The California Legislature is back in session after its annual summer recess, and over the course of this month, there will be hearings on hundreds of measures. Those include one that is a direct assault on the restaurant industry, as well as working families dealing with the dramatic rise in costs for the goods and services they rely on.
Assembly Bill 257 – known as the “FAST Act” – has been pushed through the legislative process under the guise of helping California workers in the counter-service restaurant community.
If enacted, the bill – sponsored by the Service Employees International Union – would set aside existing labor laws in favor of new rules developed and enforced by 13 unelected political appointees with zero oversight.
In a typical quick-service business, profit margins are narrow, about 6 to 9 percent.
Proponents are pushing the idea that this measure is necessary because the limited-service restaurant industry is allegedly more prone to labor law violations than other industries. That’s their story, but they’ve yet to present any credible data to support their hypothesis.
One thing we can say with certainty is, given the composition of this council, labor costs would certainly rise, and at least part of those costs would be passed onto consumers in the form of even higher prices. A typical individual spends $1,200 per year on fast casual restaurants, and prices on ingredients and supplies are going up. As a consequence, the damaging inflation that all Californians are experiencing will become worse with the FAST Act.
In a typical quick-service business, profit margins are narrow, about 6 to 9 percent. To the extent that higher labor costs imposed by the unelected statewide council are not reflected in higher consumer prices, they will eat away at these narrow margins, causing even more businesses to close shop and deterring other would-be entrepreneurs from entering.
In short, the FAST Act will take away great jobs for workers, harm consumers, raise prices, stifle competition, diminish entrepreneurship and create layers of unnecessary bureaucracy – all because of a false narrative.
Across all years of data analyzed, there was roughly one wage claim per 1,000 private sector employees in limited service – one of the lower per-employee industry rates.
Case in point: Just last week, the Employment Policies Institute (EPI) released a new study analyzing nearly a decade of California Department of Industrial Relations (DIR) data on alleged labor law violations.
This report reviews the largest-possible scope of alleged wage and hour violations as recorded by DIR, which operates under one of the most complex, extensive labor codes in the nation. These data show conclusively that fast food restaurants have far fewer wage claims as compared to other industries, undermining the case for AB 257.
Limited-service restaurants account for only 1.6 percent annually of total average wage claims filed with the state from 2017 through 2022. Using an adjusted data set that includes restaurant locations potentially miscategorized by the state, limited-service restaurants still average only 2.3 percent of all wage claims. Across all years of data analyzed, there was roughly one wage claim per 1,000 private sector employees in limited service – one of the lower per-employee industry rates.
And a process already exists to handle these claims – between enforcement from DIR and existing franchise agreements, California has the strongest labor laws and highest wage laws in the country to ensure sustainable workplace environments.
If proponents of this measure needed a real issue to solve, the bigger problem is a labor shortage, with 80 percent of brands impacted. These labor challenges – even without a the FAST Act – are slowing growth for more than 75 percent of franchisees, with many reporting a decline in their workforce despite many operators increasing wages or planning to in the near future to attract quality staff.
California lawmakers should be celebrating and preserving local restaurants, not falling prey to the misinformation campaign set forth by the backers of AB 257, which would deeply harm local restaurants and the families that frequent them.
If the real consequences of the FAST Act were considered, one can only conclude that this legislation should be shelved for good.
Editor’s Note: Jot Condie is the president and CEO of the California Restaurant Association.