California restaurant group sues state labor department to stop fast-food council

A coalition of restaurants and business groups sued the state Department of Industrial Relations Thursday afternoon, marking the group’s latest attempt to block a new California law that would create a statewide labor council to set pay and working conditions for the fast-food industry.

Save Local Restaurants announced earlier this month that it collected enough signatures — more than 1 million — from California voters to put the landmark fast-food law on the 2024 ballot. In Thursday’s suit, the group alleges that the DIR’s intent to enact the law on Jan. 1, 2023 would violate California’s constitution and undermine the legitimacy of the referendum process.

“The Save Local Restaurants coalition will not stop working to protect the small business franchisees, restaurant operators, workers, and customers of these community establishments despite this flagrant attack on the rights of California voters,” the group wrote in a statement.

The DIR has argued that the law can go into effect temporarily until the counties verify that enough of the collected signatures are valid. They have up to 30 business days after the secretary of state’s office determines that petitioners have collected enough total signatures to place the law on the ballot.

“If and when the referendum challenging AB 257 qualifies for the ballot, the law will be put on hold,” wrote DIR director Katrina Hagen in a memo to legal counsel for the opposition. “But in the absence of clear authority providing that AB 257 is suspended merely upon submission of unverified signatures, DIR has an obligation to proceed with implementing the duly enacted statute.”

The DIR did not immediately respond to an email and multiple phone calls seeking comment on the lawsuit. Spokespeople for the Secretary of State’s office and the office of the Attorney General, who are also named in the suit, directed questions to the DIR.

Gov. Gavin Newsom signed the law earlier this year on Labor Day in a big win for labor advocates and the state’s hundreds of thousands of fast-food workers. The council’s regulations would apply to any chain restaurant with at least 100 locations in the United States and could set minimum wages at $22 an hour for fast food workers by next year.

But one day after the signing, opponents filed a referendum to halt the formation of the council. What followed was a multi-million-dollar signature gathering campaign in which petitioners were accused of lying to voters and misrepresenting what the law does.

After the coalition submitted its signatures in early December, counties had eight business days to provide a count to the Secretary of State’s office. Opponents needed at least 623,000 valid signatures, which the office confirmed they had on Dec. 9.

Following the statewide count, each county then had 30 additional business days to verify that enough of the signatures were valid through random sampling. Sufficient valid voter signatures would place a question on the 2024 ballot asking voters whether the law should take effect.

That referendum could generate a costly battle between organized labor and the fast food industry, with spending reaching hundreds of millions of dollars. Save Local Restaurants raised more than $13.7 million between last January and September. Corporate brands, including Starbucks, Chipotle and McDonald’s, have each given $2 million.

“With this lawsuit, fast-food giants…prove once again that they are willing to spend tens or hundreds of millions of dollars to keep Black, brown, and immigrant workers from having a seat at the table,” said Tia Orr, executive director of SEIU California, in a statement. “This cowardly tactic comes right out of the corporate playbook Californians have, unfortunately come to know too well.”

Orr added, “While eager to get to the table to begin improving their industry, workers respect the constitutional and democratic processes of the state.”

This story was originally published December 29, 2022 at 3:07 PM.