Vice President, Labor Policy, U.S. Chamber of Commerce
June 21, 2022
A satire magazine once quipped that the state of California was the “world’s leading exporter of terrible government policies,” which some observers of labor policy would argue is more true than not. After all, the legislature there did pass a famously—or infamously—bad piece of legislation a few years ago known as AB 5 that upended the livelihoods of countless independent contractors throughout the Golden State. Perhaps not satisfied with that destructive legislation, now California lawmakers are considering another terribly flawed idea.
The proposal comes in the form of another bill known as AB 257, the Fast Food Accountability and Standards Recovery Act or FAST Recovery Act, which is a radical proposal to micromanage the fast food industry. The FAST Recovery Act would create a council of 11 unelected political appointees—regardless of whether they have any business experience whatsoever—to run California’s fast food restaurant industry from Sacramento.
Of those 11, five would be representatives from different agencies in the state government, four would be representatives of restaurant employees and their “advocates,” and there would be one each to represent franchisors and franchisees, respectively.
This Fast Food Sector Council would be empowered to establish wage rates, set working hours, and issue other rules and regulations for all fast-food restaurants whose brands have more than 30 locations nationwide, of which there are many, even though most such restaurants are individually owned and operated by franchisees. In fact, according to the Stop AB 257 Coalition, there are about 34,700 food franchises owned by 14,422 franchisees in California.
AB 257 also would fundamentally alter the franchise model of business itself, a model that has existed for over 150 years in the United States. The proposal would impose joint and several liability on franchisors for alleged violations by their franchisees. For good measure, AB 257 also would abrogate franchise agreements that waive such liability, and it prohibits franchisees from indemnifying their franchisors.
Given this potential liability, franchisors would, by necessity, have to take a much more direct role in operating individual locations that are separately owned and operated by their franchisees. Inasmuch as franchisors are not willing to bear such liability, some may simply opt not to open additional locations in California or, worse, they may cease operating there at all. Of course, the real goal of this legislation is to force whatever franchisors that remain to accept unionization at their various locations, a goal that organized labor has fantasized about since starting the so-called “Fight for $15” movement ten years ago.
At a time when economic headwinds like record inflation are making it increasingly difficult for businesses, a proposal like AB 257 would make it much harder—and more expensive—for restaurant owners to operate. The consequences of this legislation would be widespread, and consumers would be hurt by increasing prices more so than they already are.
Suffice it to say, in a state that already burdens businesses with countless regulations, adding another particularly meddlesome layer will not help things. More importantly, increasing costs that ultimately will be borne by consumers is wrong, and that’s no joke.