Wait, What Happened? The Fast-Food Accountability and Standards Recovery Act (FAST Recovery Act) was a bill aimed to enact specific workplace rules and standards for fast-food employees. It was met with widespread concern about potential devastating consequences for the industry. But recently, labor groups struck a deal to replace the short-lived legislation with a “revised” version referred to as “AB 1228,” which was signed into law on September 28, 2023 and takes effect in April 2024.
How Does This Impact Restaurants? The target of AB 1228 remains to define the rules and standards relating to “fast food restaurants” which is defined as limited-service restaurants that are a part of a “national fast-food chain.” A “national fast-food chain” means a set of limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by the standardized options for décor, 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.
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What Does The New Law Do? The compromise legislation establishes a statewide minimum wage for covered employees of $20 per hour effective April 1, 2024. Thereafter, a Fast Food Council consisting of 10-members of the fast food sector will develop wage and work standards for the fast food industry in California with authorization to increase the minimum wage annually beginning January 1, 2025. Notably, the law prohibits local jurisdictions from enacting a local minimum wage that applies to fast-food employees.
What Should California Employers Do? While California employers are already getting ready for a higher minimum wage starting January 1, 2024, those restaurants covered by AB1228 should begin to prepare their labor budgets for an increase to $20 per hour minimum wage beginning in April 2024.
Covered employers should also consider the impact a higher minimum wage will have on the minimum salary for exempt employees within their organization. That’s because as the minimum wage increases for covered employers so does the salaries of exempt employees in order to meet the exempt employee criteria and keep salaries higher than non-exempt employees.
Covered employers will also want to review their operations to explore if there are any efficiencies that can be gained without raising customer pricing. Absent additional efficiencies covered employers will need to begin considering how menu prices may be impacted as a result of the higher costs of operation.
Finally, covered employers should review all of their wage and hour practices. A higher minimum wage, results in higher meal & rest period premiums, higher reporting time pay, higher split shift premiums, and higher waiting time penalties. Employer’s policies and practices should be reviewed with these derivative impacts in mind.
Courtney Leyes and Emily Litzinger are employment lawyers at Fisher Phillips where they regularly partner with restaurant industry clients to minimize liability and reduce risk with preventative strategies focused on compliance, training, and the implementation of best practices. Having both worked in the industry, they understand the delicate balance restaurant employers face when managing a diverse and ever-changing workforce in today’s complex legal landscape.
