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Panera Exempted from California Minimum Wage Hike Thanks to Newsom Link?

"That's how the sausage gets made," Newsom said about the exception.

Published March 1, 2024

Updated March 1, 2024
 (Justin Sullivan / Getty Images)
Image Via Justin Sullivan / Getty Images

According to a California state law set to take effect on April 1, 2024, a restaurant chain with more than 60 locations nationwide that "produces for sale bread as a stand-alone menu item" does not count as "fast food." 

The confusing exception led to controversy following a Bloomberg article published on Feb. 28 reporting that the "fast-casual" chain Panera Bread had dodged an upcoming minimum-wage increase for fast-food workers in California to $20 an hour. The article connected the "bread exemption" to billionaire Greg Flynn, a frequent donor to California Gov. Gavin Newsom's political campaigns who owns more than two dozen Panera Bread locations in the state. 

In a statement to Snopes, however, Newsom spokesperson Alex Stack denied any such a connection played a role in the law and even suggested the exemption would not actually apply to Panera. "The Governor never met with Flynn about this bill and this story is absurd," Stack said. "Our legal team has reviewed and it appears Panera is not exempt from the law." The response, first given to Politico, came after Newsom received intense criticism over the perceived loophole.

Flynn, a prominent Panera franchisee erroneously described as Panera's "owner" by some sources (including the New York Post and many social media accounts), told Bloomberg he played no part in coming up with the exemption. 

The Fast Food Recovery Act 

The law in question has proved quite controversial since its initial proposal in late 2021, and as such, it has been the subject of changes and challenges. 

In the wake of the COVID-19 pandemic, fast-food workers began striking nationwide to fight for standardized working conditions. In California, lawmakers drafted Assembly Bill 257, sometimes referred to as the Fast Food Recovery Act, which would establish a statewide "Fast-Food Council" that could regulate the industry by issuing standards for wages and working conditions.

In January 2022, the bill narrowly passed in the state Assembly. Over the next seven months, the state Senate made several amendments that lessened the sweeping changes of the original draft, and a revised version of the bill passed in both chambers in August 2022 and was signed into law by Newsom in September 2022. The law would go into effect in April 2024.

Throughout the process, fast-food companies and chambers of commerce pushed back, rallying against the bill by attempting to put a measure on the 2024 ballot to repeal the act. After a year of negotiation between the state legislature and those who opposed the act, Assembly Bill 1228 was passed in September 2023, promising to repeal many parts of the act if the referendum was withdrawn, removing the fast-food council's power over workplace conditions and dropping the proposed minimum-wage increase from $22 an hour to $20 an hour.

The Bread Exception

The provision exempting restaurants that make and sell bread as a stand-alone item from the rules was included in both the 2022 and 2023 bills. The exception, as we mentioned above, is real, and was achieved by not designating such restaurants as fast food. However, Newsom's office said a legal analysis determined Panera, like other chain bakeries, does not fall under the exception because it mixes its dough off-site instead of fully producing bread on the premises of its retail locations.

According to the Bloomberg article, that exception was lobbied for by both Newsom and Flynn behind closed doors, with Flynn supposedly arguing that Panera's status as a fast-casual chain meant that it was not fast food. The article claims that a compromise with Newsom was reached through the bread exemption, with the explicit rationale being Newsom's "longstanding relationship with a Panera franchisee." These claims were made by a person who wished to remain anonymous because the talks were private. Bloomberg granted that individual anonymity, making it harder to confirm whether the rumor is true. 

"That's part of the sausage-making," Newsom said of the exception in a news conference. He mentioned that the exception had been in the original Fast Food Recovery Act, and was included in the second bill because of the "nature of negotiation trying to get a referendum off the ballot."

As reported in Bloomberg, Flynn has donated more than $150,000 to Newsom's campaigns over the years, and the two overlapped by one year at Redwood High School — although Flynn told California television station KCRA they didn't meet until decades later. Flynn told Bloomberg that he had no part in shaping the bread exemption.

Sources

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White, Jeremy. "Facing Backlash, Newsom Says Fast Food Carveout Doesn't Apply to Donor's Company." Politico, https://www.politico.com/news/2024/02/29/gavin-newsom-fast-food-panera-00144282.

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Updates

March 1, 2024: This story was updated to include comment from Gov. Gavin Newsom's office and a statement by Greg Flynn.

Jack Izzo is a Chicago-based journalist and two-time "Jeopardy!" alumnus.