Search results for: ab 1228

On September 28, 2023, Governor Newsom signed AB 1228 into law, which repealed the FAST Act and implemented new regulations of the fast food industry in California.  AB 1228 was amended to reflect the terms of an agreement reached between labor representatives and fast-food companies that was announced on September 10, 2023.  We have reported on the terms of the agreement before here, but given the importance of the new law, this Friday’s Five delves into the details of AB 1228 and highlights five key issues of the new law signed by Governor Newsom:

1. Covered employers:  AB 1228 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. 

2. Minimum wage for fast food restaurant employees: $20 per hour on April 1, 2024.  Each year thereafter on January 1, the fast food council may increase the minimum wage by the lesser or 3.5% or the average change in the U.S. Consumer Price Index.  The council has the ability to set a different minimum wage based on the region of the state or to set a statewide minimum wage increase.  The fast food council’s minimum wage preempts any other local city or county minimum wage requirements. 

3. Establishment of the Fast Food Council: This council, set up within the Department of Industrial Relations, will have representatives for all interests – employers, employees, and advocates alike. The council would be made of 9 voting members, including representatives from various sectors of the fast food industry, fast food restaurant franchisees or restaurant owners, fast food restaurant employees, advocates for fast food restaurant employees, and a neutral chairperson.  However, the Governor still maintains the power to appoint all but 2 of the 9 positions on the council. The council’s responsibilities are significant.  From 2025 to 2029, they can adjust the hourly minimum wage each year (subject to the caps discussed above). The council can also recommend other workplace standards to state agencies. But, these recommendations will undergo rigorous review under the California Administrative Procedure Act and the council does not have authority to implement any other workplace standards by itself. 

4. The FAST Act (AB 257) will be repealed and the referendum that was set to go to California votes in November of 2024 will be withdrawn

5. Key issues eliminated from the law:

  • The Industrial Welfare Commission will not be revived.   Governor Newsom signed AB 102 on July 10, 2023, and a part of that bill funded the IWC to reconvene to issue wage orders regulating the “wages, hours, and working conditions” for various industries.  Employers could have expected regulations from the IWC covering nearly every industry in California (as the current wage orders cover most industries) by October 2023. By funding the IWC, labor representatives had a backup plan to continue to regulate the quick-service industry (among other industries across California) in case the FAST Act was repealed by the voters in 2024.  The agreement reached now eliminates the funding for the IWC and it will not reconvene. 

The implications of AB 1228 are significant for the fast food industry in 2024. It is imperative for employers to be prepared. As the Governor’s deadline for signing other bills looms in mid-October, our firm remains diligent in reviewing any key legislative updates. We invite business owners, human resource professionals, and in-house counsel to join our webinar on October 26, 2023, where we will review the newly enacted employment laws for California. Registration for this informative session can be accessed here.

By Pooja Patel and Anthony Zaller

A new proposed law, AB 1228, called the Fast Food Franchisor Responsibility Act, that targets the franchise business model is making its way through California’s legislature.  At first glance, the Fast Food Franchisor Responsibility Act seems to benefit franchisees – it requires franchisors to take responsibility for complying with employment laws and share the liability of violations with franchisees. However, a deeper review reveals that this Act is not that straightforward.   

1. How did the Fast Food Franchisor Responsibility Act come about?

    After multiple amendments, Governor Newson signed the Fast Food Accountability and Standards Recovery Act (“FAST Recovery Act”) (AB 257) into law in September 2022. The FAST Recovery Act was supposed to go into effect on January 1, 2023, and create a 10-member Council whose purpose is to establish minimum standards on wages, working hours, and other working conditions. Notably, the Council would have the power to raise the minimum wage of fast food employees up to $22 per hour in 2023 and by up to 3.5 percent annually after that. However, a Sacramento Superior Court Judge granted a preliminary injunction preventing the FAST Recovery Act from going into effect. As a result, the FAST Recovery Act will now be on the 2024 ballot for voters to approve or deny.  

    One of the key amendments to the FAST Recovery Act, was the removal of the provision which imposed joint employer liability on a fast food franchisor for the employment violations of the fast food franchisee. This previously withdrawn provision is precisely what is proposed by the Fast Food Franchisor Responsibility Act.  

    2. What does this have to do with the Fast Food Franchisor Responsibility Act?

    The main component of the Fast Food Franchisor Responsibility Act would require fast food franchisors to share in civil legal responsibility and liability for the franchisee’s violations. An employee, or former employee, would be able to bring an administrative charge or civil lawsuit against not only the franchisee, but also the franchisor for violation of various employment laws, including:  

    • Unfair Competition Law; 
    • The Fair Housing and Employment Act; 
    • California Labor Code provisions regarding working conditions, hours worked, payment of wages, immigration status;  
    • CalOSHA rules; 
    • Private Attorneys General Act (PAGA);
    • Emergency and executive orders issued by the Government regarding employment standards, worker health and safety, or public health and safety; and  
    • Orders issued by a county or municipality regarding employment standards, worker health and safety, or public health and safety. 

    3. Contracts by franchisor and franchisee to indemnify each other are void under the bill.

    A franchisor and franchisee cannot contract around this provision: an agreement by the franchisee to indemnify the franchisor for liability under this section would be against public policy and be considered void and unenforceable.  

    4. The bill provides limited rights to franchisors and franchisees.

    Prior to filing any civil action, the employee must give notice to the franchisor of the alleged violation(s). If after 30 days, the violation(s) are not corrected, the employee may continue with their civil lawsuit. However, the franchisor can make a written request for additional time, for up to 60 days, to complete their investigation. If the franchisor corrects the violation within the time period, then the franchisor will not be liable under a civil action.  

    Additionally, the Fast Food Franchisor Responsibility Act creates a right of action against the franchisor by the franchisee: if the franchisor prevents or creates a substantial barrier in the franchisee’s compliance of these regulations, then the franchisee may file an action against the franchisor for monetary or injunctive relief.  

    5. AB 1288’s future and potential impact on California fast food businesses.

    AB 1288 was approved by the California Assembly on May 31, 2023, and is now being reviewed by the state Senate.  Although the Fast Food Franchisor Responsibility Act still needs to be approved by the Senate, its ramifications are significant and California employers need to understand the implications of the law if passed. Fast Food Franchisor Responsibility Act places the franchisor in a de facto employer relationship with the franchisee by imposing liability for the actions of the franchisee on the franchisor. If passed, the Fast Food Franchisor Responsibility Act would likely force franchisors to play a larger role in the day to day management of fast food restaurants, and take decision-making authority away from franchises. This could significantly impact franchisees autonomy and ability to conduct business independently. Finally, the bill would likely drive the fast food franchise model out of California due to the increased liability for franchisors. 

    With new legal requirements facing California employers in 2024, this Friday’s Five article focuses on five initial steps that employers can begin implementing now and other employment law deadlines in 2024:

    1. Minimum wage and exempt employees salary threshold: Adjust pay levels for increasing minimum wage and ensure exempt employees are paid minimum threshold salaries to qualify as exempt.

    Effective January 1, 2024, the California minimum wage will increase to $16 per hour. Employers should be mindful that higher rates may be in effect in cities (such as San Francisco) or counties (such as Los Angeles) that have enacted their own minimum wage rates, and employers must comply with the highest applicable minimum wage.

    To qualify as an exempt employee, the employee must be paid a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. With the state minimum wage increases on January 1, 2024, employers must pay a salary of at least $66,560 per year ($5,546.67 per month).

    2. Update reproductive loss leave policy

    Employers must update bereavement leave policies to comply with SB 848, which expands employee’s bereavement rights effective January 1, 2024. Employers must provide employees with five days leave for a “reproductive loss event.”  A “reproductive loss event” is defined to include failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction. The law applies to private employers with five or more employees, all public employers, and apply to employees that have worked for the employer for at least 30 days.  As with the bereavement leave requirements, this leave may be unpaid, however, the employee can use other accrued leave. Employees must take the leave within 3 months of the reproductive loss event, and an employer would not be required to provide more than 20 days in a 12-month period.  

    3. Review policies to remove noncompetition provisions by January 1, 2024 and provide notices to current and former employees by February 14, 2024.

    Effective January 1, 2024, SB 699 voids any contract that restricts an employee from engagement in a lawful profession, trade, or business of any kind, or a noncompetition agreement. This would prohibit an employer from seeking to enforce a noncompetition agreement, regardless of where or when the contract was signed. This restriction applies even if the contract was signed outside of California, or if the employment was maintained outside of California. SB 699 also authorizes an employee, former employee, or prospective employee to bring an action seeking injunctive relief, or for the recovery of actual damages, and allows the prevailing employee, former employee, or prospective employee to recover reasonably attorney’s fees and costs.  

    Similarly, AB 1076, which is also effective January 1, 2024, makes it unlawful to impose a noncompete clause on employees, unless a narrow exception applies. Employers should review all offer letters, employment agreements, or other policies distributed to employees to determine if there are any noncompete clauses with employees. If there are such policies, employers are required to notify all current and former employees that were employed after January 1, 2022, that any noncompete agreement or similar clause within their agreement is void, unless it falls within one of the exceptions. This notice must be made by February 14, 2023, and be made in a written, individualized communication delivered to the last known address and email address.  

    4. Fast Food Industry Changes

    Fast Food Minimum Wage

    AB 1228 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.”  Minimum wage for these restaurants will increase to $20 per hour on April 1, 2024.  Fast food employers need to start taking steps to ensure their payroll companies will incorporate this higher minimum wage

    Food Handler Card Costs

    Existing law requires food handlers to obtain a food handler card within 30 days of their date of hire and to maintain the card throughout employment. Effective January 1, 2024, SB 476 requires employers to pay the $15 cost of training and examination, and to pay the employee for the training time to obtain certification (which is approximately two and one-half hours).  The law also prohibits employers from conditioning employment on having an existing food handler card.

    5. Update Paid Sick Leave, Notices to Employees, and Develop Workplace Violence and Prevention Program.

    Update paid sick leave policies and ensure proper tracking of paid sick leave amounts by January 1, 2024.

    Beginning January 1, 2024, employers will be required to provide five days, or 40 hours. Employers will be able to control the amount used per year at five days or 40 hours per year and cap accrual at 10 days or 80 hours. Many California cities, including West Hollywood, have established local paid sick leave ordinances that provide more leave than required under California law. Employers should be sure to review local ordinances to determine which leave applies.

    Update Notice To Employee Under Labor Code section 2810.5 by January 1, 2024.

    Labor Code § 2810.5 requires employers to provide a Notice to Employees to all new hires that includes specific information.  Effective January 1, 2024, AB 636 requires employers to include “the existence of a federal or state emergency or disaster declaration applicable to the county or counties where the employee is to be employed, and that was issued within 30 days before the employee’s first day of employment, that may affect their health and safety during their employment.”

    Starting on March 15, 2024, employers with employees admitted pursuant to the federal H-2A agricultural visa, employers must include specific information in the 2810.5 notice about their rights as agricultural workers.  The Labor Commissioner is required to publish the updated sample notice by March 1, 2024. 

    In addition, employers must also update the 2810.5 notice to include the increased amounts of paid sick leave provided to employees as of January 1, 2024. 

    Develop Workplace Violence and Prevention Program by July 1, 2024.

    OSHA requires employers to establish and maintain an effective injury prevention program.  SB 553 requires employers to establish and maintain a workplace violence and prevention program. This includes effective training on the workplace violence prevention plan and maintaining records of workplace violence hazard identification, evaluation, and correction, training records, violent incident logs, and workplace incident investigations.  Employers have until July 1, 2024, to establish this program.

    In the ever-evolving landscape of California’s labor and employment regulations, the upcoming year promises to bring a fresh set of challenges for employers throughout the state. As we begin to close 2023, it’s imperative for businesses to familiarize themselves with the newest legal mandates and adjustments set to shape the way they operate, hire, and manage their workforce in 2024. This article delves into the key employment laws introduced for the forthcoming year, offering insights to ensure compliance and build a collaborative workplace.

    AB 1228: Fast Food Franchisor Responsibility Act 

    This bill repealed the FAST Act and implemented new regulations of the fast-food industry in California. Notably, this bill increases the minimum wage to $20 per hour as of April 1, 2024, and establishes the Fast Food Council. For details on how this Act will affect you, take a look at our detailed post here.  

    Assembly Bill 594: Public prosecution for wage theft/labor code violations  

    Public prosecutors (meaning, the Attorney General, a district attorney, a city attorney, a county counsel, or any other city or county prosecutor) can enforce labor code violations by pursuing civil or criminal actions for certain labor code violations. These labor code violations include unpaid minimum wage, unpaid overtime, failure to provide meal breaks, and failure to provide rest breaks. Public prosecutors may also enforce these labor code sections independently. Any money recovered until this code will go to the affected workers, and all civil penalties recovered under this section will be paid to the General Fund of California. The Plaintiff may also be entitled to reasonable attorney fees. It is important for employers to note that this is in addition and separate from the Labor Commissioners right to investigate and hear employee complaints, and the Labor Workforce and Development Agency’s rights under PAGA.  

    Assembly Bill 1076 and Senate Bill 699: Noncompete Agreements and Clauses 

    AB 1076 and SB 699 codifies existing law. SB 699 voids any contract that restricts an employee from engagement in a lawful profession, trade, or business of any kind, or a noncompete agreement. This would prohibit an employer from seeking to enforce a noncompete agreement, regardless of where or when the contract was signed. This restriction applies even if the contract was signed outside of California, or if the employment was maintained outside of California. SB 699 also authorizes an employee, former employee, or prospective employee to bring an action seeking injunctive relief, or for the recovery of actual damages, and allows the prevailing employee, former employee, or prospective employee to recover reasonably attorney’s fees and costs.  

    Similarly, AB 1076, makes it unlawful to impose a noncompete clause on employees, unless a narrow exception applies. Employers should review all of their offer letter, employment agreements, or other policies distributed to employees to determine if there are any noncompete clauses with employees. If there are such policies, employers are required to notify all current and former employees that were employed after January 1, 2022, that any noncompete agreement or similar clause within their agreement is void, unless it falls within one of the exceptions. This notice must be made by February 14, 2023, and be made in a written, individualized communication delivered to the last known address and email address.  

    Senate Bill 616: Paid Sick Leave Expansion 

    Currently, employers are required to provide employees with three days, or 24 hours, of paid sick leave. Beginning January 1, 2024, employers will be required to provide five days, or 40 hours. Employers will be able to control the amount used per year at five days or 40 hours per year and cap accrual at 10 days or 80 hours. Many California cities, including West Hollywood, have established local paid sick leave ordinances that provide more leave than required under California law. Employers should be sure to review local ordinances to determine which leave applies.  

    Senate Bill 723: Re-Hiring Rights for Laid-Off Employees  

    Currently, employers in the hospitality and business service provider industries are required to offer reemployment to qualified former employees as long as the former employees were (1) employed for at least 6 months in the year before January 1, 2020, and (2) laid off for a reason related to the pandemic. This is now expanded to apply to former employees who were employed for at least 6 months and laid off on or after March 4, 2020. Additionally, any separation due to a lack of business, reduction in force, or other economic, nondisciplinary reason is presumably a reason related to COVID-19. This law sunsets on December 31, 2025.  

    Senate Bill 497: Presumption of Retaliation 

    Employers are prohibited from discriminating, retaliating, or taking any adverse employment action against an employee or applicant because they engaged in protected conduct. Now, there is a rebuttable presumption of retaliation if the employer disciplines or takes adverse action against an employee within 90 days of that employee engaging in protected conduct. This means that simply by taking that action, the Plaintiff will be able to establish its prima facie case. It will be up to the employer to dispute this and establish that it did not discriminate, retaliate, or take an adverse employment action because the employee or applicant engaged in protected conduct.  

    Senate Bill 848: Reproductive Loss Leave 

    This bill expands employee’s bereavement rights. Employers must provide employees with five days leave for a “reproductive loss event.” A “reproductive loss event” is defined to include failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction. This bill applies to private employers with five or more employees, all public employers, and apply to employees that have worked for the employer for at least 30 days. As with the bereavement leave requirements, this leave may be unpaid; however, the employee can use other accrued leave. Employees must take the leave within 3 months of the reproductive loss event, and an employer would not be required to provide more than 20 days in a 12-month period.  

    Senate Bill 428: Workplace Restraining Orders 

    Employers are already authorized to seek a temporary restraining order on behalf of an employee who has suffered an unlawful violence or a credible threat of violence if it can reasonably be carried out in the workplace. Now, employers may also seek a temporary restraining order on behalf of employees who have suffered harassment. The employer must allow the employee the opportunity to decline being named in the order before filing the petition. The bill includes a carve out to prevent a temporary restraining order against speech or activities that are protected by the NLRB.   This bill goes into effect on January 1, 2025.  

    Senate Bill 553: Workplace Violence Prevention 

    The California Occupational Safety and Health Act of 1973 already requires employers to establish and maintain an effective injury prevention program. Now, employers will be required to establish and maintain a workplace violation prevention program. Employers must provide effective training to employees on the workplace violence prevention plan. In addition to the prevention program, employers must maintain records of workplace violence hazard identification, evaluation, and correction, training records, violent incident logs, and workplace incident investigation records. Employers have until July 1, 2024, to establish this program.  

    Senate Bill 700: Marijuana Protections 

    Employers may no longer ask an applicant about their prior marijuana use. This bill clarifies that the law against discrimination on the basis of marijuana includes information the employer obtained about prior marijuana use from the applicant’s or employee’s criminal history.  Our detailed article about SB 700 can be found here.

    Senate Bill 525: Healthcare Workers Minimum Wage 

    This bill creates a series of minimum wage requirements varying by type of healthcare employer with yearly increases. Additionally, covered health care employees that are paid on a salary basis must earn a monthly salary equal to no less than 150% of the health care minimum wage or 200% of the applicable minimum wage, whichever is greater, for full-time employment, to qualify as exempt from payment of minimum wage and overtime.  

    Learn more during our webinar

    Join our experts on Thursday, October 26, 2023, as we dig deeper into these new laws and how they may affect you. Register for our free webinar here: https://us06web.zoom.us/webinar/register/6316951613202/WN_RDLUQU6mSvKBzkCfB9eU-A.  

    Big changes are coming to the quick service industry in California.  An agreement reached between labor and fast-food companies has been documented in a Term Sheet dated 9/11/2023 proposes to drastically alter the FAST Act and the fast food industry in California.  The term sheet agreement, if it becomes final, introduces pivotal provisions impacting fast food workers, employers, and the entire sector at large.  Here’s a breakdown of what this means for the industry if the agreement between representatives and business becomes final:

    1. Repeal of the FAST Act: AB 257, known as the FAST Act, would be repealed.  The FAST Act was a paradigm shift on how regulations would be implemented for an industry, whereby the legislature shifted its power to regulate the fast food industry to a group of unelected members of an appointed council. 
    2. Raise in Minimum Wage For Limited-Service Restaurants: As part of the negotiations, it was agreed that starting April 1, 2024, all limited-service restaurants that are a part of a chain with over 60 locations nationwide, must pay a minimum wage of $20.00 per hour.
    3. No More Referendum on AB 257: Under the agreement, businesses supporting the referendum on AB 257 (the FAST Act) have agreed to withdraw this challenge to the law by January 1, 2024.  We previously wrote about the referendum challenging the FAST Act here.
    4. Joint Employer Provisions Eliminated in AB 1228: AB 1228’s joint employer provisions will be removed.  As a reminder AB 1228, deemed the Fast Food Franchisor Responsibility Act, would require fast food franchisors to share in civil legal responsibility and liability for the franchisee’s violations. An employee, or former employee, would be able to bring an administrative charge or civil lawsuit against not only the franchisee, but also the franchisor for violation of various employment laws.  Under this agreement, joint employer liability between franchisor and franchisee would be deleted from the bill.  We previously wrote about what AB 1228’s impact would have been on the industry here. 
    5. The Industrial Welfare Commission Will Not Be Revived: The budget appropriation for the Industrial Welfare Commission (IWC), including its budget control language, has been scrapped under the deal.  By funding the IWC, labor had a backup plan to continue to regulate the quick-service industry (among other industries across California) in case the FAST Act was repealed by the voters in 2024.  Governor Newsom signed AB 102 on July 10, 2023 and a part of that bill funded the IWC to reconvene to issue wage orders regulating the “wages, hours, and working conditions” for various industries.  Employers could have expected regulations from the IWC covering nearly every industry in California (as the current wage orders cover most industries) by October of 2024. 
    6. Establishment of the Fast Food Council:
      • This council, set up within the Department of Industrial Relations, looks to have representation for all interests – employers, employees, and advocates alike.
      • The council would be made of 9 voting members, including representatives from various sectors of the fast food industry, fast food restaurant franchisee or restaurant owners, fast food restaurant employees, advocates for fast food restaurant employees, and a neutral chairperson.  However, the Governor still maintains the power to appoint all but 2 of the 9 positions on the council.
      • The council’s responsibilities are significant.  From 2025 to 2029, they can adjust the hourly minimum wage each year.  However, they’re capped at an increase of the lesser between 3.5% or the annual change in Consumer Price Index.  They also have the flexibility to reduce future wage increases by region with specific limitations.
      • The council can also recommend standards to state agencies. But, these recommendations will undergo rigorous review under the California Administrative Procedure Act.
    7. Local Municipalities Are Limited On Setting Minimum Wages: Local governments won’t be able to set a higher minimum wage for fast food employees than what is mandated by the council.

    The term sheet published by the Save Local Restaurants is available here.  This agreement introduces major changes, and employers in the quick-service industry must closely watch the implementation of this agreement.  We will report on any other developments.