California’s fast food minimum wage increase: Who gets raises and who doesn’t?

Starting Monday, April 1, fast food restaurants in California will be required to pay their workers at least $20 an hour as Assembly Bill 1228 finally takes effect.

The polarizing law, which has been praised by advocates for low-income workers and blasted by the restaurant industry, is expected to lead to menu price increases at many popular chains, including McDonald’s and Chipotle.

The quick-service restaurant industry employs at least 500,000 Californians, but how many of them qualify for the raise?

The California Department of Industrial Relations has published a Frequently Asked Questions website about AB 1228 with the hope of clearing up any confusion.

Among the more pressing questions are: what is considered a “fast food restaurant,” and which employees are covered by the new law?

According to the state’s website, a “fast food” establishment is a “limited-service restaurant … that offers limited or no table service, where customers order food or beverage items and pay for them before they are consumed.”

Also, the food must be intended for “immediate consumption.”

But even if a restaurant meets those criteria, there is yet another layer.

A smaller, locally owned and operated burger joint or taco shop will not be impacted by the new law if it is not part of a chain of at least 60 restaurants nationwide.

“Business locations performing only administrative, warehouse, or food preparation work are not counted as “establishments” toward the 60-establishment minimum,” the state explains.

What if a restaurant serves food for “immediate consumption” but also offers prepared dishes to be heated and served later?

This is where things get a bit murky.

If a restaurant earns more than 50% of its gross income from selling food or beverage items for “immediate consumption,” then its employees should be paid $20 an hour starting Monday.

“For example, if a fast food pizza restaurant earns 30% of its revenue from ‘take and bake’ pizza to be baked at home, but earns 70% of its revenue from sales of fully-cooked food and beverages for immediate consumption, the restaurant is primarily engaged in selling food and beverage for immediate consumption and would be covered by the new law (provided no other exemption applies),” according to the FAQs.

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What about ice cream, boba tea, pretzel and donut shops?

Yes, they are considered fast food, and if they are part of a chain with at least 60 locations, they must adhere to AB 1228.

Exemptions

One of the more controversial elements of the new law is the exemption for restaurants that also operate as bakeries and produce and sell “bread” as a stand-alone menu item.

Why is “bread” in quotation marks? Because that also needed to be defined.

The FAQ website explains, “Bread is defined as a single unit item that weighs at least ½ pound after cooling and must be sold as a stand-alone item.”

Hamburger buns, croissants, muffins, scones and rolls don’t count because they aren’t heavy enough.

Also, restaurants aren’t exempt if they don’t produce bread on-site, which also needed to be defined because some restaurants bake pre-made dough (those aren’t exempt).

Initially, it appeared that Panera Bread would be exempt, which led to an unflattering article from Bloomberg which reported that it was a carve-out for a wealthy Gov. Gavin Newsom donor, Greg Flynn, who owns two dozen Panera Bread locations in California.

Both Newsom and Flynn denied the assertion, and Flynn later announced that he would abide by the new law.

What if a grocery store serves fast food at a separate counter or kiosk?

AB 1228 might not apply.

There’s an exemption for fast food establishments located within a store “over 15,000 square feet in size” that sells primarily “household foodstuffs,” including fresh produce, meat, poultry, fish, deli products, dairy products, canned foods, dry foods, beverages, baked foods, or prepared foods to be consumed offsite.

The new law includes many other provisions, including whether fast food managers are exempt, whether workers who receive tips are exempt (they’re not), and why there could be differences between two employees who work for the same chain.

Read all FAQs about California’s new fast food minimum wage law here.

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