Fast-food companies agreed over the weekend to pull a referendum off next year’s ballot that sought to reverse a landmark worker-protections law, forgoing a costly political fight with labor unions over employee pay.
The deal will result in an increase in the minimum wage for fast-food workers of $20 per hour in April and form a new council of representatives for workers and companies to consider pay bumps in the future, according to sources involved in the negotiations.
Negotiated with the help of Gov. Gavin Newsom’s top advisors, the agreement represents a rare compromise that allows business groups and labor to avoid a ballot fight over repealing a law boosting fast-food wages that could have topped $100 million in campaign spending.
“It is a powerful, amazing day,” said Tia Orr, executive director of SEIU California. “The new bill really clears a path for workers to have their victory back.”
The saga over Assembly Bill 257, also known as the Fast Food Accountability and Standards Recovery Act, started last year when the Service Employees International Union muscled the proposal through the state Legislature with the help of its Democratic allies. Restaurant owners opposed the legislation, arguing they couldn’t bear the increased costs without raising prices for their customers.
Newsom’s signature on the bill opened a political chess match in Sacramento that has quietly played out all year, involving maneuvers in the state budget, several pieces of legislation and a new law changing how Californians vote on ballot referendums.
The fast-food law originally created a statewide 10-member fast-food council and regional councils comprising labor and employer representatives to set minimum wage, hour and working condition standards in California, which unions touted as a national success model. Under the law, pay could have increased up to $22 per hour in 2024 for employees of chains with more than 100 restaurants.
Fast-food companies quickly launched a campaign to qualify a referendum on the ballot to reverse the law, a tactic business interests have adopted to pause and halt progressive laws from taking effect in California.
Unions cried foul, arguing that wealthy corporations were abusing the referendum system to subvert the will of a Democratic supermajority in Sacramento and deceive voters into reversing laws intended to raise up some of the state’s lowest-income workers. Armed with anecdotes of signature gatherers inaccurately representing the intent of the campaign to qualify the referendum on the ballot, they introduced a bill to make it easier for voters to understand the petitions they sign.
The bill, AB 421, which Newsom signed Friday, changes “yes” and “no” voting options on referendums to “keep the law” or “overturn the law,” ensuring that voters aren’t confused about how to cast their ballots.
AB 421 also provides a way for campaigns to pull their referendum off the ballot after it qualifies.
Through the state budget approved over the summer, Democrats also revived a separate council, called the Industrial Welfare Commission, with more authority to raise wages without limits and to enact workplace conditions for fast food and other California industries. The IWC, which was defunded years earlier, served as an insurance policy if the fast-food industry’s referendum on AB 257 succeeded and the original fast-food council was nullified.
Under a separate bill, AB 1228, unions applied even more pressure on corporations by trying to make fast-food franchisors legally liable for labor violations committed by franchisees.
Orr said the unions knew they needed to be strategic after wealthy corporations tried to reverse the fast-food wage law.
“That’s what it takes,” Orr said. “It takes multilevel, multipronged steps in order for us to beat back the level of corporate interest and resources that are going into halting workers’ progress.”
The strategy ultimately brought representatives of the fast-food industry and labor unions to the negotiating table this summer. In the deal struck over the weekend, each side offered concessions to avoid the ballot referendum fight.
Fast-food companies pledged to remove their referendum to repeal AB 257 from the November 2024 ballot. In return, lawmakers and the governor agreed to rework AB 257 and defund the revival of the Industrial Welfare Commission, which was set to convene in January.
Unions agreed to halt their efforts to hold corporations liable for labor violations committed by their franchisees under AB 1228.
Unions won a wage increase next year of $20 per hour for California workers employed by any fast-food chain that has more than 60 locations across the country. The deal also allows the new council to advance annual wage increases of either 3.5% or an amount based on average changes to the Consumer Price Index each year, whichever is lower, that could apply to fast food workers statewide or in specific regions. Statewide the $20 minimum wage increase is estimated to affect more than 500,000 workers.
As part of the peace agreement between the two sides that expires in 2029, localities will not be able to further increase wages regionally for fast-food workers.
A new nine-member Fast Food Council, similar to the one created under AB 257, will be established and consist of two representatives of the fast-food restaurant industry, two franchisees or restaurant owners, two restaurant employees, two advocates for fast-food restaurant employees and one member of the public who is not affiliated with either side and will serve as chair.
The council will have two additional non-voting members from the Department of Industrial Relations and the Governor’s Office of Business and Economic Development.
The council, which will hold its first meeting by March 15, will be charged with advancing fast-food restaurant minimum standards on wages, working hours, and working conditions in coordination with state agencies.
Many of the changes were made public Monday under sweeping amendments to AB 1228 and SB 105.
The bill will become void if fast-food companies do not withdraw the referendum on AB 257 by Jan. 1.
David Huerta, president of SEIU California and SEIU United Services Workers West, urged lawmakers to pass the legislation.
“Never underestimate the power of courageous workers, standing together to improve their workplaces and lift up their families,” Huerta said. “AB 1228 clears the path for fast-food workers to start making much-needed improvements to the policies that affect their own workplaces and their lives.”
The deal allows Democrats and their allies in Sacramento to focus their resources on defeating a ballot initiative co-sponsored by the California Business Roundtable that seeks to make it more difficult to raise taxes in California.
For any new or increased taxes approved by a two-thirds vote of the state Legislature, the “Taxpayer Protection and Government Accountability Act” would also require voters to sign off with majority vote in a statewide election. Passing any local taxes would require support from two-thirds of voters. The measure expands the definition of taxes to include other fees.
If approved by voters, the initiative would ultimately lower annual state and local revenues, which concerns Democrats. The measure also includes some provisions that could be a boon to real estate developers. Democrats are pushing a separate bill in the Legislature, Assembly Constitutional Amendment 13, to thwart the business initiative by requiring two-thirds voter approval for the measure instead of a simply majority.
Newsom and environmentalists are gearing up for another fight over setbacks around new oil and gas wells. SB 1137, which passed last year, prohibited new or modified oil and gas wells within 3,200 feet of homes, schools, parks and other buildings open to the public.
Similar to the fast-food law, oil companies qualified a referendum on the November 2024 ballot that asks voters to reject the law. Supporters of the original law raised concerns about the way in which the signatures were gathered on the referendum, prompting environmentalists to team up with labor to pass AB 421 to rein in corporations.