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The Industrial Welfare Commission (IWC) was established in California in 1913 to regulate the wages, hours, and working conditions of women and children employed in the state.

The IWC’s first order, issued in 1916, established a minimum wage for women and children in the garment industry. The order also set limits on the number of hours that women and children could work per day and per week. In the years that followed, the IWC issued a series of orders covering other industries, including manufacturing, retail, and agriculture.

In 1972, the California Legislature amended the Labor Code to authorize the IWC to establish minimum wages, maximum hours, and standard conditions of employment for men as well as women. The IWC promulgated a series of wage orders in 1976 and 1980. These orders were challenged in court, but ultimately upheld.

In 1988, appointees of Governor Pete Wilson on the IWC repealed the “daily overtime” provisions in many of the wage orders. This change was controversial, and it was eventually reversed in 1999.

The IWC is currently not in operation. The Division of Labor Standards Enforcement (DLSE) continues to enforce the provisions of the wage orders.

However, the IWC has just been revived as a result of the new budget just signed into law. On July 10, Governor Gavin Newsom signed A.B. 102, the final step in moving the State Budget Act of 2023 into law. It takes effect immediately upon signing. The 2023-24 state budget includes total spending of approximately $310.8 billion, of which $225.9 billion is from the General Fund.

The new budget allocates $78,650,000 “for support of Department of Industrial Relations.” and Schedule (5) of that allocation provides the sum of $3,000,000 for the now dormant Industrial Welfare Commission. The allocation provisions contained the following earmark.

“Of the amount appropriated in Schedule (5), $3,000,000 shall be available for the Industrial Welfare Commission to convene industry-specific wage boards and adopt orders specific to wages, hours, and working conditions in such industries, provided that any such orders shall not include any standards that are less protective than existing state law. The commission shall prioritize for consideration industries in which more than 10 percent of workers are at or below the federal poverty level. The Industrial Welfare Commission shall convene by January 1, 2024, with any final recommendations for wages, hours, and working conditions in new wage orders adopted by October 31, 2024.”

California Labor Code section 1178 permits the Industrial Welfare commission to convene these Wage Boards. Ultimately there is a great probability that higher minimum wages, especially in targeted industries, will be arriving by the end of next year.

The back story to the resurrection of the IWC may have been minimally successful efforts to increase wages in various industries in California in previous years, such as the Fast Food Accountability and Standards Recovery Act (AB 257 – FAST Recovery Act) aimed at fast-food workers. It became law in 2022.

This law was to have established the Fast Food Council within the Department of Industrial Relations until January 1, 2029, and was to be composed of 10 members to be appointed by the Governor, the Speaker of the Assembly, and the Senate Rules Committee, and would prescribe its powers.

In response to this Act, California small business owners, restaurateurs, franchisees, employees, consumers, and community-based organizations announced the formation of a coalition to refer the FAST Act back to voters and suspend its implementation until they have a say in November 2024.

The coalition’s effort was co-chaired jointly by the National Restaurant Association, the U.S. Chamber of Commerce and the International Franchise Association.

On December 5, the coalition announced it submitted to county elections officials over one million signatures from Californians in order to prevent AB 257 from taking effect until voters have their say on the November 2024 ballot. However, Katrina S. Hagen Director, California Department of Industrial Relations, sent the coalition a letter on December 27, 2022 stating that it intends to implement AB 257 on January 1, 2023.

The Local Restaurants coalition therefore filed a lawsuit on December 29, 2022, claiming that the state’s Constitution dictates that, as part of the referendum process, laws cannot go into effect until voters have an opportunity to exercise their voice and vote on the proposed legislation.

The judge issued a temporary restraining order blocking the state from implementing the law while a lawsuit challenging its constitutionality is pending.

However, the resurrection of the Industrial Welfare Commission by provisions of the newly approved budget may have opened a new front in this political battle. The Governor will now have to evaluate candidates and make appointments to members of the IWC. All five will be the subject of confirmation hearings in the California Senate. And staff members will be recruited and hired under the Civil Service Ace.

The resurrection process will therefore take substantial time to fully make the IWC operational. Nonetheless, employers should expect efforts to increase wages statewide in the coming years from various legal and political fronts.