Signed by Governor Gavin Newsom on September 28, 2023, Assembly Bill 1228 (“AB 1228”) is scheduled to become effective in California on April 1, 2024. AB 1228 was enacted primarily to: Moves include raising the minimum wage for non-exempt employees at fast food restaurants to $20 an hour. In addition to increasing the minimum wage for eligible non-exempt employees, the fast food industry will be subject to AB 1228's impact on the minimum required salary for employees who are exempt under California's executive, professional, or executive exemption. It is necessary to prepare for
Current law, California Labor Code Section 515, requires employees who are exempt under administrative, professional, or executive exemptions to earn at least twice the state minimum wage for full-time employment. salary must be paid. AB 1228 provides “an established hourly minimum wage.” [by A.B. 1228] shall constitute the state minimum wage for fast food restaurant employees for all purposes pursuant to the Act. [the Labor Code] and Industrial Welfare Commission Wage Orders. ” (Emphasis added.)
Therefore, the applicable minimum salary for fast food restaurant employees subject to AB 1228 to qualify for the California administrative, professional, or executive exemption is $83,200 per year (i.e., 2 x $20 x weekly 40 hours or $1,600/year). The California Labor Commission, also known as the Department of Labor Standards Enforcement (“DLSE”), recently confirmed this interpretation of AB 1228 in its Fast Food Minimum Wage Frequently Asked Questions (FAQ No. 15) (https:/ /www.dir.ca.gov/dlse/Fast-Food-Minimum-Wage-FAQ.htm).
A fast food chain is defined broadly as “more than 60 establishments nationwide that share a common brand or are characterized by standardized options in decoration, marketing, packaging, products, and services and that are primarily engaged in the following services: is defined as a “limited service restaurant consisting of…” “Food and beverages for immediate consumption on or off-premises, where patrons generally order or select items and pay before consuming them, with limited or no table service; ” falls within the scope of AB 1228. Based on his DLSE response to FAQ No. 6, AB 1228 “applies only to fast food restaurant employees” as defined above. (Emphasis added.) This suggests that employees who perform administrative and human resources functions at a company's headquarters probably do not fall under the new law.
Given the magnitude of AB 1228, lobbying efforts are underway to create exceptions to the law. Indeed, this is the case with a related bill pending in Congress, Assembly Bill No. 610 (“AB 610”), filed on February 22, 2024. AB 610 seeks to clarify the scope of covered fast food restaurants and employers. If enacted, AB 610 would immediately exempt the following food service establishments from the industry-specific minimum wage and other standards established by AB 1228:
Bakery (i.e., a facility that produces bread for sale in-store as a “stand-alone menu item”). However, AB 1228 already includes a similar exemption.Fast food restaurants in designated locations: Grocery stores Hotels Event centers (stadiums, concert halls, convention centers, etc.) Theme parks Museums Casinos Corporate campuses Public lands
We will continue to monitor this pending legislation. AB 610 is listed as an emergency bill, meaning it would become law immediately if signed by the governor.
DLSE clarified that “employers bear the burden of demonstrating that the new law does not apply to them.” Therefore, national fast food employers based in California should familiarize themselves with AB 1228 and work to ensure compliance with its requirements, particularly with respect to payroll for exempt employees.
Over time, there is little doubt that the ripple effects of AB 1228 will become known and felt throughout the labor market in various industries as employers face increasing pressures to compensate and retain employees. There's no room for that. In particular, covered employers should be aware that increased operating costs in California will inevitably impact budgets, staffing levels, and consumer prices in a variety of ways.
If you have any questions regarding your obligations under AB 1228, please feel free to contact the author or AALRR's regular counsel for clarification and guidance. Combining decades of experience and extensive knowledge, AALRR attorneys are trusted advisors who are well-equipped to navigate unknown legal situations.
This AALRR publication is for informational purposes only and should not be relied upon to reach any conclusions in any particular area of law. The applicability of the legal principles discussed may vary significantly depending on individual circumstances. Receipt of this document or any other of his AALRR publications does not create an attorney-client relationship. We are not responsible for any inadvertent errors that may occur during the publishing process. © 2024 Atkinson, Anderson, Loya, Ruud, Romo
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