Restaurant Owners Not Too Thrilled With The Fast Food Wage Hike in New York

Not more than a month back, New York’s Wage Board was expected to approve a new $15 minimum hourly pay for the state’s 200,000 fast food workers.

The move was to mark a victory for labor activists and employees of McDonalds, Burger King and their competitors, many of whom have been involved in a nationwide wave of protests and strikes that kicked off in Manhattan in November 2012.

But according to latest reports, fast-food franchise owners in New York are gearing up to fight the proposal.

Raise Plan

The proposal to raise pay from the current $8.75 an hour would be phased in over the next six years, starting with an increase at the end of this year. The increase now awaits approval by Democratic Gov. Andrew Cuomo’s labor commissioner. Cuomo supports the increase, so its approval is considered a certainty.

Last month, the three-member board unanimously recommended that the $15 rate be phased in by Dec. 31, 2018, for New York City, and by July 1, 2021, for the rest of the state. It applies to fast-food chains with 30 or more locations.

The wage board’s decision followed four public hearings in June in which industry and worker advocates testified.

Backlash from Franchise Owners

While the complaints filed with the labor commissioner are unlikely to derail the pay hike, they prefigure the legal arguments being considered by restaurant owners who warn it would force them to raise prices and possibly replace workers with automated service stations.

In a letter opposing the hike, a lawyer for the National Restaurant Association argues that the increase unfairly applies to only national chain restaurants and violates the Legislature’s authority to pass minimum-wage increases. The letter also notes that the three-member Wage Board had no representative from the fast-food industry.

Attorney Randy Mastro wrote that the increase would “improperly target only a sliver of a segment of a single industry, without support in data, logic or law” and that implementing the increase would be “arbitrary, capricious, irrational, unreasonable, invalid and contrary to law.”

The letter was filed Friday. A similar complaint was announced on Monday by the Business Council of New York State. The letters were filed during a period of public comment required before the increase can be approved.

I’d be surprise if there wasn’t one (a court fight),” Ken Pokalsky, vice president at the council, said. “There is too much money at stake.”

That said, any legal challenge would likely come from the restaurant association, Pokalsky added.

Franchise owners have said they are considering whether to challenge the increase in court, and the arguments laid out in the letters of objection are likely to underpin any eventual lawsuit.

Effects of Raise

The increase will impact an estimated 200,000 workers. Supporters say the industry can absorb the increase, which they say is needed to help workers struggling with high costs of living.

In a piece published in the New York Times in May, Cuomo pointed to the burden on taxpayers of low-wage jobs, saying New York State tops the nation in public assistance spending per fast-food worker, at $6,800 a year, or $700 million annually.

“The government is subsidizing these corporations, allowing them to keep their labor costs low and their profit margins high,” Cuomo wrote at the time. “The industry is healthy, having taken in $195 billion in global revenues last year, a sum that is projected to grow to $210 billion by 2018. McDonald’s brought in $4.67 billion last year; Burger King earned $291.1 million.”

The current wage already is set to automatically rise to $9 for all workers at year’s end.

The University of California, the nation’s largest public university, last month said it plans to incrementally raise the minimum wage for workers from a current rate of $9 an hour to $15 by the fall of 2017.