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Compliance Alert: Minimum Wage For Fast Food Workers in California Increased to $20 on April 1st, 2024

Contributor: Judy Liang, aPHR

April 5th, 2024 | 6 min. read

By Tony Calavitta

Did you read 'April 1st, 2024' in the title and immediately think that the indicated minimum wage change was an 'April Fools' Day' joke? If so, you'd better read on!

Under AB1228, also known as the Fast Food Franchisor Responsibility Act, California's minimum wage for fast food workers really did increase to $20 per hour on April 1st, 2024.

This means that if you are an employer in this sector and $20 per hour is your new minimum wage standard, you are in the clear. But, if you are an employer in this sector and haven’t made the changes necessary to comply with AB1228, you are already late (And the compliance clock will only keep ticking toward costly consequences).

The good news is: No matter which of those two categories you fall into, this comprehensive article was carefully designed to help you avoid the pains of AB1228 compliance penalties.

Whether you need to get compliant or validate confidence in the compliance measures you’ve taken, by reading this article you will be equipped with all the information you need to leave any wage worries way behind you.

So, keep reading to learn the requirements, exemptions, and implications of AB1228 as well as a step-by-step process to ensure that you are fully compliant.

An overview of AB1228: California's new minimum wage law for the fast food sector

Governor Gavin Newsom's signature on September 28, 2023, brought AB1228, a law meticulously crafted to uplift the fast-food workforce in California, onto the legal scene. More than just a wage increase, AB1228 is a compensation strategy designed to ensure fair wages within the fast-food industry, reflecting years of negotiation and advocacy by labor unions and workers alike.

This law requires a $20 per hour minimum wage for employees in the fast-food sector, a significant leap from the state's previous wage standards.

And, as you now know, as of April 1st, 2024, AB1228 is in full effect.

Why was AB1228 passed?

AB1228 recognizes the growth of disparities in wage standards across various sectors. Fast-food workers, often at the forefront of economic vulnerabilities, have historically been compensated at rates barely sufficient to meet the rising cost of living in California.

AB1228 was passed as a legislative response to these challenges, aiming to provide a living wage that reflects the essential services these workers provide to millions of Californians daily.

What are the key provisions of AB1228?

$20 minimum wage:

All non-exempt employees working in fast-food restaurants covered under AB1228 are entitled to a minimum wage of $20 per hour.

$83,200 minimum salary:

All exempt employees working in fast-food restaurants covered under AB1228 must now earn at least twice the state's applicable minimum wage, translating to an annual salary of at least $83,200. This requirement elevates the exempt salary threshold significantly above the general standard for California employees, which currently stands at $66,560.

Supplemental posting requirement:

Employers are obligated to inform their workforce about the new wage standards. This involves posting a supplement to the minimum wage order prominently within the workplace, a measure designed to ensure transparency and awareness among employees.

Exclusion of tips and lodging credits:

AB1228 stipulates that tips or meal and lodging credits cannot be counted towards the minimum wage. This provision ensures that the $20 per hour is a base compensation, not to be offset by other forms of compensation.

Local Wage Ordinances:

The law also addresses the potential for local variances in wage standards. While California cities and counties are precluded from enacting ordinances that set a higher minimum wage exclusively for fast-food restaurant employees covered by AB1228, they retain the ability to establish a higher general minimum wage applicable to all workers. This clause maintains a uniform wage floor for fast-food workers across the state, while still allowing local governments the flexibility to address broader wage issues within their jurisdictions.

Who does AB1228 apply to?

AB1228 targets a specific segment of California's dining industry, focusing on fast-food establishments that offer limited or no table service.

Here’s a quick breakdown of which businesses need to comply:

  • Type of Service The law applies to "limited service restaurants" where customers order and pay before eating. This model is typical of fast-food operations.

  • Business Size – It covers restaurants that are part of a chain with 60 or more locations nationwide, ensuring major players in the fast-food industry adhere to the new wage standards.

  • Sales Focus – To fall under AB1228, an establishment must primarily sell food and beverages for immediate consumption. This means over half of a restaurant's revenue should come from meals consumed on-site, in a car, or immediately after leaving. Food intended for home preparation is excluded.

  • Ownership – The law is applicable regardless of whether the establishment is operated by the owner of the national brand or a franchisee, broadening its impact across the industry.

This approach ensures that a significant portion of workers in the fast-food sector, from large chains to franchise-operated locations, benefit from the wage increase, reflecting the law's intent to improve compensation across the board.

Who does the new law NOT apply to?

While AB1228 sets a new standard for wages in California's fast-food industry, it also specifies certain exemptions. These exemptions aim to ensure the law's wage adjustments are applied thoughtfully, taking into account the diverse operational contexts within California's fast-food landscape.

Here's an overview of establishments and scenarios that are not covered by the new law:

The specialty bakery exclusion:

  • Eligibility for exemption – Specialty bakeries that focus on producing and selling bread as an independent item are exempt. To qualify, the bread must be a single item weighing half a pound or more post-cooling.

  • Exceptions to the rule – Bakeries whose bread offerings are solely components of other menu items like sandwiches or those primarily selling baked goods lighter than half a pound including most pastries and rolls, do not meet the exemption criteria. Additionally, bakeries must manufacture their bread on-site – those baking from pre-prepared dough are not covered. The assessment for this exemption applies irrespective of the bread sales volume in comparison to the bakery's total sales.

The  grocery establishments exclusion:

  • Definition and exemption – Eateries situated inside grocery stores, specifically those over 15,000 square feet primarily selling food for off-premises consumption, are exempt, so long as the grocery stores directly employ the individuals working in the restaurant section.

The AB610 higher wage standard exclusions:

  • Expanded Exemptions – Further exemptions have been introduced by AB610 to preserve already implemented wages that exceed $20 per hour. This covers many fast food outlets located in unique venues such as museums, airports, theme parks, casinos, hotels, event centers, or corporate buildings, along with those situated in publicly owned locales like ports, beaches, parks, historic areas, or piers operating under a concession or food service agreement.

What are the implications of AB1228?

The introduction of AB1228 marks a pivotal shift in California's fast-food industry, setting new wage standards that promise to reshape the economic landscape for employees, employers, and the broader economy.

But what does this mean in practical terms?

The implications of this legislation extend far beyond the immediate adjustments to paychecks. From enhancing the financial well-being of workers to challenging businesses to rethink their operational strategies, and even influencing the overall economic health of the state, the effects of AB1228 are multifaceted.

Let's explore the specific impacts of this law:

Implications for employees:

For employees, AB1228 is a catalyst for increased financial empowerment. Elevating the minimum wage to $20 per hour promises not just an improvement in living standards but also a reinforcement of the value placed on this type of labor. This is a significant step toward ensuring economic security for thousands of workers and their families.

Implications for employers:

Employers are at a crossroads, facing the challenge of integrating higher wage costs into their operational budgets while seizing the opportunity to cultivate a more satisfied and stable workforce. Regardless of challenges, however, adherence to AB1228 is imperative, serving as a cornerstone for maintaining a competitive and compliant presence in the fast food industry.

Implications for the economy:

The economic ramifications of AB1228 are twofold. While the increased wage could lead to higher operational costs for employers, it also promises enhanced purchasing power for workers. This dynamic has the potential to stimulate consumer spending and contribute to broader economic growth.

How to comply with the new minimum wage requirements of AB1228

Compliance with AB1228 is not just a legal requirement; it's an opportunity to demonstrate your commitment to your employees and to champion ethical business practices.

Here's a detailed guide to help you navigate this process:

Step #1: Determine coverage

Review the criteria:

Confirm whether your establishments meet the definition of a "fast food restaurant" under AB1228. This includes assessing the service model, national chain affiliation, and the primary business of selling food and beverages for immediate consumption.

Check for exemptions:

Identify if any of your establishments qualify for exemptions under the law, including those outlined in AB610.

Step #2: Adjust payroll systems

Update wage rates:

Ensure that your payroll systems are updated to reflect the new $20 per hour minimum wage for eligible employees.

Salary thresholds for exempt employees:

Review and adjust the salaries of exempt managerial employees to meet the new threshold, ensuring they earn at least twice the state minimum wage for full-time employment.

Step #3: Post required notices

Workplace postings:

Display the updated minimum wage notices in prominent locations within your establishments to inform employees of their rights under the new law.

Step #4: Stay informed

Follow the fast food council:

Keep abreast of any future changes or updates issued by the Fast Food Council, including potential future wage increases and new employment standards.

Step #5: Consult with professionals

Seek expert advice:

If you're unsure about any aspects of compliance, consult with legal and HR professionals to ensure your practices are in line with the law.

Want to make sure your business policies are up to date and in line with all of California's 2024 compliance regulations? Download our comprehensive guide below!

The California Employer’s Guide to New Laws LC 1

Are you compliant with AB1228? 

By reading this  this article, you've learned the intricacies of AB1228, covering everything from its foundational principles to the steps necessary for compliance.

But, understanding these changes is just the beginning. True adaptation requires decisive action, especially with the April 1, 2024, effective date already behind us.

Our team of dedicated professionals is here to guide you through the maze of AB1228 compliance. We're committed to ensuring your transition under this new wage standard is seamless and straightforward.

Are you ready to lead the way in compliance?


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Act now and secure your position at the forefront of this significant change!

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This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.