The new law went into effect on April 1st, 2024, paying “fast food restaurant employees” as they are referred to in the bill, raising their minimum wage to $20 an hour. While many are happy about this, others are concerned, and then there is me, looking at how businesses will get around this new law. One, allegedly using connections, to get an exemption included in the bill that was *very* detailed in ways that gave their franchises an out. That loophole will surely be used by other companies trying to cut costs any way they can.
<2>Who, What, When, Where
The bill, AB 1228 details many things concerning raising the minimum wage in California. Specifically, what defines a “fast food restaurant” –
*The business must meet ALL these criteria*
- The restaurant must be a “limited-service restaurant” in California. A limited service restaurant is one that offers limited or no table service, where the customers order food or beverage items and pay for those items before the items are consumed.
- The restaurant is part of a restaurant chain of at least 60 establishments nationwide. An establishment is a single restaurant location offering food or beverages to customers. Off-site business locations (geographically separate from a restaurant location), at which employees perform administrative, warehouse, or preparatory food production tasks, are not counted as “establishments” toward the 60 establishment minimum.
- The restaurant is primarily engaged in selling food and beverages for immediate consumption.
This is very specific, obviously considering it is targeting usually lower wage paying companies such as McDonald’s, Burger King, Panera Bread (wait, scratch that one, a franchisee in California is the reason for the loophole), Subway, etc.
Before people start complaining saying “McDonald’s will take away the $1 menu if they have to pay higher wages”. Look at the menu next time you are there, that cheaper option has been dead for years, a zombie in limited locations ($1 for a small coffee for instance). The days of a $1 cheeseburger or $1.50 double cheeseburger are long gone whether people paid attention or not.
Exemptions and Other Ways Companies Can Ignore This Law
First, if you are an employee not directly employed at the fast food restaurant location (i.e., you are an office employee working down town, or at home) you are not included in this new law.
Next the fast food restaurant location matters as well. Not *all* employees of fast food restaurants will receive that $20 minimum wage. While there was plenty of uproar from the public over Panera Bread franchise owner, Greg Flynn, allegedly high school friends with the governor of California, Gavin Newsom, getting an exemption that seemed tailor made for Panera Bread, Flynn has backtracked.
Other locations that are exempt from paying their employees that $20 an hour include restaurants –
That are connected to an airport, hotel, event center that is over 20,000 square feet and seats more than 1,000 people, a theme park museum, gambling establishment, and more.
Restaurants located on public land such as a beach, park, historic district, or operated by a port authority are also exempt.
Finally, if the restaurant is *inside* another store such as Walmart or Target, identified as “earning more than 50% of its gross income from the sale of household foodstuff for offsite consumption” are exempt as well. I am looking at Starbucks on this one, at least in my area in Arkansas – the trend is to put Starbucks inside grocery stores, Super Targets, etc.
Get Ready for McBread and The King’s Bread, Coming Soon, Maybe
Back to that Panera Bread, sorry, bread exemption. The new law states “restaurants that operate a bakery that “produces” and sells “bread” as a stand alone menu item…” are exempt from paying their employees $20 an hour.
The law goes onto further detail the process of making that bread available for sale that will result in exemption or not. “…Sell bread only as part of a sandwich or hamburger, but not a stand-alone menu item…” means you must pay the new minimum wage. Same for baking bread from dough if that dough was prepared at another location (such as a warehouse in mass quantities then shipped to locations to bake).
If your restaurant makes bread, according to the bill, “…includes making the dough (typically flour, water, yeast) and baking it…” on site then you are exempt from this law.
To me, this screams McDonald’s, Burger King, etc franchise owners in California will begin offering loafs of bread at their locations. Why? Because the bill does not state any requirements on how much of the revenue must come from bread sales, only that it be made on-site.
I am all for people making as much money as they can, regardless of how, as long as it is legal. I personally quit a full time job with 27 years experience in the field because I was told I was overpaid at $16 an hour. Life is short, get what you can while you can.