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Exemptions to California’s Fast-Food Minimum Wage Boost

Screenshot 2024-04-21 at 12.06.02 PM

On a recent Monday, a significant legislative change took effect in California, setting a new precedent for fast-food worker compensation across the state. The new law, a clear win for many employees in the industry, has increased the minimum wage for fast-food workers from $16 to $20 per hour. This adjustment acknowledges the demographic shift within the industry, recognizing that the majority of fast-food employees are adults supporting families, not just teenagers earning extra cash.

However, the impact of this wage increase is not universal within the fast-food sector. Certain locations, including those within airports, hotels, event centers, theme parks, museums, and specific other designated areas, are exempt from this wage hike. Additionally, fast-food outlets situated within grocery establishments—defined as retail stores larger than 15,000 square feet that primarily sell household foodstuffs for offsite consumption—will also not be required to implement this wage increase.

Governor Gavin Newsom, who signed Assembly Bill 610 into law on March 25, delineated these exemptions. The law clarifies that such establishments must derive at least 50% of their gross income from selling household foodstuffs offsite and directly employ the fast-food workers to qualify for an exemption. For instance, a Starbucks inside a large Ralph’s grocery store would not be eligible for the increased wage if it meets the specified criteria.

The broader implications of the new wage law are already being felt across California’s fast-food industry. Franchise operators for well-known brands like Pizza Hut, Auntie Anne’s, and Cinnabon have announced plans to either reduce their workforce or raise prices to manage the increased labor costs. These responses highlight the complex balance between fair compensation and business sustainability in the fast-food sector.

As California sets a new standard with this legislation, it will be intriguing to see how these changes influence the fast-food industry both within the state and potentially across the nation. While the wage increase is a significant step toward supporting the economic stability of many workers, the exemptions and resultant business strategies underscore the ongoing challenges in achieving broad-based impacts.