New Developments: Fast Food Minimum Wage

New Developments: Fast Food Minimum Wage

As a reminder, fast food chains must implement the new minimum wage of $20/hour, effective April 1, 2024, and post the Supplemental Required Posterin a conspicuous location in the workplace. Read more about AB 1228 in our previous blog article here.

New Developments

The Department of Industrial Relations provided much-needed clarification to some unanswered questions in the law, in their Frequently Asked Questionsupdated March 2024. Key highlights include:

• The law applies to all "limited-service restaurants" that are part of a chain of at least 60 establishments nationwide. The FAQs clarify that an establishment is a single restaurant location offering food or beverages to customers. Business locations performing only administrative, warehouse, or food preparation work are not counted as "establishments" toward the 60 establishment minimum.
• AB 1228 applies to employers of "fast food restaurant employees" regardless of whether the employer is the business entity that owns the national brand or a franchisee or licensee of that national brand.
• In describing the term "immediate consumption," the DIR notes: Typically, customers at a fast food restaurant will eat at a table inside or outside the restaurant, in their car, or as soon as they get back home or to work with their order. Food sold to be baked, cooked, or heated at home is not for immediate consumption.
• The term "primarily engaged in" means the business earns more than 50% of its gross income fromselling food or beverage items that are for immediate consumption.
• For example, if a fast food pizza restaurant earns 30% of its revenue from "take and bake" pizza to be baked at home, but earns 70% of its revenue from sales of fully-cooked food and beverages for immediate consumption, the restaurant is primarily engaged in selling food and beverage for immediate consumption and would be covered by the new law (provided no other exemption applies).
• If you have a fast food restaurant that is located inside another store (e.g., a McDonalds inside a convenience store), and you have an employee working for both the fast food restaurant and the convenience store, the DIR provides an example clarifying that the fast food minimum wage applies only to "hours perform[ed] in the fast food restaurant." (This example assumes that the employer does not meet the grocery store exemption outlined in AB 1228.)
• To qualify as an exempt employee at a covered fast food restaurant, the employee must earn two times the fast food minimum wage. That is, $83,200/year.

Next Steps

If this change applies to you, make sure you have taken the following steps to ensure compliance:

• Upon the effective date, update your payroll system
• Notify your affected employees within seven calendar days of the change (or earlier). Employers may do this by updating the Wage Theft Formand retaining a copy for the employee's personnel file.
• Ensure your wage statements reflect the correct pay rates, including overtime rates.
• If the change impacts your pay scales, including for job postings, be sure to update those as well.
• Consider any personnel restructuring and/or shift adjustments as needed.

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