In a groundbreaking move aimed at advancing workers’ rights and improving working conditions, California has re-established the Industrial Welfare Commission (IWC). This long-awaited decision, part of the 2023 budget bill signed by Governor Gavin Newsom on July 10th, 2023, brings renewed hope for employees across various industries, especially for those in the fast-food sector and gig workers. As the IWC prepares to reconvene by January 2024, employers must grasp the significance of this development and how it may impact their operations.
A Historic Return With A Clear Mission
Founded in 1913, the IWC was initially created to protect and enhance the well-being of workers. Despite closing in 2004 due to funding issues, the commission’s wage orders have remained in effect, encompassing 17 different industries and occupations. Now, with a dedicated budget of $3 million, the IWC will reconvene and adopt final recommendations by October 2024.
Empowering Workers And Raising Industry Standards
The IWC’s revival signifies a potent tool for California’s Democratic-controlled Legislature to advance its pro-worker goals. By designating wage boards to recommend fair pay, appropriate working hours, and improved working conditions, the commission will actively support industries with a high concentration of low-income workers. In particular, the focus will be on sectors with over 10% of employees living at or below the federal poverty level.
Addressing Key Industry Challenges
With the IWC's return, lawmakers aim to tackle two pressing issues:
- Regulations in the fast-food industry
- Classifications of gig workers
The fast-food sector has resisted stricter regulations, including AB 257, a law designed to elevate the industry's pay rates and working conditions. Business groups have opposed the law, leading to a ballot measure seeking its repeal. Similarly, the classification of gig workers has been a contentious topic, with AB 5 imposing stringent requirements on companies to classify workers as employees. Proposition 22, a 2020 ballot measure that allowed Uber, Lyft, and other platforms to classify their workers as independent contractors rather than employees, exempted certain companies from AB 5, but legal battles persist.
IWC’s Implications For Employers And Industries
Employers must acknowledge the magnitude of the IWC’s return. With its ability to influence California’s regulatory landscape, the agency will likely prioritize industries regulated by Wage Order 5, such as restaurants and hotels. Under the current provisions of Wage Order 5, if an employee works a 50-hour workweek of two 20-hour shifts and one 10-hour shift, the employer will pay daily overtime workweek because the employee’s workweek schedule is more than 40 hours.
However, as the commission potentially gains more funding in subsequent years, its impact may extend to a broader array of sectors. This development may also pave the way for other states to establish their own IWCs, further reshaping workers’ rights nationally.
Collaboration And Concerns
While labor groups such as the Service Employees International Union (SEIU) applaud the IWC’s revival for its potential to combat poverty and inequality, employment lawyers harbor concerns about the scope of its power. The agency follows a unique rulemaking process not subject to the Administrative Procedure Act, which raises questions about transparency and accountability. Employers are advised to stay vigilant, as a small group of appointed members may hold significant sway over industry regulations.
The Assistance Of A PEO
In the face of California’s re-established Industrial Welfare Commission (IWC) and the potential changes it may bring to industry regulations, employers may find navigating the evolving landscape challenging. A professional employer organization (PEO) might be the solution you need. When you partner with a PEO like GMS, businesses can offload complex HR tasks, compliance management, and payroll processing, allowing them to focus on their core competencies. GMS acts as a co-employer, sharing employer responsibilities, which means we help employers adapt seamlessly to any industry-specific rules and regulations set forth by the IWC. Our expertise in HR compliance and industry best practices allows us to help employers remain compliant with evolving laws and can offer competitive employee benefits. Embracing the support of GMS during this transformative period ensures business continuity and empowers employers to prioritize their workforce’s well-being, ultimately leading to a more prosperous and harmonious working relationship for all. Contact us today to learn more!