Fast Food Minimum Wage: California Employer Guide

Most operators who get the California fast food minimum wage wrong do not get the $20 wrong. The $20 is easy. It is on every poster and in every news story, and payroll systems handle it fine. When I think about where this law really costs a restaurant money, I skip past the hourly rate to the people on salary.

What operators get wrong is the manager. Under California law an exempt employee, meaning one you are not required to pay overtime, must earn at least twice the applicable minimum wage. AB 1228, the state law behind the fast food rate, makes $20.00 the applicable minimum wage for covered fast food employees "for all purposes."

The exempt salary threshold works out to $83,200 for a covered fast food manager, not the $72,384 that applies to every other California employer from January 1, 2027 ($70,304 until then). Pay that manager $75,000, feel comfortable because it clears the general state threshold, and you have just created a non-exempt employee who is owed overtime.

This guide is written for the operator, not the worker. It covers the current rate, the three-part coverage test, the AB 610 exemptions that take some restaurants out from under the law, the exempt manager threshold in detail, what misclassification actually costs in California, the posting requirement, how local ordinances interact, and where the rate is headed.

The Current Rate

The rate has been $20.00 since April 1, 2024, and it applies from an employee's first day. There is no probationary rate, no training rate, and no variation by role.

A dishwasher, a cook, a cashier, a drive-thru operator, and a shift lead at a covered restaurant all start at $20.00 an hour minimum. A shift lead who gets a lead differential gets it on top of $20, not instead of it.

For context, California's general state minimum wage is $17.40, effective January 1, 2027 ($16.90 until then). So from that date, a covered fast food restaurant pays $2.60 an hour more per employee than the business next door ($3.10 until then).

One more rule sits underneath the rate: tips do not count toward it. The Labor Commissioner, the state office that enforces California wage law, has confirmed that an employer may not credit tips toward the $20.00 hourly minimum. The same rate also governs how much of a covered worker's pay is protected from wage garnishment.

Who Is Covered

Coverage under AB 1228 is a three-part test, and all three parts must be satisfied. Miss one and the $20 rate does not apply to you.

Three points trip operators up.

The 60-location count is at the brand level, nationally. If you are a franchisee with two locations in Sacramento and the brand has 300 establishments across the US, you are covered. Your personal footprint is irrelevant.

The California DIR is explicit on this: AB 1228 applies regardless of whether the employer owns the national brand or franchises it. The statute itself, AB 1228, added sections 1474 through 1476 to the Labor Code.

The boundary at exactly 60 is worth a note. Labor Code section 1474 defines a national fast food chain as one with more than 60 establishments, while the Labor Commissioner FAQ puts the test at 60 or more. Because the burden of showing you are not covered is yours, a chain sitting exactly on 60 should treat itself as covered.

The immediate-consumption test is a revenue test rather than an impression, and the line is more than 50 percent of gross revenue. The DIR gives the example of a pizza chain earning 30 percent of revenue from take-and-bake and 70 percent from fully cooked food: that chain is covered. Flip the ratio and it is not.

The AB 610 Exemptions

AB 610 amended the law effective March 25, 2024, and carved out a meaningful set of establishments. If you assumed you were covered without checking this list, check it. The last two rows, qualifying bakeries and restaurants inside grocery stores, were already excluded under AB 1228 before this amendment.

If you land in one of these categories, the $20 rate does not apply and you revert to California's general minimum wage, $17.40 from January 1, 2027 ($16.90 until then), or a higher local rate if one applies. That is a difference of up to $2.60 per hour per employee ($3.10 until then), so it is worth confirming rather than assuming.

Read the two concession rows carefully, because each one needs every condition it lists, not just one of them. A concession contract on its own exempts nobody: the campus carve-out also needs a single-corporation office site and a restaurant that mainly feeds that corporation's staff.

The public-land carve-out has the same shape. It needs the concession or food service contract plus land that is a port district, a public beach, a public pier, a state park, a municipal or regional park, or a historic district.

Confirming coverage means working the three coverage tests and the exemption list in writing, one location at a time, and keeping the answer. Since the burden of showing you are not covered sits with you, the written answer is the point of the exercise rather than a by-product of it.

The Exempt Manager Trap

The trap is simple: at a covered restaurant, the salary a manager needs to stay exempt from overtime is tied to the fast food rate, not to the general state minimum wage, so it is much higher. This is the rule that matters most, and almost no article written for operators states it plainly.

The mechanism is straightforward once you see it. California Labor Code section 515 requires that an employee exempt under the administrative, professional, or executive exemptions earn a monthly salary of at least twice the state minimum wage for full-time employment, which the same section defines as 40 hours a week.

Labor Code section 1475 then provides that the hourly minimum wage the Council sets "shall constitute the state minimum wage for fast food restaurant employees for all purposes" under the Labor Code and the wage orders. That one clause is what pulls the $20 rate into the exempt salary test.

Put those two together. Twice $20.00, at 40 hours a week for 52 weeks, is $83,200, or $1,600 a week. The DIR confirmed this in its FAQ, stating that if your salary is less than $83,200 as a fast food restaurant employee, you are not an exempt employee.

One variation deserves its own line, because it turns up at every operator running a counter inside a larger store. A manager who supervises both covered fast food staff and other staff does not get one threshold or the other. The Labor Commissioner requires a blended figure, recalculated weekly from the share of time spent on each side.

Take a manager who spends 40 percent of the week over fast food workers and 60 percent over everyone else. Their weekly threshold is 40 percent of the $1,600 fast food figure plus 60 percent of the general weekly figure.

From January 1, 2027, the general figure is $1,392 a week, so this manager's threshold comes to $1,475.20 for the week. Until then it is $1,352 a week, and the threshold comes to $1,451.20 instead. Keep the split in writing, because the blend moves with the schedule rather than with the job title.

You have exactly two compliant options for a manager between $72,384 and $83,200: raise the salary to at least $83,200, or reclassify them as non-exempt and start tracking their hours and paying overtime. Doing neither is not a third option; it is a wage claim waiting to be filed. The exempt vs non-exempt guide covers the duties test, which a manager must pass on top of the salary threshold.

That choice gets made one salaried manager at a time, so list them all in one place before you make any of it. Put each manager's current salary next to the threshold, and record which of the two options you took and the date it takes effect.

What Getting It Wrong Costs

California overtime exposure is larger than most operators expect, because California is not a weekly-overtime-only state. The Labor Commissioner's overtime rules add daily triggers on top of the weekly one.

A misclassified manager working 50 hours a week for a year leaves you with far more than a modest correction. Between weekly overtime, daily overtime on long shifts, and any double time, the back-wage figure adds up quickly, and it typically arrives alongside claims for missed meal and rest breaks, waiting time penalties for late final pay, and interest.

Posting Requirements

Covered employers must post the Minimum Wage Order Supplement for Fast Food Restaurant Employees. This is a distinct posting from your standard Industrial Welfare Commission wage order, the industry rules on pay and hours already in your poster set. Wage Orders 5 and 7 also carry their own AB 1228 amendments, as the amendment note printed on each order records.

Watch the language question, because it runs the opposite way from the rest of your poster set. The Department of Industrial Relations' wage order page offers Wage Orders 5 and 7 in Spanish, Chinese, and Korean alongside English, but has the fast food supplement in English only. There is no translated version to order for a Spanish-speaking crew.

This is the cheapest item on the compliance list and one of the most commonly missed. It is a new posting rather than a change to an existing one, so it does not turn up automatically when you replace an older poster set.

How Local Minimum Wages Interact With the $20 Rate

Local minimum wages interact with the $20 rate in one way only: through a higher general minimum wage, never through a separate fast food rate.

A city or county cannot pass an ordinance setting a higher minimum wage specifically for fast food restaurant employees covered by AB 1228. That path is closed.

But a city or county can set a higher general minimum wage applying to all employees in the jurisdiction, and covered fast food restaurants must then pay that higher local rate. The rule you follow is simply whichever is higher.

In practice, check the general minimum wage in every city where you have a location. At least two California cities clear the fast food rate. According to the UC Berkeley Labor Center inventory of local minimum wage ordinances (July 2026), Emeryville is at $20.34 and West Hollywood at $20.25, so covered employees there get the local rate rather than $20.00.

What Happens Next to the Rate

The Fast Food Council has statutory authority to raise the rate annually. Any increase is capped at the lesser of 3.5 percent or the change in the US Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), rounded to the nearest ten cents.

The Council may set a single statewide rate or vary it by region. It cannot set an increase that takes effect after the 2029 calendar year, and Labor Code section 1475 ends the Council's operations on January 1, 2029.

A cost-of-living increase of up to 70 cents, which would have taken the rate to $20.70, was slated in February 2025 for discussion at the Council's next meeting. That meeting never happened. The Council's meetings page lists nothing after February 2025, and no increase has been adopted, which is why the rate sits at $20.00 today.

Two things to do with that. First, do not assume the number is frozen; it simply has not been raised yet. Second, and more usefully, model future increases now.

The hourly increase is the visible cost and the easy one to budget. The exempt threshold moving in lockstep is the one that surprises people, because every raise to the floor pushes your managers closer to being non-exempt without anyone touching their salary.

If You Are Not Covered

If you run an independent restaurant, or a chain under 60 locations, or a full-service restaurant with table service, AB 1228 does not apply to you. You pay California's general minimum wage, $17.40 from January 1, 2027 ($16.90 until then), or a higher local rate where one applies, and your exempt threshold is $72,384 from that date ($70,304 until then).

There is a common assumption that the $20 rate drags all restaurant wages up with it through competitive pressure.

According to a National Bureau of Economic Research working paper on the law (May 2026), the policy raised fast food wages by about 7 percent. Both the wage effects and the drop in separations (workers leaving their jobs) concentrated among the large employers AB 1228 actually covers, with limited spillover onto uncovered businesses.

That said, you are competing for the same labor pool. If a covered chain across the street starts at $20 and you start at $17.40, you will feel it in hiring and in retention, even if no law obliges you to match. That is a business decision, not a compliance one, so it belongs in your labor budget rather than your legal risk register.

Fast Food Minimum Wage Outside California

There is no federal fast-food-specific minimum wage. The federal minimum under the Fair Labor Standards Act is $7.25 per hour and applies across industries, and the Department of Labor publishes a fact sheet covering restaurants and fast food specifically.

California is the outlier, which is why most of what you read about the fast food minimum wage turns out to be about California, even when you operate somewhere else. Every other state applies its general minimum wage to fast food workers.

New York ran a separate fast food wage schedule for years, until January 1, 2025, when its fast food rates were aligned with the rest of the Hospitality Industry Wage Order. Covered fast food workers there now earn the same rate as other non-tipped hospitality employees in their region.

That change is worth knowing if you operate in both states, because it ends a separate schedule people still budget for. The New York Department of Labor keeps the fast food definition on the books, a chain of 30 or more locations nationally, in case a separate rate is ever set again.

If you operate across state lines, treat California as the exception that gets its own process. Everywhere else, your restaurant follows the same wage rules as any other employer in that state.

The Compliance Checklist

The whole compliance job for a California fast food operator comes down to seven tasks.

The one that costs real money is the fourth item, and it is the one no poster reminds you about.

Common Mistakes

These are the seven mistakes operators most often make under AB 1228, with what happens and the fix for each.

Three of these are coverage questions: the franchise, national-count, and AB 610 rows. The top row is a payroll question, and it is the one that turns into a lawsuit.

At a multi-location operator, the weak point is the paperwork: the coverage determination, the manager's salary, the classification decision, and the posting record live in four different places. When someone finally asks whether you did the analysis, nobody can produce it.

FirstHR holds the employee records, the classification documentation, and the signed acknowledgments in one place with e-signature, so the answer to "can you show us how you classified this manager" takes thirty seconds rather than a week. It does not run your payroll. It keeps the paper that proves you did the work.

Frequently Asked Questions