It’s a tale as old as time yet too often ignored by politicians: elected officials pass sweeping new policies and small businesses and consumers pay the price. Consider the new law in California mandating a $20-hourly minimum wage at quick-service restaurants across the state.
In the days leading up to the April 1 implementation date, the headlines were predictably awash with grim economic news. "Minimum wage increase in California could lead to layoffs" blared KNTV in San Francisco.
As business owners and their trade groups warned when the Fast Food Accountability and Standards Recovery (FAST) Act was first proposed in 2022, the chickens are finally coming home to roost in the form of higher prices, job cuts and shuttered businesses. But California politicians, who are beholden to the Service Employees International Union’s (SEIU) demands for fear of political retribution, chose not to listen.
The original version of the FAST Act would have been even more damaging. Negotiations yielded a compromise lowering the minimum wage from $22 to $20 and extended the timeline of its implementation from Jan. 1, 2023, to April 1, 2024. It also neutered the powers of a "Fast Food Council" to advisory-status rather than creating a new rule-making body.
Most importantly, the California compromise eliminated joint employer liability, which would have destroyed the franchise model by tying brands and their franchise owners together as one entity — long a prize for unions in their ongoing boondoggle to attempt to organize employees at franchised locations as one entity. Joint employer status erodes independence and autonomy from individual franchise owners, consolidating power with big business and big labor unions.
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By their nature, compromises are never perfect, but in a state where one party controls all the levers of power, it was progress nonetheless.
That’s the good news. On the other side of the coin, the Biden administration’s National Labor Relations Board is pursuing a similar joint employer policy at the national level. Thankfully, the House of Representatives passed a repeal, and now the Senate must get the ball over the finish line. In the upper chamber, the effort enjoys bipartisan support, including from Sen. Joe Manchin, D-W.Va., and several other moderate Democrats.
Exporting policies too extreme for the Golden State is not a wise course of action for the rest of the country.
Small business owners in California face one of most-unfriendly climates. The state has the highest unemployment rate in the country and its job growth is dead last. Businesses are fleeing in droves at the nation’s fastest rate. Before the FAST Act took effect, restaurant jobs in the state were down. More entrepreneurs are opting to relocate elsewhere rather than comply with an endless torrent of mandates or being forced to close their doors. Meanwhile, some California politicians are even calling for a $50-minimum wage.
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Even in California, voters are starting to fight back. Assemblyman Chris Holden — author of the FAST Act, who hailed its passage as the "most progressive fast food wage law in the country" during a bill signing alongside Gov. Gavin Newsom — is getting trounced in his bid for a seat on the Los Angeles Board of Supervisors. He has even distanced himself from the final bill, a bold claim that lays bare who is really calling the shots in California — the labor unions.
The lessons of California are worth keeping in mind as the SEIU claims it wants to take these failed policies to other liberal locations.
Politicians are fond of railing against "big corporations," but it’s the small business owners and consumers who end up paying the bill for a $24 burger.
Matt Haller is president and CEO of the International Franchise Association.
