In a significant development for California's fast-food restaurant industry, Gov. Gavin Newsom recently signed AB 1228 into law, ushering in a range of provisions that include the creation of the Fast Food Council, a minimum wage increase to $20 per hour, and changes to employment standards in the fast-food restaurant industry.

The new law applies to employees in national fast-food chains, defined as “limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services, and which are primarily engaged in providing food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no table service." 

This definition excludes bakeries and restaurants within grocery stores.

Creation of a Fast Food Council

AB 1228 establishes the Fast Food Council within the Department of Industrial Relations. The council consists of nine voting members, including representatives from the industry, franchisees, employees, and advocates, as well as non-voting members from relevant state agencies. It is tasked with recommending employment regulations specific to the fast food industry, including minimum wage rates, working hours, and workplace health and safety. Additionally, the council can recommend workplace standards to state agencies.

Minimum Wage Increase

The minimum wage set by AB 1228 will serve as the "state minimum wage" for fast-food restaurant employees. Effective April 1, 2024, the hourly minimum wage for these employees will increase to $20 per hour. Subsequently, the council will have the authority to adjust this minimum wage annually, considering factors like inflation. However, any increase must not exceed 3.5 percent or the rate of change in the U.S. Consumer Price Index, with considerations for regional differences. Notably, AB 1228 minimum wage supersedes any local city or county minimum wage requirements for fast-food restaurant employees. 

The $20 per hour minimum wage increase is significant for California employers in the fast-food industry, especially considering the statewide minimum wage was set to increase to $16 per hour on Jan. 1, 2024, as the higher wage will affect labor costs and may require adjustments to budgets and staffing levels. 

Employers paying less than $20 per hour must prepare for its impact, particularly in areas with lower labor market rates or labor shortages.

Retaliation Clause

The new law also includes a retaliation clause to protect employees who participate in proceedings convened by the Fast Food Council. The labor commissioner will enforce the law, which calls for injunctive relief and attorney's fees and costs awarded in successful civil actions. 

AB 1228 introduces substantial changes to the fast-food restaurant industry in California. Employers in this sector must be prepared to adapt to new minimum wage requirements, adhere to workplace health and safety standards, and avoid retaliatory actions against employees participating in council proceedings. Understanding and complying with these new regulations will be essential to avoid potential legal issues. AB 1228 is set to sunset on Jan. 1, 2029.