Most of these Monday began paying employees the new minimum wage of $20 an hour for fast-food workers, a $4 an hour hike from California’s already high $16 an hour minimum wage.
Advocates of the new fast-food wage, the highest minimum wage in the U.S., say it’s a win for workers who even at $20 an hour can’t afford to pay for basic necessities in high-cost-of-living areas such as Santa Cruz County.
The pay increase established by Assembly Bill 1228 applies to California fast-food workers employed by any chain with more than 60 locations nationwide and covers corporate-owned and franchised locations. The state has more than 540,000 fast-food workers and 37,926 fast-food businesses.
What will this new law, sponsored by the Service Employee International Union, mean for the fast-food industry?
The most obvious outcome is that workers will get bigger paychecks — although research is less than decisive that major increases in the minimum wage lift families out of poverty. Moreover, according to one study, fast-food franchisees’ payroll records showed that employment fell with each 10% increase in the minimum wage reducing employment by nearly 2%.
The other almost certain effect is that prices will go up for consumers and that these increases will be borne disproportionately by low-income families. Some fast-food operators have announced they plan to raise prices — or are considering doing so. Chains such as McDonald’s, Starbucks and Jack in the Box say they are planning to push the wage increase onto their customers or change their operations.
Aside from these outcomes, it’s also a curious law as it legislates that a hamburger flipper at McDonald’s will earn a higher minimum wage than one doing the same job at a local restaurant. Last week, for instance, Gov. Gavin Newsom signed into law a carve-out for fast-food places at airports, convention centers and hotels.
As employers attempt to find out whether they will have to pay the $20 an hour, it’s up to a new labor-management Fast Food Council, the state labor commissioner and, possibly, the courts to determine which businesses have to pay the higher wage. The council’s mandate also includes work hours and conditions.
Bakeries were the first businesses to appeal to the council, after “PaneraGate” when questions arose about a wealthy Panera Bread franchisee’s political relationship with Newsom and a possible exception for his restaurants. The Fast Food Council, advised by a lawyer for the labor commission, ruled that bakeries such as Panera that use premixed dough, have to pay $20 and that only bakeries that prepare and bake bread on site and sell it separately may qualify for an exemption.
A CalMatters reporter’s public records request found that many other employers have been trying to figure out if they will be forced to comply with the $20 standard.
Some are already considering legal action, while still others are targeting SEIU-backed politicians who supported the law.
It’s unclear how the state will handle the confusion going forward. Its FAQ directs workers who believe they’re wrongly being denied $20 an hour to file a wage theft claim with the Labor Commissioner’s Office — a backlogged process where complaints can take years to resolve.
But it’s not just confusion over who might be exempt from the new minimum wage creating havoc around the law.
In San Jose over the past few months, labor leaders have floated ideas for local requirements that would include security guards at every fast-food restaurant, two weeks’ advance notice on scheduling, paid time off and employee-rights training for workers paid for by restaurant owners.
Aside from questions about why does a government mandate treat people in similar economic circumstances differently, or why local governments should further muddy a state wage requirement, this law promises to become a gold mine – for lawyers.
And for consumers, just wait for even higher prices.