We are a fast food restaurant covered by the new minimum wage law for fast food restaurant employees. Does this new law also affect the minimum salary we must pay to our exempt managers?
Yes, the new minimum wage law hike for fast food chain workers also has a substantial impact on the minimum salary required for exempt employees in the fast food industry.
New Fast Food Worker Minimum Wage
AB 1228 (codified in California Labor Code Section 1474–1476) is a new law in California that increases the minimum wage for fast food restaurant employees. The law applies to certain fast food chains with 60 or more locations nationwide.
Starting April 1, 2024, all fast food restaurant employees covered by the law must be paid at least $20 an hour. The law also creates a Fast Food Council, which is empowered to make future increases to the minimum wage and to adopt other standards for fast food restaurants. The next such minimum wage increase could occur as early as January 2025.
Minimum Salary for Exempt Managers
While the higher minimum wage for fast food employees most clearly has an impact on non-exempt worker wages, it also increases the exempt salary threshold for managers and other salaried employees of covered fast food restaurants.
Under California law, employees classified under the “white collar” administrative, professional or executive exemptions must earn at least two times the state minimum wage for full-time employment to maintain exempt status.
The fast food minimum wage law provides that the hourly minimum wage established by the law shall constitute the state minimum wage for fast food restaurant employees for all purposes under the Labor Code and the Industrial Welfare Commission Wage Orders.
That means that starting April 1, 2024, managers at fast food restaurants must earn a minimum salary of at least $83,200 per year ($6,933.33 per month) to qualify as exempt.
In March 2024, the California Department of Industrial Relations (DIR) issued guidance on the new fast food minimum wage law in the form of Frequently Asked Questions. (FAQ) The guidance spells out in FAQ Nos. 14 and 15 that covered fast food restaurant employers must use the higher $20 per hour rate set by the new law for their exempt employee calculations.
The DIR guidance states: “Under California law, to qualify as an ‘exempt employee’ for wage-and-hour purposes, you must receive a salary of at least two times the state minimum wage for someone working 40 hours a week and meet other specific requirements. If your salary is less than $83,200 as a fast food restaurant employee starting April 1, 2024, you are not an exempt employee.”
Recommended Action
Covered employers in the fast food industry should review their exempt manager salaries to ensure that the managers are being paid the minimum salary required for exempt employees under the new law.
As stated above, exempt employees working for covered fast food restaurants must earn at least $83,200 per year starting on April 1, 2024; otherwise, they will no longer be considered exempt. Employers who fail to take steps to make any necessary changes could face expensive claims for unpaid wages, statutory penalties and more.
If you have any questions regarding coverage or exceptions under the new fast food minimum wage, review the California DIR’s Frequently Asked Questions and the Wage and Hour Requirements for Fast Food Restaurants section in the HR Library on HRCalifornia.
Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred members and above. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.
