Business
‘A devastating financial blow’: California’s ‘draconian’ fast-food bill becomes a law – Times of India
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NEW DELHI: California Governor Gavin Newsom has put his signature on a bill, AB 1228, known as the Fast Food Franchisor Responsibility Act, which would raise wages for fast-food workers all across California. This legislation establishes the highest guaranteed minimum wage for fast-food employees in the entire industry nationwide, Yahoo Finance reported. “This is a big deal. What a remarkable moment,” Newsom said during a press conference in Los Angeles on September 28.
The National Owners Association (NOA), which advocates for over 1,000 McDonald’s franchise owners, has strongly criticized the groundbreaking legislation for its ‘draconian’ regulations.
Apart from the upcoming minimum wage hike for fast-food employees that will take effect on April 1, 2024, the legislation also establishes a council with the authority to approve future wage hikes.
The NOA argues that this law would introduce expenses that “simply cannot be absorbed by the current business model.” According to the group, 95% of the 1,300 McDonald’s establishments in California are owned and operated by local small business owners.
“The new AB 1228 legislation has been voted into law and will result in a devastating financial blow to California McDonald’s franchisees at a projected annual cost of $250,000 per McDonald’s restaurant,” the NOA said in a memo obtained by Fox Business
AB 1228 is applicable to fast-food chains that operate a minimum of 60 locations nationwide, with an exception for those that produce and sell their own bread. The primary change brought about by this bill is a substantial increase in the minimum wage to $20 per hour, which is nearly $5 higher than California’s existing minimum wage of $15.50.
The legislation also establishes a Fast Food Council responsible for setting wage rates and offering recommendations regarding working conditions. The council holds the authority to annually raise the new minimum wage until 2029, up to a maximum of 3.5%, or the average change in the Consumer Price Index for urban wage earners, whichever is less.
Originally, AB 1228 would have held fast-food corporations jointly responsible if franchisees engaged in labor violations. The NOA expressed concerns that this provision could result in ‘frivolous lawsuits against franchisees’ potentially compelling larger corporate headquarters to exercise greater control over local operations.
Governor Newsom said, ”That was a tectonic plate that had to be moved”. He referred to what he recalled were the more than 100 hours of negotiations that took place to reach a negotiation between industry and labor groups.
As a compromise for abandoning the effort to hold corporations responsible for the actions of franchisees, business leaders decided to withdraw a voter initiative that would have initiated a referendum on worker wages in 2024. This decision paved the way for the wage increases outlined in the legislation.
Fast-food employees in California will need to wait until April 1 of the following year to get benefits of these wage hikes. However, they might experience a slight raise in the new year when the state’s minimum wage for all workers increases to $16 per hour on January 1, 2024.
The NOA has voiced its apprehension regarding the potential ramifications of the bill’s approval, expressing concerns that it might encourage similar legislative initiatives across the nation. These efforts, as per the NOA, could pose a threat to franchisees’ autonomy in making local business decisions.
The NOA emphasized the need for unity to prevent the bill’s expansion to other regions, stating, “We need to remain unified so that this cannot gain a foothold anywhere else,” as reported by Fox Business.
The National Owners Association (NOA), which advocates for over 1,000 McDonald’s franchise owners, has strongly criticized the groundbreaking legislation for its ‘draconian’ regulations.
Apart from the upcoming minimum wage hike for fast-food employees that will take effect on April 1, 2024, the legislation also establishes a council with the authority to approve future wage hikes.
The NOA argues that this law would introduce expenses that “simply cannot be absorbed by the current business model.” According to the group, 95% of the 1,300 McDonald’s establishments in California are owned and operated by local small business owners.
“The new AB 1228 legislation has been voted into law and will result in a devastating financial blow to California McDonald’s franchisees at a projected annual cost of $250,000 per McDonald’s restaurant,” the NOA said in a memo obtained by Fox Business
AB 1228 is applicable to fast-food chains that operate a minimum of 60 locations nationwide, with an exception for those that produce and sell their own bread. The primary change brought about by this bill is a substantial increase in the minimum wage to $20 per hour, which is nearly $5 higher than California’s existing minimum wage of $15.50.
The legislation also establishes a Fast Food Council responsible for setting wage rates and offering recommendations regarding working conditions. The council holds the authority to annually raise the new minimum wage until 2029, up to a maximum of 3.5%, or the average change in the Consumer Price Index for urban wage earners, whichever is less.
Originally, AB 1228 would have held fast-food corporations jointly responsible if franchisees engaged in labor violations. The NOA expressed concerns that this provision could result in ‘frivolous lawsuits against franchisees’ potentially compelling larger corporate headquarters to exercise greater control over local operations.
Governor Newsom said, ”That was a tectonic plate that had to be moved”. He referred to what he recalled were the more than 100 hours of negotiations that took place to reach a negotiation between industry and labor groups.
As a compromise for abandoning the effort to hold corporations responsible for the actions of franchisees, business leaders decided to withdraw a voter initiative that would have initiated a referendum on worker wages in 2024. This decision paved the way for the wage increases outlined in the legislation.
Fast-food employees in California will need to wait until April 1 of the following year to get benefits of these wage hikes. However, they might experience a slight raise in the new year when the state’s minimum wage for all workers increases to $16 per hour on January 1, 2024.
The NOA has voiced its apprehension regarding the potential ramifications of the bill’s approval, expressing concerns that it might encourage similar legislative initiatives across the nation. These efforts, as per the NOA, could pose a threat to franchisees’ autonomy in making local business decisions.
The NOA emphasized the need for unity to prevent the bill’s expansion to other regions, stating, “We need to remain unified so that this cannot gain a foothold anywhere else,” as reported by Fox Business.
