California Governor Signs Fast Food Industry Minimum Wage Law

On September 28, 2023, California Governor Gavin Newsom signed Assembly Bill (AB) No. 1228 into law, repealing the FAST Food Accountability and Standards Recovery Act (FAST Recovery Act) (AB 257) and replacing it with a $20-per-hour minimum wage for fast food workers, among other provisions.

Quick Hits

• Fast food restaurant employees in California will be entitled to earn at least $20 per hour, beginning on April 1, 2024.
• The fast food employee minimum wage will increase on an annual basis thereafter, up through 2029.
• The law establishes the Fast Food Council, which will be appointed and may recommend regulations addressing other working conditions, beginning in 2024.

Covered Businesses

The law applies to “fast food restaurants.” The term means “restaurants in [California] that [are] part of a national fast food chain.” A “national fast food chain” is defined to mean restaurants that are:

• “a set of 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
• “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.”

The definition includes, but is not limited to, establishments with the North American Industry Classification System (NAICS) Code 722513 (limited-service restaurants). The definition excludes certain businesses operating as bakeries.

Fast Food Minimum Wage

Beginning on April 1, 2024, fast food restaurant employees must be paid a minimum wage of $20 per hour.

The hourly minimum wage for fast food restaurant employees may be increased by a state-appointed Fast Food Council on an annual basis, beginning on January 1, 2025, at a rate tied to the Consumer Price Index. The council has authority to set different minimum wage rates in different regions of the state.

The authority to increase the minimum wage expires at the end of 2029 (unless, of course, this sunset provision is eliminated in a future amendment to the law).

Fast Food Council

The law creates the Fast Food Council, which will be housed within the Department of Industrial Relations. The council’s nine members will be appointed by the governor and legislative representatives. The council will have authority to adjust on an annual basis, from 2025 to 2029, the hourly minimum wage for fast food restaurant employees, as referenced above.

Additionally, the council may recommend other workplace regulations to the state labor agency. Such regulations may address working conditions related to health and safety, security, the right to take time off for protected purposes, and protections from harassment or discrimination. The council’s authority will not include the power to promulgate regulations regarding paid sick leave, vacation, or predictable scheduling.

Repeal of FAST Recovery Act

The law repeals the FAST Recovery Act and withdraws an industry-sponsored voter referendum scheduled for the November 2024 election.

The FAST Recovery Act, had it remained effective, would have increased the minimum wage to $22 per hour, beginning in 2023, with annual increases thereafter. The law would also have granted the Fast Food Council more expansive powers to regulate fast food industry working conditions.

Looking Ahead

Businesses operating as restaurants in California may want to determine if they are part of a national fast food chain, as defined in the law. Such businesses may also want to plan for an increase in the employee minimum wage to $20 per hour by April 1, 2024. Employers may also want to remain alert for additional industry regulations, once the Fast Food Council is convened in 2024.

Ogletree Deakins will continue to monitor developments and will provide updates on the California, Hospitality, Wage and Hour, and Workplace Safety and Health blogs as additional information becomes available.

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