Fast Food Minimum Wage California, What is the Minimum Wage in California?

Fast Food Minimum Wage California  

The State of California has recently passed a law to increase the minimum wage across the state for various service and blue-collar workers. Most such hikes came into effect on April 1st, 2024, for the state of California, with industry-specific ones like “fast food restaurant employees."

For them, the minimum wage increased from 16 dollars an hour to 20 dollars an hour. The law that does this is AB 1228, which adds sections 1474, 1475, and 1476 to the California labor code, which increases the minimum wage, establishes the Fast Food Council, and convenes from time to time to discuss the minimum wage.

This wage increase applies to restaurant chains that are providing limited-service restaurants with no tables and have a minimum of 60 restaurant establishments across the country. 

What is the Minimum Wage in California? 

The minimum wage in California has been steadily increasing since 2017 when they started enacting the $15 phase-in, and the minimum wage started to rise from $10  to the current $16  for all categories of workers.

It is calculated using the national consumer price index at the urban level for workers and clerical staff. If the prices of everyday consumption goods go up, then the minimum wage needs to increase, but not more than 3.5% annually. 

The US is a federal state; it has union, state, and local municipal councils all enacting the law regarding labor benefits under their respective jurisdictions. Each has conflicting impacts on the business.

But in the case of the employer, he has to follow the highest and strictest standard that needs to benefit the employee, no matter which government entity enacted the law, whether a union, state, or local council.  

If there is a conflict between the employee and employer regarding the minimum wage benefits, the employee can file a wage claim via the Labour Commissioner, alternative dispute resolution mechanism, or courts. Each of these has its own set of procedures to solve the issue.

The AB 1228 and its Effects 

AB 1228 is a California state law authored by California State Assemblymember Chris Holden. The law’s main aim is to reduce the differing responsibility gap between the franchisor and franchisee business models within the fast food restaurant business and bring about joint liability between both of them for violations of the laws and regulations. 

The law has been enacted according to assembly members to stop the franchisor, who might be a big corporation, from exploiting the franchisee business model and not passing down wage benefits like in trickle-down economic theory.

Instead, the franchisor is just a bystander watching the company's profit margins, not the people. These are not exact words, but we are paraphrasing them. This model puts the local owner-operators of the franchise under enormous pressure to earn a profit margin for themselves and the employees's safety and healthy working conditions. 

The opposition to these laws is most of the business chambers across California and associations supporting franchisor and franchisee business models. The joint liability will break the flexibility of the model.

In their argument, local owner-operators are the sole entity responsible for all the things that happen in fast-food restaurants; they just operate under the national brand and name.

This per se determination will not make the issues listed in the said legislation solve the problem, as per the exact words, “the legal, contractual, operational, and economic realities of the relationship will not change,"  showcasing a strong case that the franchisor and franchisee business model is here to stay as well as its perceived negative effects.

Restaurants exempted from AB 1228

Restaurants under Act AB 1228 are not a blanket term; they apply only to a certain set of them based on criteria. 

I) Restaurants that sell and operate bread as a standalone item from September 15, 2023.

II) Restaurants that sell and operate under the grocery establishment that sells household items that are being used for offsite consumption.

III) Restaurants that are connected to geographical locations like 

• Airport
• Theme Park 
• Museum
• Hotel 
• Gambling place.
• An event center with more than 20,000 square feet. 

IV) based on the concession agreements for one-for-profit companies, i.e., offices, colleges, school canteens, and also on public lands like beaches and public parks. 

The Fast Food Council

The Fast Food Council had already tried to establish itself by enacting AB 257 FAST Recovery Act, but this was overturned and not passed. The current AB 1228 creates the Fast Food Council.

This council is composed of fast-food restaurant industry representatives, fast-food restaurant franchisees, fast-food restaurant employees, fast-food restaurant employee advocates, and one unaffiliated member from the public.

These are voting members, and the council also has two non-voting government officials, each from the Department of Industrial Relations and the Governor's Office of Business and Economic Development. 

The Council’s mandate is to maintain the standard of minimum wage in the fast food business industry, and to ensure the safety and health benefits of employees, the council is to foresee whether regionalization of the minimum wage standard within the state or a single statewide minimum wage is enough for the fast food industry. 

Benefits of a Higher Minimum Wage in Fast Food Restaurant Chains  

• The minimum wage increase in the consumption and growth-based economies has a primary effect, which is stronger headwinds for consumption in the market. 
• The higher wages help the employee stay in the current job location and not shift the job location based on wages and other costs.
• The higher wage normally motivates the employee to work in a highly efficient manner. 
• The higher wage lifts people out of poverty and allows them to spend it on their families.
• The rise in the minimum wage will lead to more time spent with family instead of doing two jobs to cover the costs. 

Negative of a Higher Minimum Wage in Fast Food Restaurant Chains

• The negative effects will be a stark contrast and will strike at the heart of the franchisor and franchise business model in the restaurant.
• The price of restaurant menu items rose due to incurred labor costs. 
• More franchisors or franchise restaurants will close as the cost rises, especially in rural areas of California.
• Big corporations always found ways to escape the joint liability issue by not paying more and covering operating costs for franchise establishments. 
• Initial layoff in the fast food restaurant as the regulation kicks in but will stabilize.