On April 1, 2024, a pivotal change took effect in California as Assembly Bill No. 1228 (AB 1228) was enacted, positioning the state’s fast food workers among the highest paid in the United States. The implementation of this bill, however, has stirred a mix of reactions and some confusion among employers about compliance due to the high stakes associated with California’s Labor Code.
Historical Context: The FAST Act and Its Complications
The journey to AB 1228 began with the passage of the Fast Food Accountability and Standards Recovery Act (FAST Act) in 2022, which aimed to overhaul the fast food industry. This act established a regulatory council within the California Department of Industrial Relations, empowering it to elevate minimum wages to as much as $22 per hour for 2023. Despite its intentions, the FAST Act was met with strong opposition from the restaurant industry and business groups, branding it a union-backed measure that unfairly favored employees. The controversy led to the act being suspended pending a referendum set for the November 2024 election.
AB 1228 emerged as a legislative response, perhaps as a middle ground amidst the ongoing uncertainty around the FAST Act. Codified as California Labor Code §§ 1474 et seq., AB 1228 increased the minimum wage for fast food restaurant employees to at least $20.00 per hour and formed a Fast Food Council with a more restrained scope of authority than the FAST Act envisioned. It also revised liability rules for franchisors regarding employment law violations by franchisees.
Coverage and Exemptions under AB 1228
AB 1228 applies to national fast food chains that meet specific criteria:
- Operate over 60 establishments nationally under a unified brand.
- Primarily serve food and beverages for immediate consumption.
- Offer minimal or no table service.
- Typically require customers to order and pay before eating.
Exemptions are outlined for:
- Restaurants with a bakery selling bread as a main item.
- Restaurants within grocery establishments.
- Restaurants in airports, hotels, event centers, theme parks, museums, and select other venues.
Despite these clear categories, some businesses find themselves in a gray area, leading them to seek further clarification on their obligations under the law. For instance, if a fast food restaurant inside a retail store not classified as a grocery establishment might still need to comply with the $20.00 minimum wage, according to the Department of Industrial Relations.
Proactive Measures and Ongoing Uncertainty
To mitigate potential future disruptions, including profitability and legal challenges, many employers are preemptively adjusting by raising prices, reducing staff hours, or conducting layoffs. The long-term effects of AB 1228, whether beneficial or detrimental, are yet to be fully realized.
Legal Implications of Non-compliance
Non-compliance with AB 1228 can lead to serious repercussions, including claims for lost wages, statutory penalties, and civil penalties under the California Labor Code Private Attorneys General Act of 2004 (PAGA). Given these potential outcomes, it is crucial for fast food employers to consult with legal experts to determine applicability and ensure adherence to AB 1228.
The ongoing developments surrounding AB 1228 underline the complexity and dynamism of labor regulations in California’s fast food industry, signaling a critical period of adjustment and legal scrutiny for all involved stakeholders.
