Last September, California Gov. Gavin Newsom signed a new law – AB 257, or the Fast Food Accountability and Standards Recovery Act – that will have an enormous regulatory impact on the state’s fast food industry.
Small business owners will like the new law.
Why? Because the law, which takes effect on Jan. 1, will require fast food restaurants (which include many independent restauranteurs, franchise owners and other small businesses) to answer to a newly formed committee that will “set minimum standards for workers in the industry, including for wages, conditions related to health and safety, security in the workplace, the right to take time off from work for protected purposes and protection from discrimination and harassment.”
I realize that statements like this can cause any businessperson to shudder.
The committee, called the Fast Food Council, will be made up of 10 representatives of fast food workers, franchisees, franchisors and political appointees from the Governor’s Office of Business and Economic Development and the Department of Industrial Relations.
The Council will be authorized to make recommendations to the state’s legislature on working conditions and pay (including a potentially significant increase in minimum wages), and the law bounds the legislature to abide by those recommendations.
As you can imagine, the fast food industry is up in arms. McDonald’s U.S. president says the bill could “raise minimum wages to $22 per hour” and “hurt everyone.” The U.S. Chamber of Commerce says the bill “would impose joint and several liability on franchisors for alleged violations by their franchisees, and 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.”
Chipotle’s CEO says that the bill is “unfortunate because it also impacts the economic model, and that could impact how many restaurants we open in the future in a state like California…which is a shame.”
So, will the bill cause fast food operators to leave California? Probably not. Will prices rise so much that people will stop buying Big Macs? No.
The bill scares many businesses because, if the legislation sticks (the industry may have gathered enough signatures to call for a statewide referendum to overturn it), it could spread to other states and affect other industries. But now I’m wondering: Is this such a bad thing?
Maybe allowing an independent council to determine wages is a good compromise for industry and will create a more level playing field. In fact, maybe an increase in wages and an improvement in working conditions will help those companies attract more talent and reduce turnover. At the very least, it may help reduce the number of hairs I routinely find in my chicken nuggets.
Businesses have always battled government over regulations. Billions get spent annually on lobbyists defending an industry’s priorities and freedom to operate. An equal amount is spent by unions and labor advocates representing their constituencies.
Some industries are left to self-regulate (which means workers get no or little say). Others are subject to an over-abundance of government oversight. Politicians get bought and sold depending on their campaign’s bank account balance and what election cycle they’re in. Priorities change with each new administration. There’s no balance.
The Fast Food Council may be a model for such a balance. In theory, having a committee authorized to make decisions over safety, practices and pay for an industry stops this war between industry and government. Assuming that the committee fairly represents the interest of workers, government and businesses means that this quasi-independent body can mutually agree on the rules impacting an industry and therefore minimize potential abuse and political shenanigans.
In this model, the government is essentially punting its oversight on an industry to a better, more experienced group of people and saying “Hey, whatever you guys decide, we’ll go with.” As opposed to politicians who have an interest in just getting elected, that group – both workers and owners – have a mutual interest in their industry succeeding.
This being politics, there’s plenty of room for abuse. Who exactly are these appointees from the Governor’s Office of Business and Economic Development and the Department of Industrial Relations anyway? How do the other representatives get “appointed”? Who’s paying off whom? How is the committee itself governed? Why 10 members and not more (or fewer)? Won’t the lobbyists, unions and big corporations just redirect their persuasion efforts (i.e. money) to these members, rather than to members of the state legislators? What kind of person orders a “junior” Whopper?
Those questions need to be figured out, and more concise rules need to be established. Sorry, fast food people, it looks like your industry is going to be the guinea pig for this.
But if California’s political leaders are willing to be flexible and to propose future amendments to AB 257 so that the Council can be more effective and independent, and if both industry and workers’ representatives are willing to commit to this model, it’s a better way for government and business to work together, free from government interference.
Yes, it’s different. But it’s worth a shot.
Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.