New CA fast-food workers minimum wage law has a catch for those who work inside retail stores

Say you work at a fast food restaurant or coffee shop that bears the name of a national chain. Under California law, you're entitled to be paid at least $20 an hour starting Monday.

Say you work at one of those stores, inside a grocery store. The grocery store, your employer, is exempt under the law. You'll keep getting your current wages.

But say you assemble burgers, scoop ice cream or prepare Frappuccinos at one of those stores, and it's inside another store, but the bigger store isn't a "grocery" because less than half of its revenues are made off groceries. What then?

According to the state of California, the store should be paying you at least $20 an hour, but only for the hours you work in the fast food portion of the store. If you spend part of your shift checking out customers or stocking the shelves in the rest of the store, you're only entitled to the regular minimum wage of $16 for those hours.

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That's according to an 18-item FAQ the Department of Industrial Relations published in March as California businesses prepare for the fast food minimum wage to kick in on Monday.

It's not the only situation that is confusing employers and workers alike.

To raise wages for fast food workers, the Service Employees International Union struck a deal last year with the International Franchise Association and California Restaurant Association that included owners of fast food chain locations but exempted those who operate independent restaurants.

The law covers all fast food restaurants that belong to chains with 60 or more locations nationally, roping in the unions' targets: McDonald's or Burger King and their franchise owners. More than 500,000 Californians -- primarily women, immigrants and people of color -- work in what's known in the industry as "limited service restaurants." Earlier this year SEIU estimated the law will apply to roughly 3,000 employers.

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"The vast majority of fast-food locations in California operate under the most profitable brands in the world," Joseph Bryant, SEIU's executive vice president and a member of a new statewide fast food regulatory council, said in a statement Thursday. "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."

But outside those national chains are numerous other food sellers and business arrangements, not all of which are directly addressed in the new law. Grocery stores and some bakeries are exempt, and this week, Gov. Gavin Newsom signed into law a carve-out for fast food places at airports, convention centers and hotels.

According to emails obtained by CalMatters in response to a public records request, a range of employers have been trying to figure out if they must pay $20 ever since the law was signed late last September.

In October, the Department of Industrial Relations received two inquiries from franchise owners asking whether they must comply with the law. One employer owned an Auntie Anne's and a Cinnabon and believed selling pretzels and cinnamon rolls qualified them for the controversial bakery exemption. The other owned an ice cream parlor.

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"This clarification is imperative as to whether or not we will be financially able to open more locations at the proposed wage increase to $20 an hour," the ice cream store owner wrote.

Both were forwarded to the department with a request for legal guidance by a staffer for Assemblymember Chris Holden, the law's author. In recent weeks, Holden has been unable to answer reporters' questions about why certain exemptions -- such a carveout for some bakeries -- were included in the law. The department redacted responses to those emails under a public records exemption for attorney-client communications.

The ice cream store owner, Gabriela Campbell, was featured this week in a KCRA report detailing how she contacted multiple state offices and still isn't sure if the law applies to her.

By December, employers were lawyering up.

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Attorneys for the Honey Baked Ham chain asked whether it would qualify. They described the stores as "retail meat stores" where customers primarily buy cooked hams and other "bulk proteins" and sides to eat at home, but acknowledged they also sell sandwiches that customers can eat at the restaurants or take to-go.

Attorneys also sought clarification over whether their clients would have to pay $20 if they own a chain of Papa Murphy's "take and bake" pizza shops.

In late December, attorneys for an unnamed retail chain asked the department whether they would have to pay $20 in the fast food restaurants or cafes that are inside some of its stores. The attorneys noted the company's stores sometimes sell groceries, but not primarily, and employees who work the fast food counters are often also assigned to other parts of the store.

Department attorney Ehud Appel said it did not respond to individual inquiries, instead answering to the companies with the FAQ this month.

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In the FAQ, the state said: businesses are not exempt for selling ice cream, even though a national industry classification system excludes some ice cream shops from the definition of fast food, or "limited service" restaurants. To count as a bakery, the state said, the bread sold must weigh at least half a pound. And workers at a "store within a store" must be paid $20 for the hours they work in the restaurant portions of the stores.

The answers apparently created new questions.

The FAQ stated fast food managers can only be exempt from California's overtime pay laws if they make more than twice the minimum wage -- a threshold that is now higher for fast food employees. But attorneys for the retailer wrote in another letter to the department in mid-March that the stores' managers only manage the fast food counters part time.

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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 process that is so backlogged amid a staffing crisis for the office that complaints can take years to resolve. The department did not immediately respond Thursday when asked for further clarification.

The new fast food council may also take up the concerns, or they could end up in the courts to decide.

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