California's legislative landscape has shifted with the introduction of AB 1228. This legislation mandates a wage increase for fast-food restaurant employees, raising the bar to $20 an hour — $4 above the state’s minimum wage — for chains with 60 or more locations nationwide. This increase affects an estimated 400,000 employees and is part of a broader effort to raise the earnings of the state's lowest-paid workers. The legislation also introduces the Fast Food Council, tasked with guiding wage increases in line with inflation and advocating for better health and safety standards in the industry.
For additional information regarding California’s fast food minimum wage law, and to find out how this could impact your business, please contact our Managing Partner, Richard Liu, at richard.liu@consultils.com.
Overview of AB 1228
At its core, AB 1228 introduces two critical changes:
Minimum Wage Increase: Elevates the minimum wage for fast food employees to $20.00 per hour, effective April 1, 2024.
Fast Food Council Creation: Forms a council to propose future wage increases and set minimum employment standards.
Who Benefits?
The law specifically applies to employees working within “fast food restaurants” defined by several strict criteria:
Limited-Service Restaurant: The establishment must operate within California as a limited-service restaurant, characterized by offering minimal or no table service. Customers typically order and pay for their food or beverage items before consuming them.
Part of a Chain: The restaurant must be part of a chain comprising at least 60 establishments nationwide. Here, an "establishment" refers to a single location where food or beverages are offered directly to customers. Notably, off-site locations where employees engage in administrative, warehouse, or preparatory food production tasks do not count towards this 60 establishment threshold.
Engagement in Immediate Consumption: The establishment's primary business must be selling food and beverages intended for immediate consumption by customers.
Key Exemptions
The law does not apply to every fast food restaurant. Notable exemptions include:
Bakeries: Establishments producing and selling bread weighing at least ½ pound post-cooling as a standalone item before September 15, 2023.
Restaurants Within Grocery Stores: Defined as retail spaces larger than 15,000 square feet, primarily selling household foodstuffs for offsite consumption.
Specific Venues: Excludes operations within airports, hotels, event centers over 20,000 square feet or with more than 1,000 seats, theme parks, museums, and gambling establishments.
Employer Mandates
Under AB 1228, employers are required to display updated minimum wage orders prominently. The legislation explicitly prohibits using meal or lodging credits to offset the new wage requirements. Moreover, while local governments cannot enact fast food-specific wage laws, they have the authority to increase the general minimum wage, which could indirectly affect fast food workers.
The Role and Ambition of the Fast Food Council
Composition: The council includes industry representatives, franchisees, employees, employee advocates, public members, and non-voting governmental advisors.
Functions: Beyond wage adjustments, the council is tasked with developing standards covering working hours and conditions to ensure workers' health, safety, and welfare. It has the authority to adjust the minimum wage annually based on the lesser of 3.5% or the consumer price index change, with the flexibility to set regional minimum wages.
Compliance and Enforcement
Employees not receiving the mandated $20.00 per hour under AB 1228 have several avenues to seek redress:
Wage Claim Filing: Employees can file claims with the California Labor Commissioner's Office for instances of unpaid wages.
Adjudication Process: The Labor Commissioner’s Office is authorized to conduct investigations into these claims, which may include audit reviews and hearings to ascertain compliance.
Judicial Remedies: Additionally, employees have the right to pursue civil litigation against employers for wage and hour violations.
For Managers' Salary Compliance:
Exempt Status Salary Basis: Managers must earn a salary at least twice the state's minimum wage for full-time employment to be exempt from overtime. For those overseeing both fast food and other business operations, a blended salary calculation is required.
Blended Calculation Example: If a manager divides their time between fast food operations (at a $20.00 per hour minimum wage) and general retail operations (at the general state minimum wage), their salary must reflect these proportions to maintain exempt status.
Conclusion
Non-compliance with AB 1228 exposes employers to significant legal and financial liabilities, including unpaid wages and penalties, which can substantially exceed the initial wage discrepancies. It's critical for employers to comply with this legislation to avoid these risks and to affirm their commitment to fair labor practices. This enhances employee morale and contributes to the operational success and sustainability of their businesses in California's fast food industry.
For additional information regarding California’s fast food minimum wage law, and to find out how this could impact your business, please contact our Managing Partner, Richard Liu, at richard.liu@consultils.com.
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Richard Liu, Esq. is the Managing Counsel of ILS. He serves clients as a management-side defense lawyer specializing in employment and business litigation. Richard is also an expert on litigation prevention and compliance. He regularly advises Fortune 500 companies and startups on employment, labor, and commercial matters.
Email: richard.liu@consultils.com | Phone: 626-344-8949
*Disclaimer: This article does not constitute legal opinion and does not create any attorney-client relationship