Overview of the Fast Food Minimum Wage Increase AB1228

CEN Blog Image Get an overview of AB 1228’s intricacies and its impact on fast-food workers, from wage increases to exemptions. Tomiwa Aina and Nikki Mahmoudi continue the discussion on the fast-food minimum wage increase in this installment of California Employment News.

Review our previous episode, “Top Developments in Wage and Hour Law for 2024

Watch this episode on the Weintraub YouTube channel

Show Notes:

Tomiwa: Hello, everyone. Thank you for joining us today for this installment of the “California Employment News”, an informative video and podcast resource that’s offered by the Labor and Employment Group at Weintraub Tobin. My name is Tomiwa Aina, and I am an associate at Weintraub Tobin. And today, I am joined with Nikki Mahmoudi, also another associate at Weintraub Tobin. Now, a few weeks ago, we had a “California Employment News” episode on the top developments in wage and hour law for 2024. In that episode, Ryan Abernathy and Lucas Clarey briefly touched on the new legislation, AB 1228. That legislation increases the wages of fast food workers to $20 an hour, effective April 1, 2024. This legislation also creates the Fast Food Council, and since this law was announced, there has been quite a bit of confusion, and many employers are left wondering as to whether or not the law applies to them. We have gotten some clarification from the Department of Industrial Relations in a March 2024 Frequently Asked Questions that they published, as well as from the Fast Food Council meeting on March 15, 2024. So thank goodness for that. Today, we will discuss some of those clarifications with you, as well as a quick overview of the new law. Now, you can find a link to the FAQ in the text below. However, we’d like to note that today is just a brief overview of the subject, and it’s important to check with your council if you have any questions as to whether or not the fast food increase applies to your workers. Also, as a word of caution, since the increase in the workers’ wages just went into effect on April first, we anticipate that more clarification from the Department of Industrial Relations will follow, and also from the Fast Food Council. What we’re discussing today, though, is based on what we know as of April 1, 2024. Now, Nikki, can you tell me a little bit more about the fast food wage increase and who it applies to?

Nikki: Of course. Let’s get into it. As I’m sure you’re aware, the California minimum wage, effective January 1, 2024, is $16 an hour. But under AB 1228, as of April 1, 2024, the minimum wage for fast food restaurant employees is $20 an hour. This law also establishes a Fast Food Council who will meet regularly to develop new minimum employment standards specific to the fast food industry, including future minimum wage increases, as well as working hours and working conditions. So, who are fast food restaurant employees? A fast food restaurant is defined as a limited service restaurant in the state, so California, that is a party of a national fast food chain. What does that mean? We’re going to break that down even more. A limited service restaurant is going to include an establishment within the North American Industry Classification System Code 722513. I’m probably not making this any more clear, but we’ll break it down even more. This is consisting of establishments primarily engaged in providing food services where patrons generally order or select items and a day before eating. And food and drink at these restaurants can be soon on-premises, taken out, or delivered to the customer’s location. Examples are going to include takeout sandwich shops, pizza delivery shops, and so on. Now, the Fast Food Council and the Department of Industrial Relations, or the DIR, as we call it, in their FAQs has clarified that other establishments could also fall under a limited service restaurant. That’s going to include chain donut stores, ice cream shops, café selling coffee and tea, boba tea shops, and so on. Based on what we currently know, a limited service establishment is not limited to the establishment in that North American Industry Classification System Code, 722513. Now, going into what a national fast food chain is, that’s a set of limited service restaurants consisting of more than 60 establishments nationally. That was a key question, is it within the state or outside. It’s going to be all over the country that share a common brand or that are characterized by standardized options for decor, marketing, packaging, products and services, and primarily engage in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming with little or no table service. Now, there are some exceptions to this, I’ll go into a few notable ones. Fast food restaurants do not include a restaurant located in an airport, although there are even more exclusions to that, and restaurants connected to or operating in conjunction with the following locations: hotels, event centers, theme parks, public or private museums, and gambling establishment. Another exception is when a restaurant is located and operates within a grocery establishment, and then the grocery establishment employer employs the individuals working in the restaurant. With all these exceptions, I’m giving a very brief overview. It’s important, again, to talk to your counsel or look at how the terms are defined in the code. That’s in labor code sections 1474 to 1476. Those are where the new fast food laws are. One other notable but not inclusive exception is the bread exemption. Tomi, could you tell me a little bit about that?

Tomiwa: Thank you, Nikki. This one is a bit technical. Restaurants that, as of September 15, 2023, operate a bakery that produces for sale on their premises bread as defined under the Code of Federal Regulations as a standalone menu item, and that continue to do so are exempt from the new law. What does this mean? Restaurants that sell bread only as a part of a sandwich or hamburger, not as a standalone item, would not come under the exemption. This would not require that the restaurant be primarily engaged in the sale of bread as a standalone item, though. The exemption could even apply when the sale of bread at a restaurant constitutes a small portion of that restaurant’s total food sales. Now, to confirm that you meet this bread exemption, it can be a little bit technical. You’d have to look at the code of federal regulations and also consult with your attorney.

Nikki: Thanks, Tomi. Well, as you can see, this can be a lot. It’s important to check with your counsel, look at labor code sections 1474 to 1476, and check the Department of Industrial Relations website for any FAQs, check for updates from the Fast Food Council, and so on, to get a sense of all of this. You can continue to find our video series and podcast through the lelawblog.com or on the Weintraub Tobin YouTube channel. Thank you, everyone, for joining us, and we look forward to reconnecting with you on our next edition of “California Employment News.”