California's Controversial and Unprecedented New Law Creates "Selective" Minimum Wage For Fast Food Workers and Council to Oversee Franchise Owners.
“Selective” Minimum Wage
Fast food workers receive $4.50 an hour pay raise in less than one year.
California franchise owners and their employees are in for a wild ride as California fast-food employees are set to receive a $20 minimum wage beginning in April of 2024. The minimum wage for all other employees in California is currently $15.50 an hour and will increase by a mere 0.50 cents to $16 an hour on January 1, 2024. In contrast, under the new law, the fast food workers will be receiving a whopping $4.50 more per hour!
The new law is called the Fast-Food Franchisor Responsibility Act (Assembly Bill 1228) and was signed into law on September 28, 2023 by Governor Newsom. This new law is unprecedented because it sets a minimum wage that is applicable only for a particular group of employees- fast food workers. The new law applies to employers who are “limited-service restaurants” which basically means the new law applies to all fast food chains with at least 60 establishments nationwide. Interestingly, the new law will not apply to those that bake and sell their own bread such as Panera and Boudin.
Beginning on April 1, 2024, the employees that work at these “limited-service restaurants” will receive a minimum wage of $20 per hour and a yearly minimum wage increase on January 1 to be determined by the fast food council. The standard for raising the minimum wage will be the lesser of 3.5% or the average change in the US Consumer Price Index. In addition, the fast food council’s minimum wage will preempt any local city or county minimum wage requirements.
Franchise owners may be wondering who will be on the “fast food council” and what their qualifications are since the fast food council will now exercise some control over the franchise owner’s business. Well, the fast food council will be a part of the Department of Industrial Relations and have nine voting members that includes two representatives for the fast food restaurant industry, two representatives for the fast food restaurant franchisees or restaurant owners, two representatives of fast food restaurant employees, two representatives of advocates for fast food restaurant employees, and a neutral member of the public. Unfortunately, the Governor alone will have the power to choose who seven of those members will be.
This council will be responsible for not only increasing the minimum wage yearly, but they will also be able to recommend other standards franchise owners must abide by. The council will be able to recommend new standards for “working conditions” to “ensure and maintain the health, safety, and welfare of, and to supply the necessary cost of proper living to fast food restaurant workers.” The phrase “working conditions” includes wages, employees’ health and safety, employees’ security at work, employees’ right to take time off, and any discrimination or harassment against employees. Clearly, the council can do more than just set minimum wage requirements.
What is interesting is that franchisees are meant to be independent business owners who operate third-party franchises. These business owners may now be subject to rules and regulations created by a council comprised of individuals that were appointed by the Governor himself. The Governor will have a huge influence in the rules and regulations because he appoints the majority of the people on the council. California franchise owners are now in a new and unprecedented era: one in which they are not independent businesses and likely cannot continue to run their businesses like they used to.
Only time will tell what the future holds for employees of fast-food franchises, but one thing is for sure: the cost of doing business in California is going up.