California Passes FAST Recovery Act to Impose New Labor Burdens on Fast-Food Restaurants

On September 5, 2022, California’s Governor signed the Fast Food Accountability and Standards Recovery Act, also known as the FAST Recovery Act (the “Act”). While the Act eliminated a prior joint-liability provision for franchisors, it will still impose far-reaching labor burdens on a broadly defined sector of “fast food restaurants” in California. Critics of the Act are seeking a voter referendum, which franchisors with restaurant franchises in California should follow closely.

The Act applies to operators of “fast food restaurants” in California that are part of a “fast food chain,” meaning a set of restaurants consisting of 100 or more common-brand locations nationwide. The Act defines a “fast food restaurant” as an establishment providing food or beverages (1) for “immediate consumption,” (2) to customers who “order . . . and pay before eating,” (3) with “items prepared in advance,” and (4) with “limited or no table service.” The Act’s broad scope could thus apply beyond what many would ordinarily consider fast-food.

The Act establishes a ten-member “Fast Food Council” comprised of franchisors, franchisees, employees, worker advocates, and government officials. Members of the Council will be governor-appointed, serve four-year terms, and set industry standards for hours, wages, and other working conditions.

The Act provides new whistleblower protections for employees of fast-food restaurants. They may now assert private causes of action against operators of fast-food restaurants for allegations of discharge, discrimination, or retaliation due to (1) actual or believed complaints or disclosures of violations, (2) participation in certain proceedings, or (3) refusal to work based on “reasonable cause to believe” the restaurant was violating certain laws or posing a “substantial risk” to health or safety. The Act establishes a rebuttable presumption of discrimination or retaliation if an adverse action occurred within 90 days after the operator learned of the protected activity.

The Act faces substantial opposition from the business community, citing concerns about restaurant closures, price inflation, and an overall decline in fast-food industry employment. The Act is set to take effect on January 1, 2023, but if it qualifies for a voter referendum, its implementation will be put on hold until voters can weigh in, most likely in November 2024. As with many California laws, the Act may serve as an unfortunate model for other industries and states.