.