Folded into California’s $310 billion 2023-24 budget agreement is a relatively small line item: $3 million to resurrect an obscure old state commission that once regulated industries from factories to farms to laundries — and even had the power to set the minimum wage.
The budget deal between the Legislature and Gov. Gavin Newsom would reconvene the Industrial Welfare Commission, dormant since 2004, to issue new rules on wages and working conditions for specific industries.
If that sounds familiar, that’s because it’s similar to what labor groups tried to institute for California fast food workers last year, with the passage of a law to create a state-run council governing the industry.
Business groups quickly put that law on hold, pouring millions into a referendum campaign shortly after Newsom signed it last fall. Whether the state convenes a new fast food council — which would be empowered to raise the minimum wage in fast food to as much as $22 an hour — is now up to the voters in November 2024.
The California Chamber of Commerce called the 2022 law “a radical proposal to micro-manage the fast-food restaurant industry.”
Pro-labor groups have already begun the campaign against the referendum. Hundreds of singing demonstrators joined two San Jose City Council members at City Hall Wednesday to build public support for better wages for fast-food workers.
“Our fast-food workers, many of them make an average of $17 an hour, which is outrageous,” 5th District Councilmember Peter Ortiz told the group. “Any fast-food employer should be ashamed of themselves. They're making billions of dollars off the backs of their working people.”
Using a state-appointed board to issue industry-specific labor regulations was no new idea in California.
The state’s Industrial Welfare Commission did just that for most of the 20th century, before it was defunded in 2004. Without funding, the commission hasn’t met or operated, but it’s still a part of state law. The new, tentative budget deal would bring it back.
Business groups were quick to criticize this funding proposal last week, calling it a “backdoor” way for the state to start issuing rules for fast food despite the pending referendum.
“This budget bill is undemocratic and a shameful attempt to silence California voters,” said International Franchise Association CEO Matthew Haller in a statement.
The budget bill doesn’t specify an industry for the new Industrial Welfare Commission to focus on, but does direct it to prioritize industries in which 10% or more workers live below the federal poverty line – for which fast food likely qualifies.
Asked for comment, Service Employees International Union, which pushed for the fast-food law, did not say whether it want a new commission to convene specifically for fast food. In a statement, SEIU California president David Huerta praised Newsom and lawmakers for “listening to workers and taking the bold action needed to make progress against a growing tide of inequality and poverty experienced by low-wage workers and people of color.”
The union’s close ally Sen. María Elena Durazo, a Los Angeles Democrat who leads a budget subcommittee on labor, said lawmakers have heard workers across industries testify that they can’t afford the basics despite working full time or more.
“Some of these industries already have wage orders,” she said. “It’s just a matter of looking at them (again) … It’s not just fast food.”
Newsom administration officials did not respond to a request for comment.
The bill only allows about 10 months — right up to about a week before next November’s election — to issue new rules on wages and working conditions. Longtime Capitol lobbyist Chris Micheli said given that tight timeframe, a new commission could only focus on a few industries that fit the poverty description, with fast food being likely.
In the current budget bills, the new Industrial Welfare Commission would not be allowed to issue labor rules that are less protective of workers than current law.
That’s raised the ire of business groups. In a statement last week, the California Chamber of Commerce, state Restaurant Association and other groups denounced the limitation, saying it “will only create unnecessary confusion, create layered burdens on employers, and subject businesses to more frivolous litigation.”
Ironically, it was labor groups that pushed to disband the commission nearly two decades ago.
Created in 1913, the Industrial Welfare Commission was California’s version of “wage boards” that were common methods of setting labor standards across several Northern states during the Progressive Era. The commission was initially tasked with regulating labor in industries employing many women and children, the marginalized workers of that era who had neither union representation nor the ability to vote for stronger labor protections on their own.
The commission includes five members appointed by the governor: two representing employers’ interests, two representing labor’s interests and one representing the “general public.” It met in public, received comments and issued rules by industry in the form of wage orders.
In later decades, it expanded in scope to cover virtually every occupation.
The commission’s wage orders covered industries such as manufacturing, timber, agriculture, motion picture production, canneries, transportation and personal services. They regulated such working conditions as the length of breaks, overtime pay, the provision of seating and water for workers and whether employers had to provide uniforms if they were required.
The commission’s most high-profile responsibility was setting the statewide minimum wage. One of its most famous moves was to grant farm workers the right to overtime pay in the 1970s.
It was as susceptible as any Sacramento body to political influence. In the 1990s, then-Republican Gov. Pete Wilson appointed labor representatives to the commission that labor groups opposed, said Catherine Fisk, a UC Berkeley labor law professor.
The commission made the controversial move to roll back daily overtime rules — the requirement that employers pay extra for more than eight hours of work per day. Lawmakers later reinstated the overtime rules on their own.
Labor groups ultimately decided the commission wasn’t serving workers. At the urging of the California Labor Federation, lawmakers in 2004 zeroed out the commission’s funding, according to news reports.
Since then, the commission has lain dormant — other than a brief revival in 2006 under Republican Gov. Arnold Schwarzenegger, who was deadlocked at the time with the Democratic-led Legislature over how much to hike the minimum wage.
The state Labor Commissioner still enforces the commission’s old wage orders. The Legislature has become the primary body for writing new labor rules. Fisk said that’s not the best set-up for workers or the economy.
“It might be that the minimum wage should be $24 an hour in some occupations, but that in others, that’s too high and it would cause harm,” she said. “That’s an empirical question that should be studied based on sociological and economic analysis, which the Legislature is not set up to do as well as an expert body.”
Whether a resurrected Industrial Welfare Commission focuses on fast food or another industry, UC Santa Barbara labor historian Nelson Lichtenstein said it makes sense for the board to return.
The conditions and diminished clout of low-wage workers today, he said, in some ways mirror those of the women and children laboring in canneries and garment factories in the 1910s.
“Labor law is pretty ineffectual; labor organization is very very low,” Lichtenstein said. “You have (workers) who are only semi-citizens, whether they’re undocumented or marginalized. So we’ve sort of returned to the sociology of the Progressive Era.”
Jeanne Kuang is a reporter with CalMatters. Bay City News contributed to this report.