California’s New $20 Fast-Food Worker Minimum Wage, Explained

On Monday, April 1, the minimum wage for fast-food workers in California rose to $20 under AB1228, a new law that aims to offer increased protections for workers in the fast-food industry. The law defines a fast-food establishment as a limited-service restaurant that is part of a chain with at least 60 locations nationwide and primarily sells food and beverages for immediate consumption. AB1228 replaces AB257, a 2022 bill also known as the FAST Recovery Act, which was passed to achieve similar worker protections. As of January 1, 2024, the statewide minimum wage was $16 an hour.

The response to the new wage has differed between employees and franchise owners. Franchise owners have expressed concerns with the new minimum wage, citing increased operational costs and its potential to trigger menu price hikes that impact sales and customer retention. Alex Johnson, who owns 10 Auntie Anne’s Pretzels and Cinnabon locations around the San Francisco Bay Area, told the Associated Press that the wage increase will cost him about $470,000 a year and require him to raise menu prices between 5 and 15 percent to offset the additional costs. The Wall Street Journal reported that some businesses, including allegedly Pizza Hut, laid off employees in advance of the wage increase. In a statement to USA Today, Joe Condie, the president and CEO of the California Restaurant Association, said that it would be difficult for restaurants to take on the increased labor costs associated with the new minimum wage without making business adjustments.

California fast-food workers generally supported the wage increase; one Jack and the Box employee interviewed by the AP expressed that she wished it had come sooner. The Service Employees International Union (SEIU) emailed a statement to Eater celebrating the wage increase going into effect. “Those corporations need to pay their fair share and provide their operators with the resources they need to pay their workers a living wage without cutting jobs or passing the cost to consumers,” Joseph Bryant, executive vice president of SEIU and a member of the California Fast Food Council, said in the statement. Bryant also refuted the claim that franchise owners would need to implement price hikes to offset costs, calling it “largely unfounded.” He noted that higher wages are linked to worker retention and job growth.

AB1228 was put under increased scrutiny in February 2024 when Bloomberg reported that Panera was allegedly exempt because of its classification as a bakery. The publication also alleged that Gov. Gavin Newsom had pushed for the exemption because of his relationship with Greg Flynn, a billionaire who owns a number of Panera locations in California. In a Los Angeles Times report, a representative for Newsom denied that Panera was exempt and called the claim “absurd.” In a statement to Eater, Flynn said he would increase all hourly pre-tip wages for Panera employees in California regardless of whether or not the exemption was valid, effective April 1.

In the wake of the controversy, California issued an FAQ with expanded guidelines explaining which businesses the law applies to and which ones are exempt. For example, bakeries that produce and sell bread on-site as a standalone item would be exempt, as well as restaurants that operate in conjunction with an airport, hotel, or theme park.

According to the Governor’s office, California is currently home to over 500,000 fast-food workers. In 2022, the statewide average hourly wage for fast-food workers was $16.21.