California's law aimed at fast food wages is on hold. Lawmakers may have found a way around it

SACRAMENTO, Calif. -- A new California law aimed in part at boosting salaries for fast food workers has been delayed for nearly two years following industry resistance. Now the Democrats who control the state Legislature might have figured out how to raise worker pay anyway.

Gov. Gavin Newsom signed the law last year. It created a 10-member council with the authority, among other things, to increase the state's $15.50 minimum wage to a maximum of $22 per hour for some fast food workers. Some experts quickly hailed the law as one of the “most significant pieces of employment legislation passed in a generation.”

But unlike in most states, California voters have the power to overturn some laws passed by the Legislature. Business groups who opposed the law gathered enough signatures to qualify a referendum in 2024. In the meantime, the law does not take effect.

Business groups were confident the law would ultimately be blocked at the ballot box. But tucked inside California’s more than $300-billion operating budget is a provision to resurrect a long-dormant regulatory commission that would have powers similar to that of the fast food council.

The Industrial Welfare Commission regulates wages, hours and working conditions in California. It has been dormant for most of this century. The Democratic-controlled Legislature stripped its funding in 2004 when Arnold Schwarzenegger was governor, making it more difficult for the Republican to iNFLuence the state's wage regulations. The commission has not issued any orders since.

California's budget, scheduled to be voted on this week, includes $3 million to bring that commission back to life. The commission has the power to investigate wages paid across various employment sectors. If it finds wages are “inadequate to supply the cost of proper living,” it can convene industry-specific wage boards to gather findings and make recommendations. The commission can then issue orders specific to wages, hours and working conditions.

The funding would come with conditions. It would require the commission to prioritize industries in which more than 10% of workers are at or below the federal poverty level, a definition that includes California's fast food workers, according to the University of California-Berkeley Center for labor Research and Education.

It also ordered the commission to complete its work by the end of October 2024, days before voters are scheduled to vote on whether to uphold the fast food law. And because that funding is part of a budget bill, it could not be blocked by voters.

Matt Haller, president of the International Franchise Association, said he sees that as a clear attempt by the Legislature to bypass the industry's efforts to block the law creating the fast food council.

“We're concerned about any attempt to create some Frankenstein version” of that law, Haller said, noting that more than a million California voters signed a petition to block it. “It speaks to (labor unions') desire to create political control over our business model.”

State Sen. Maria Elena Durazo, a Democrat from Los Angeles and chair of the budget subcommittee responsible for labor issues, said lawmakers were not targeting the fast food industry by restoring the commission's funding. She said lawmakers were seeking to improve conditions for all California workers. More than a third of California's residents don't make enough money to meet their basic needs, according to a report from the United Ways of California.

“The fast food industry is one of the industries with the problem, but it's not the only industry,” Durazo said, adding that the commission “should always be looking at what the wages (are) of workers."

“There comes a time when they should step up and do something about it and we're just giving them the funding to address it because it's a much bigger problem,” she said.

The Service Employees International Union, or SEIU, had sponsored the fast food law last year. David Huerta, president of SEIU California and SEIU-United Service Workers West, did not comment on whether the union has pursued the funding as a way to accomplish the goals of the fast food law. But he said the funding is part of “workers in low-wage industries ... rising up to demand the wages they need to provide for their families.”

“SEIU members thank Governor Newsom and legislators for listening to workers and taking the bold action needed to make progress against a growing tide of inequality and poverty experienced by low-wage workers and people of color,” Huerta said.

California's new fiscal year begins Saturday. Newsom and legislative leaders reached an agreement late Monday a new operating budget, which includes restoring funding for the Industrial Welfare Commission. Newsom's office declined to comment Monday on restoring funding for the commission.

The Industrial Welfare Commission has continued to exist despite not having any money to operate. It has 17 wage orders that are still in effect, including setting a minimum wage and other factors for the manufacturing, agricultural and housekeeping sectors, according to a legislative analysis.

If signed into law, the Industrial Welfare Commission could have impacts beyond the fast food industry. Several Business groups have come out against it, including the California Chamber of Commerce, the California Retailers' Association, the California Manufacturers and Technology Association, the California Restaurant Association and the California Building Industry Association.

Those groups particularly don’t like that the the Legislature would limit the Industrial Welfare Commission from issuing “any standards that are less protective than existing state law.”

“This limitation will only create unnecessary confusion,” the business groups said in a statement.