No Joke—California Fast Food Workers’ Minimum Wage Increases to $20 per Hour on April Fools’ Day

The newest fast food worker law, California Labor Code sections 1474-1477 (enacted by AB 1228), increases fast food workers’ hourly wages on April 1, 2024.  The law requires fast food employers to pay fast food employees at least $20 per hour, establishes a Fast Food Council, and repeals the FAST Recovery Act.

National Fast Food Chains Are Covered by the Bill

The bill applies to “national fast food chains,” which are defined as “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 which 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 establishments with the North American Industry Classification System Code 722513, such as pizza delivery shops, takeout eating places, and fast food restaurants.

The bill does not apply to bakeries (i.e., establishments that produce for sale bread as a stand-alone item for purchase) and limited restaurants that are located within and operated by grocery stores.

The Minimum Wage for Fast Food Workers Must Be $20 Per Hour

The hourly minimum wage for fast food restaurant employees must be $20, beginning on April 1, 2024.  The Fast Food Council, a group established with the Department of Industrial Relations to establish minimum working standards for fast food workers, may increase the minimum wage annually, but no sooner than January 1, 2025.  The hourly minimum wage may be adjusted annually by no more than the lesser of either 3.5 percent or the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers.

The new hourly minimum wage for fast food workers and subsequent minimum wage increases will constitute the state minimum wage for purposes of existing applicable wage orders of the Industrial Welfare Commission.  It will also increase the salary for California exemptions for salaried limited services restaurant employees to $83,000 per year (i.e., two times the state minimum wage).

The Scope of the Bill Will Need to Be Clarified

There is uncertainty as to which restaurants are covered by the bill.  The author of AB 1228, Assemblymember Chris Holden, issued a letter in September 2023 attempting to clarify the bill's scope.  The letter states that the term “fast food restaurant” does not include “fast food restaurants that are located within an airport; which are connected to or operated in conjunction with a hotel, event center, theme park, museum, or gambling establishment; or which are located in and operated in conjunction with a building, group of buildings, or campus used for office purposes primarily by a single, for-profit corporation and its affiliates, where the restaurant is part of or subject to a concession or food-service contract, and primarily or exclusively serves employees of that corporation or its affiliates.”  But confusion continues, and the State legislature is already considering a “clean-up” bill to address these ambiguities.  If a new bill does not pass, we expect the Fast Food Council or the Department of Industrial Relations to issue guidance.

Takeaway

If you are a fast food employer, make sure you raise the minimum wage for fast food workers to $20 per hour by April 1, 2024.  If you are unsure whether your business is considered a “fast food restaurant” or need advice navigating next steps, please contact us.