Thanks to the complexity of our labor laws, attorneys and accountants stand to benefit from Assembly Bill 1228 which went into effect April 1st. (link to AB1228 – https://legiscan.com/CA/text/AB1228/id/2843232)
Nothing is ever as straightforward as it seems when it comes to the labor code.
Most people understand the new law to require $20 as the required minimum wage at fast food restaurants. Despite using nearly 4,300 words, the new law still may not be clear, which is when the attorneys and accountants enter the scene.
What exactly is a fast food restaurant? For legal analysts, this is not a rhetorical question. Sure, the Golden Arches at the corner of many major intersections may come to mind, but what about a small restaurant with a drive-thru window? What about a favorite coffee franchise that also sells food? What if that coffee franchise is located inside the grocery store? What if the fast food restaurant is inside the airport? My favorite question: what if the fast food restaurant bakes its own bread?
As a tax attorney, this reminds me of the tax laws on the sale of prepared food. Is it hot or cold? Is it part of a meal-deal? For here or to go?
For AB1228, the questions are necessary to determine which businesses must increase the minimum wage paid to its workers.
It turns out, only fast food restaurants that are “limited-service restaurants in California that are part of a national fast food chain” are fast food restaurants; unless they bake bread. More specifically, unless they have been baking bread since September 15, 2023 for sale as a stand-alone menu item, in which case that fast food restaurant is exempt from the minimum wage increase. But what is bread?
Bread is defined under Part 136 of Subchapter B of Chapter I of Title 21 of the Code of Federal Regulations. I am not making this up.
The bread must be “produced” at the fast food restaurant and cannot be mixed or prepared at another location and then shipped to the fast food restaurant. Once bread is defined, the exemption makes clear the bread has to be sold as bread, not part of a sandwich or burger. Fast food restaurants cannot simply start baking bread to become exempt; that ship sailed on September 15, 2023, per the statute.
Another exemption is if the restaurant is located within a “grocery establishment,” also specially defined to be over 15,000 square feet in size, amongst other qualifications. If the establishment qualifies as a grocery establishment, and the grocery establishment is the employer of the individuals working in the restaurant, then the restaurant is no longer a fast food restaurant. Not because of the national chain status, or whether bread is baked, but based on who signs the workers’ paychecks.
One thing is certain, some labor lawyers and accountants will benefit as much or more than the workers intended to benefit from the new law. (Fast) food for thought!
