The mandatory raise would apply to all fast food restaurants in California that are part of a chain with at least 60 locations nationwide. It does not apply to restaurants that operate a bakery and sell bread as a stand-alone menu item, such as Panera Bread. The $20 wage would start April 1 and a council would have the power to raise it each year through 2029.

Ingrid Vilorio, a fast-food worker at a Jack In The Box in the San Francisco Bay Area, said the increase in salary next year will bring some relief to her family, who until recently was sharing a house with two other families to afford rent.

“A lot of us (in the fast-food industry) have to have two jobs to make ends meet, this will give us some breathing space,” said Vilorio, who also works as a nanny.

The agreement ends an tense standoff between labor unions and the fast food industry that started last year when Democratic Gov. Gavin Newsom signed a law creating a Fast Food Council with the authority to raise wages of fast food workers up to $22 per hour. California’s current minimum wage for all industries in the state is $15.50 per hour.

Before the law could take effect, the fast food industry gathered enough signatures to qualify a referendum on the law in the November 2024 election. That meant the law would be on hold until voters could decide whether to overturn it.

Furious, labor unions sponsored legislation this year that would have made fast food companies like McDonald’s liable for any misdeeds of their mostly independent franchise operators in the state. Democratic lawmakers also restored funding to the Industrial Welfare Commission, a long-dormant state agency that has the power to set wage and workplace standards for multiple industries.

Both of those moves alarmed the business groups. All sides began working on a compromise over the summer. In exchange for a $20 minimum wage, labor unions have withdrawn their legislation to make fast food companies liable for their franchise operators’ labor violations and lawmakers have stripped funding for the Industrial Welfare Commission.

The Fast Food Council created in the original legislation would still exist, but it would only have the authority to set wages, not workplace standards. The council could make recommendations about workplace standards to various state agencies.

The bill must still be approved by the Democratic-controlled state Legislature and signed into law by Newsom. If passed and signed, the bill can only take effect if the restaurant groups pull their referendum from the ballot, which spokesperson Kathy Fairbanks said they planned to do. In the past, a referendum couldn’t be removed from the ballot, but Newsom signed a law last week allowing it.

“This agreement protects local restaurant owners from significant threats that would have made it difficult to continue to operate in California,” said Sean Kennedy, executive vice president for public affairs for the National Restaurant Association.

The $20 hourly wage would be a starting point. The nine-member Fast Food Council, which would include representatives from the restaurant industry and labor, would have the power to increase that minimum wage each year by up to 3.5% or the change in the U.S. consumer price index for urban wage earners and clerical workers, whichever is lower.

“California’s fast-food industry is stuck in a crisis of low pay and unsafe working conditions,” said Joseph Bryant, executive vice president of the Service Employees International Union. He said the bill gives California “an opportunity to reaffirm our commitment to getting fast-food workers a seat at the table to make decisions about standards guiding their pay, training and working conditions.”