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California Fast Food Bill Inches US Toward Bargaining by Sector

Aug. 18, 2022, 9:30 AM

California is poised to enact a new method of boosting pay and improving job conditions for fast-food workers, and in the meantime has the potential to nudge European-style sectoral bargaining—or something like it—closer to playing a meaningful role in the US labor market.

A bill (AB 257) pending in the state legislature would create a council that sets workplace standards covering the state’s fast-food industry, including wages, working hours, health and safety, training, and other workplace conditions. The measure is awaiting a Senate floor vote after winning Assembly approval in January and passing through Senate committees. The 13-member council would include government officials and representatives of fast-food workers, franchisees, and corporate brands.

The sector council model isn’t new to the US, but it isn’t widely used. California’s version also isn’t true sectoral bargaining, in which worker-selected labor unions negotiate industrywide standards with the major employers in a particular sector.

But enacting the California legislation and advancing that council model would mean a big power shift toward workers and labor unions, which have struggled to make headway into low-wage and hard-to-organize industries such as fast food.

US labor law, in particular the National Labor Relations Act, emphasizes union elections and bargaining at the individual work-site level.

“That’s a particular problem in industries that are highly fissured,” with many employers, constant downward pressure on pricing, and widespread franchising, said Kate Andrias, a professor at Columbia Law School and former chief of staff in the White House counsel’s office under President Barack Obama.

“In order to actually improve conditions in the industry, you have to bring all the relevant players to the table—hard to do that on a shop-by-shop basis,” she said.

Business Concerns

Business groups, including the US Chamber of Commerce, are fighting the California bill, arguing the sector council is likely to set onerous standards that make it hard to operate financially viable restaurants in the state.

“The downside from the business community perspective is the people that might be involved in the council may or may not have any business experience. They might make sweeping judgments” about mandatory working conditions and wages, said Sean P. Redmond, vice president of labor policy at the US Chamber and a former US Labor Department official under President George W. Bush.

“It doesn’t take into account the realities of running a business,” he said.

US Rep. Ro Khanna (D-Calif.) urged California lawmakers and Gov. Gavin Newsom (D) to enact the bill, both for its direct benefits to California fast-food workers and its broader influence on worker protections nationally.

The measure “would help lay the groundwork to expand sector councils not only in California but across the United States—a watershed moment for the low-wage workforce nationwide,” Khanna said in an Aug. 3 letter.

The US has some history of sectoral bargaining, generally in small pockets where unions have market strength, such as bargaining citywide standards for janitors in certain locales rather than bargaining with each individual employer or work site, Andrias said.

But because of federal labor law preemption, states can’t mandate sectoral bargaining systems, she added. Setting up a sector council is the closest states can get without a rewrite of federal labor law.

‘Fledgling Developments’

The California fast-food proposal would set up “by far the most significant sectoral council to be enacted” in recent US history, said David Madland, a senior fellow at the Center for American Progress. “But it’s based upon what a whole bunch of cities and states have done.”

These include sectoral councils or worker boards enacted since 2018 to govern aspects of other occupations in less-populous areas, mostly those with Democratic-majority government leadership—domestic workers in Seattle, farm laborers in Colorado and New York state, nursing home workers in Michigan, and home care workers in Nevada.

There are other “fledgling developments” advancing the notion of setting standards across a sector, Andrias said, such as a legislative proposal that stalled in New York this year to set up a council for nail salon workers.

Setting sector-wide standards—whether through a government-run council or privately run sectoral bargaining—can have advantages not just for workers but also for businesses and the overall economy, Madland said. Having a floor of wages and benefits across an entire industry forces companies to compete on innovation and productivity, rather than competing by lowering pay and prices.

“But to get management on board, usually in these situations there has to be something that pushes them to do so. That usually has to be in the form of legislation,” said Jason Veny, at attorney at Murphy Anderson PLLC in Washington D.C. who represents labor unions.

In at least one recent instance, management for the ride-share industry showed interest in a version of a sector council. The industry helped negotiate proposed legislation in New York in 2021 to set up a council and establish pay and benefits standards for drivers, while maintaining their legal status as independent contractors.

That proposal stalled after drawing criticism from advocates who said it wasn’t worker friendly. The proposal drastically limited the list of working conditions available for bargaining, they said, and gave the ride-share companies too much control over which union would serve on the council to purportedly represent drivers’ interests.

“Just calling something sectoral bargaining doesn’t make it so,” Andrias said. “It needs to be a real system of bargaining through unions that workers control.”

Franchise Model Challenged

A key aspect of the California proposal, and another point of contention for the US Chamber, is the bill’s treatment of the franchise model—a piece of the puzzle that’s likely to apply in future sector council or bargaining plans.

If enacted, it would make the corporate fast-food brands liable for violations of state employment laws, in addition to the franchisees who operate many fast-food restaurants and have direct control over workers and their wages.

The proposal coincides with a broader national debate of joint employment policies, as the US Labor Department and the National Labor Relations Board each pursue regulatory moves that could make corporate brands more likely to be treated as joint employers under federal labor and employment laws.

In a widely franchised industry such as fast food, having the “apex company” involved in deciding the standards and being responsible for complying with them is necessary, Andrias said.

“The individual franchise owner doesn’t have a whole lot of ability to make improvements,” she said, because the corporate brand owner dictates much of the business model, often including food prices, menus, uniforms, and how many workers should be scheduled for each shift.

But because the corporate brands don’t run most of the restaurants or directly manage employees, holding those companies liable for labor violations creates major financial risk for them, said Redmond, the US Chamber executive.

“You kind of have to wonder what their reaction is going to be,” he said, suggesting some fast-food chains might scale back or stop opening new stores in California if the measure becomes law.

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editor responsible for this story: Genevieve Douglas at gdouglas@bloomberglaw.com