California’s Assembly Bill No. 1228 (A.B. 1228), signed into law by Governor Gavin Newsom on September 28, 2023, is scheduled to come into effect on April 1, 2024. Primarily aimed at raising the minimum wage for non-exempt fast-food restaurant employees to $20 per hour, A.B. 1228 also carries implications for the minimum required salary for employees to qualify for exempt status under California’s administrative, professional, or executive exemptions.
Under current law, employees exempt under these exemptions must receive a salary of at least twice the state minimum wage for full-time employment. A.B. 1228 stipulates that “the hourly minimum wage established [by A.B. 1228] shall constitute the state minimum wage for fast food restaurant employees for all purposes under [the Labor Code] and the wage orders of the Industrial Welfare Commission.” Consequently, the minimum salary required for fast-food restaurant employees covered by A.B. 1228 to qualify for exemptions will be $83,200 per year (i.e., 2 x $20 x 40 hours/week, or $1,600/week) starting April 1, 2024.
The Division of Labor Standards Enforcement (DLSE) has confirmed this interpretation of A.B. 1228, clarifying that the law applies specifically to employees of fast-food restaurants as defined by the legislation. Therefore, administrative and personnel functions performed in corporate offices may not be subject to the new law.
Efforts are underway to lobby for exceptions to A.B. 1228, with Assembly Bill No. 610 (A.B. 610) introduced on February 22, 2024, seeking to clarify the law’s scope. If enacted, A.B. 610 would immediately exempt certain food service establishments, such as bakeries and fast-food restaurants located within specified venues like grocery stores and corporate campuses, from the industry-specific minimum wage set by A.B. 1228.
Employers should be aware that they bear the burden of demonstrating they are not covered by A.B. 1228. As such, national fast-food employers operating in California should familiarize themselves with the law and ensure compliance, particularly regarding exempt employee compensation.
The repercussions of A.B. 1228 are expected to reverberate throughout the labor market, affecting budgets, staffing, and consumer prices as employers navigate higher operating costs in California. For guidance on compliance with A.B. 1228 or any related inquiries, individuals are encouraged to reach out to AALRR attorneys, who possess extensive experience and knowledge in employment law matters.