Law to Increase Fast-Food Worker Wages Halted by Judge, Pitting Industry Groups Against Unions and State

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Workers protest with signs that read "Join us at the table, respect democracy, protect AB257"
Dozens of fast-food cooks and cashiers in Los Angeles and Orange counties join a statewide strike to demand that McDonalds, Starbucks and other chains drop their referendum seeking to overturn AB 257, aka the FAST Recovery Act, outside a Starbucks in Los Angeles on Nov. 15, 2022. (Genaro Molina/Los Angeles Times via Getty Images)

A judge on Friday temporarily blocked the state of California from implementing a landmark new law aimed at raising wages and improving working conditions for fast-food workers.

Sacramento County Superior Court Judge Shelleyanne Chang's order came in response to a lawsuit by restaurant industry groups under the Save Local Restaurants coalition, which is seeking a referendum on the November 2024 ballot in a bid to overturn the law. The coalition unites major fast-food chains like McDonald's, Starbucks and Chipotle as corporate brands and franchisees together raised $12.7 million in 2022 to fight AB257, aka the FAST Recovery Act.

"Above all, today’s decision by the Sacramento Superior Court protects the voices of over one million California voters who exercised their democratic right in asking to vote on a piece of legislation before bearing its burden," said the coalition in a statement Friday. "While this pause is temporary, the impact is beyond just one piece of legislation and keeps intact for the time being California’s century-old referendum process.”

The law establishes a 10-member council empowered to set minimum wages as well as standards for hours and working conditions for California's fast-food workers.

State and county elections officials are still verifying whether the referendum proposal received enough signatures to qualify for the ballot, a determination expected by the end of January. If that happens, the law would be halted from taking effect until voters weigh in.

In the meantime, the state Department of Industrial Relations said it plans to begin implementing the law on Sunday.

"If and when the referendum challenging AB 257 qualifies for the ballot, the law will be put on hold," said Katrina Hagen, director of the DIR, in a declaration (PDF) on December 27. "But in the absence of clear authority providing that AB 257 is suspended merely upon submission of unverified signatures, DIR has an obligation to proceed with implementing the duly enacted statute."

Implementation could include clearing the way for appointments to the Fast Food Council. But any wage increases or other changes couldn't take effect until at least October, meaning the law would have no immediate impact on worker pay.

The International Franchise Association and the National Restaurant Association said state law requires the state to sit tight until the status of the referendum is determined. The industry groups submitted more than 1 million signatures from voters in support of the referendum, well above the roughly 620,000 required by state law.

“California bureaucrats, at the behest of special interests, are taking an unprecedented step to violate their Constitution and the will of more than one million voters who asked for the Fast Food Council to be stopped via the referendum process,” Matt Haller, chief executive officer and president of the International Franchise Association, said in a statement.

The Service Employees International Union, which drove support for the creation of the council, blasted the lawsuit and several companies by name, including McDonald's, Chipotle and Starbucks.

“This cowardly tactic comes right out of the corporate playbook Californians have, unfortunately, come to know too well," said Tia Orr, executive director of SEIU California, in a statement.

“When corporations fail to halt progressive legislation in the legislature, they pivot to bankrolling ballot measures in an attempt to circumvent democracy and the will of the people," she added.

Over Twitter on Friday, the Fight for $15 coalition said: "Cowardice, greed, and not just rejecting the needs of our families, but punishing us for trying to get ahead, is exactly why we fought and won a Fast Food Council in California. Now the fast food industry is willing to spend millions of dollars to take away our victory."

If the signature drive doesn't qualify for a referendum and the law moves forward, fast-food wages could be raised as high as $22 an hour by the end of 2023. California's minimum wage for all workers is set to rise to $15.50 an hour starting Sunday.

Chang, the judge, scheduled a hearing on the matter for January 13. She also wrote that restaurant groups have failed to prove they properly served the state with the lawsuit, and she ordered them to do so.