California Increases Minimum Wage For Fast Food Employees to $20 Hour

California governor, Gavin Newsom, signed into law a bill to increase wages for fast-food workers across the state. AB 1228, also known as the Fast Food Franchisor Responsibility Act, will secure the highest guaranteed base pay in the industry for Californian fast-food employees. The bill, which will come into effect April 1, 2024, applies to any fast-food chain with a minimum of 60 locations nationwide — excluding those that make and sell their own bread.

This landmark change will increase fast food workers minimum wage to $20 per hour, almost $5 higher than the Golden State’s minimum wage of $15.50. Also known as the FAST Act, this bill establishes a council that would have the power to set and increase minimum wages up to 3.95% through 2029, and make recommendations for working conditions.

The National Owners Association, who represent more than 1,000 McDonald’s franchise owners, have criticized the bill for its severity. According to this association, the law would establish costs that “simply cannot be absorbed by the current business model.”

The NOA stated in a memo published by Fox News, “The new AB 1228 legislation has been voted into law and will result in a devastating financial blow to California McDonald’s franchisees at a projected annual cost of $250,000 per McDonald’s restaurant.” The group claims that 95% of the 1,300 McDonald’s restaurants in California are locally owned and operated by small business owners.

The National Owners Association has conveyed their concerns in that the passage of AB 1228 could potentially lead to similar attempts by legislators throughout the country. These efforts may affect franchise owners’ ability to make local business decisions.

According to the Congressional Budget Office, a $20 minimum wage increase in California has the potential to negatively impact fast food employment. The increase could reduce employment by 10%, meaning that there would be a loss of more than 50,000 jobs in this sector. Employers are most likely to respond to the wage increase by cutting hours, benefits, and training.

Before the approval of AB 1228, fast-food corporations could have been collectively liable if franchises violated employment laws.  The National Owners Association desperately wanted to avoid parent corporations from liability for the infringements of franchisees—which they say would have resulted in larger corporate head offices exerting more control over local operations. So fast-food giants were working on a voter initiative for 2024 to stop such liability.

Instead of making corporations liable for the infringements of franchisees, leaders settled on the wage increase in this bill.

The wage increase will be effective April 1, 2024, however fast-food workers may receive a small raise in the new year due to the state’s minimum wage increase to $16 per hour on January 1, 2024.

What do you think of separate/higher minimum wage rates for workers based on their industry?