Coming Right Up! California Fast-Food and Fast-Casual Workers Get Minimum Wage Hike and Other Protections on April 1

California rolled out a new framework on April 1 providing more protections for the state’s fast-food and fast-casual workers, including a minimum wage increase to $20 per hour and establishing a new Fast Food Council that will set minimum employment standards in the industry. The changes stem from a bill Governor Newsom signed into law last year and replaces California’s Fast Food Accountability and Standards Recovery Act. We’ll explain which companies must comply and give you three key takeaways from the new law, as well as four steps you should consider taking next.
 

Which Employers Must Comply?

 
Most Fast-Food and Fast-Casual Restaurants Must Comply.
AB 1228 applies to “fast food restaurants” – which means limited-service restaurants consisting of more than 60 establishments nationally that:

• share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services; and
• are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service.

“Limited-service restaurants” include, but are not limited to, establishments under the North American Industry Classification System Code 722513. Because the definition is so broad, the law applies to many non-fast food establishments.

Certain Bakeries and Grocery-Store Restaurants Excluded.
This current definition excludes bakeries operating in a prescribed manner and in operation since September 15, 2023, and certain restaurants located in grocery establishments.

Additional Restaurants Excluded Under AB 610.
On March 25, 2024, Governor Newsom signed AB 610 into law, which amends AB 1228 to exclude additional restaurants. As a result, AB 1228 does not apply to restaurants in airports, hotels, large event centers (such as stadiums, concert halls, convention centers, etc.), theme parks, museums, gambling establishments, corporate campuses, and certain public land.

 

3 Key Changes Under the New Law

AB 1228 overhauls the rules and regulations governing the fast-food industry (to read more about the bill’s history, click here). Here are three key changes:

1. Establishment of the Fast Food Council
The Fast Food Council, part of the Department of Industrial Relations, will develop minimum standards for employment in the fast-food industry. The Fast Food Council is deemed a governmental agency and its decisions regarding standards, rules, or regulations must be made by a vote of at least five of the Council members.

The Council may recommend employment standards and regulations specific to the fast food industry to “ensure and maintain the health, safety, and welfare of, and to supply the necessary cost of proper living to fast food restaurant workers” – such as working hours and minimum wage rates, safety working conditions, security, taking protected leave, and protection from harassment and discrimination.

The Council may not regulate paid sick leave, vacation, or predictable scheduling for franchisees. And the Labor Commissioner – not the Council – will enforce the law, which calls for injunctive relief and attorney’s fees and costs awarded in successful civil actions.

2. Minimum Wage Increase
Starting April 1, the minimum hourly wage increases to $20 per hour for most fast-food and fast-casual restaurant workers. As a result, the minimum salary threshold for exempt employees increases to $83,200.

The Fast Food Council will have the authority to make annual adjustments to the minimum wage, but any increase must not exceed 3.5% or the rate of change in the U.S. Consumer Price Index. AB 1228’s minimum wage supersedes any local minimum wage requirements for fast-food restaurant employees.

The $20 per hour minimum wage is a significant increase for California employers in the fast-food industry, especially considering that the statewide minimum wage increased to $16 per hour on January 1, 2024.

3. Retaliation Prohibited
The new law prohibits employers from discriminating or retaliating against employees who participate in proceedings convened by the Fast Food Council.

4. Steps Employers Can Take to Comply
AB 1228 introduced substantial changes to the fast-food restaurant industry in California, and more changes may be coming if AB 610 is finalized. Understanding and complying with these new regulations will be essential to avoid potential legal issues. Here are four steps you can take now:

1. Determine whether you must comply with the law. The law broadly defines “fast food restaurants” and may cover other types of restaurants, such as casual dining establishments that you may not think of as “fast food.”
2. If your company is subject to the law, ensure all hourly employees are paid at least $20 per hour, and after confirming all salaried exempt employees have been properly classified, pay exempt employees at least $83,000 per year.
3. Look out for new rules from the Fast Food Council, including any changes to the minimum wage requirements (which also impacts the minimum salary calculation for exempt employees) or workplace health and safety standards. Be sure to adhere to those rules.
4. Avoid retaliatory actions against employees participating in Council proceedings.