By Richard Dahl on September 12, 2022 9:06 AM | FindLaw

Traditionally, collective bargaining in the U.S. involves labor negotiations with management in one workplace or one company.

On Labor Day, however, California took collective bargaining to a new level. Gov. Gavin Newsom signed a law that gives workers in one entire industry — fast food — unprecedented powers to negotiate wages and working conditions for all 556,000 Californians working in those establishments.

It’s called “sectoral bargaining,” where the terms of an agreement cover an entire occupation or industry instead of workers at one company or workplace. Sectoral bargaining is common in Europe, but is rare in the U.S., although some industries, like auto manufacturing, have agreements that are similar.

California is the first state to enact a law that lays the groundwork for one work sector to collectively bargain. The law, the Fast Food Accountability and Standards Recovery Act, will create a 10-person council of business, labor, and government representatives. The council will set an industry-wide minimum wage, which could go as high as $22 per hour, and annual raises of either 3.5% or the rate of inflation. The law, which goes into effect next year, will also set new safety and anti-discrimination rules.

Strong Industry Opposition

The bill faced vehement opposition from fast-food companies, who argued that it will force them to pass on the additional costs to consumers and feed inflation.

“California’s approach targets some workplaces and not others,” Joe Erlinger, president of McDonald’s USA, responded. “It imposes higher costs on one type of restaurant while sparing another. That’s true even if those two restaurants have the same revenues and the same number of employees.”

The National Restaurant Association warns that the trend could spread. “(T)here could be a future push in California to expand the legislation to include full-service chain restaurants and potentially independent restaurants under a similar sector council. Additionally, we anticipate similar legislation in states like New York, Oregon, Washington, Illinois, and more.”

But others point out that workers in the fast-food industry need special attention because it is notorious for exploitation. In part, that’s because many fast-food restaurants are franchises, and “franchises can’t control pricing, hours of operation, or their suppliers,” said Brian Callaci, chief economist at the Open Markets Institute, an anti-monopoly think tank. “All they can do is drive down labor costs, so the franchising model is really designed to put the interests of local employers and workers at odds.”

Because the law gives power to a particularly vulnerable group of workers, Columbia Law School professor Kate Andrias, who teaches labor law, called it “one of the most significant pieces of employment legislation in a generation.”

Will Sectoral Bargaining Spread?

While the focus in California is on fast-food workers, the growing gig economy may also be a place where sector bargaining can be useful. ConnecticutMassachusetts, and New York lawmakers are discussing the creation of sectoral bargaining for app-based food-delivery and ride-share workers. And last year, the Biden administration created the White House Task Force on Worker Organizing and Empowerment, which promotes sectoral bargaining.

We’ll wait to see if it catches on elsewhere, but in California, it’s safe to say the new law will do several things:

  • Fast-food workers will make more money and have more influence over working conditions.
  • Fast food in California will become more expensive.
  • As labor costs rise, fast-food restaurants will turn to automation where they can — self-service kiosks, food-preparation robots — instead of humans.
  • Workers in other employment sectors will want something similar.

And of course, there will be legal challenges — probably lots of them.