As reported previously on this blog, the minimum wage for California’s fast-food operators will increase to $20 per hour on April 1, 2024 under AB 1228.  The new law applies to national fast food chains, which are defined as “limited-service restaurants consisting of more than 60 establishments nationally that share a common brand, or that are characterized by standardized options for decor, 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. For purposes of the definitions in this part, “limited-service restaurant” includes, but is not limited to, an establishment with the North American Industry Classification System Code 722513. Bakeries and grocery stores are exempt from this definition and are not included as fast-food restaurants. 

Here are five essential steps fast-food operators who are covered under AB 1225 should review for this April 1 deadline:

1. Update wage rates with payroll company.

Operators need to communicate with their payroll company to ensure that the $20 per hour minimum wage is updated and reflected on all employees’ pay stubs provided for pay periods after the April 1^st deadline. 

2. Ensure that all overtime rates are calculated at the new rate.

Likewise, operators need to ensure that all applicable overtime rates are calculated properly for all overtime worked starting April 1. 

3. Update pay stubs to reflect increased wages.

All pay stubs issued for pay periods that include work done since April 1, 2024 must include the increased minimum wage rate.  Employers need to work closely with their payroll companies to ensure that work prior to the April 1 deadline, and work completed on and after April 1 are reported correctly on employees’ pay stubs. 

4. Ensure new employee notices include the updated wage information.

Covered businesses must also update the notices to employees required under Labor Code section 2810.5 are updated with the new minimum wage for any employees hired on April 1, 2024.

5. Audit exempt employee classifications and ensure all exempt employees are paid at least $83,200 annually.

Operators cannot forget to review the status of exempt employees.  Under AB 1228, fast-food industry employers covered under the law must pay exempt employees at least $83,200 on a salary basis (a monthly salary equivalent to no less than two times the minimum wage for full-time employment). Given the higher salary requirement, many employers are re-classifying previously exempt managers as non-exempt. Employers may do this for any at-will employee (as there is no contract requiring employers to continue to pay employees at a given rate), but there needs to be some advanced notice to employees who are being reclassified as non-exempt.