How did California Paneras get minimum wage exemption? Republicans blame Newsom’s ‘pay to play’

The California Democrat who authored bills creating a fast food worker council and setting a $20-per-hour minimum wage claims he was not part of negotiations that led to an exemption for Panera and similar bakery restaurants.

Assemblyman Chris Holden, D-Pasadena, on Thursday responded to questions about Assembly Bills 257 and 1228 after Bloomberg reported Panera may have achieved a special carve-out due to franchisee Greg Flynn’s friendship with Gov. Gavin Newsom.

State filings show Flynn donated hundreds of thousands of dollars to Newsom’s 2021 anti-recall and 2022 re-election campaigns.

When asked whether he was involved in the talks that led to an exemption for fast food restaurants that bake and sell their own bread, Holden said, “No, I was not.”

“In terms of the negotiations, it was bringing together the business community and the franchisees and franchisors and also (Service Employees International Union) and others,” he said. “Through the governor’s leadership, they came together, and what came out of that is what became the amendments to the bill.”

Meanwhile, Republicans called the exemption “pay to play” and used it to slam Newsom and labor bills they already disliked.

“I guess if you’re in the bread-making business, there’s a lot of dough to go around,” said Sen. Brian Dahle, R-Bieber, during the Senate floor session on Thursday in Sacramento. “But this is just not right. At the end of the day, we need to pass good laws and we need to not carve out people who are campaign donors.”

How did the exemption happen?

Former Assemblywoman Lorena Gonzalez, D-San Diego, first authored AB 257 in 2021. But the bill died that year, and Holden took it up in 2022 after Gonzalez left the Legislature to lead the California Labor Federation.

AB 257 created a fast food council made up of employees, employers and government officials to create regulations around workplace conditions. The bakery exemption was not part of Gonzalez’s original bill.

Holden in 2023 authored AB 1228, which would have made fast food companies and franchise owners jointly liable for workplace abuses.

Fast food companies spent millions lobbying against the bill. Holden and labor leaders eventually reached a deal with them removing joint liability from the legislation in exchange for setting a $20-per-hour minimum wage and dropping a ballot measure that would have asked voters to repeal the fast food council in 2024.

Both AB 257 and AB 1228 include provisions exempting fast food bakery restaurants that were making and selling bread as a standalone menu item prior to a specific date.

When asked about the carve-out at the AB 1228 bill signing in 2023, Newsom said, “That’s a part of the sausage-making.”

Tia Orr, executive director of SEIU California, said the final measure “is historic by any measure and is a bold, transformational step toward an economy that works for all, not just billionaires, shareholders and CEOs.”

“Like all transformational initiatives, it addressed difficult questions around its scope,” Orr said in a statement. “Including what constitutes a fast food restaurant as opposed to a bakery, for example, and it involved literally hundreds of businesses in discussions.”

Republicans slam Panera exemption

Republican lawmakers on Thursday slammed the Panera exemption and called for an Ethics Committee investigation into it.

In the Senate, they tried to take down another related Holden measure currently moving through the Legislature that would exempt establishments in airports, hotels, event centers, theme parks and other places from the definition of “fast food restaurant.”

Holden said the bill is meant to help union members negotiating higher salaries at those locations.

“We were just trying to focus on the fact that as you have bargaining units that are negotiating for their members for $30 an hour, it, I guess, muddies the waters and makes it difficult when you have a bill that you’re a part of that says 20,” he said. “They say, ‘Well, we’re already paying you that.’ So I think that was why it was necessary to allow them to continue to have free negotiations.”

But Republican senators, who already disliked AB 257 and AB 1228, used the Panera news as an opportunity to attempt to shoot down and criticize Holden’s most recent bill, even though several voted in favor of the measure during earlier committee hearings. It advanced from the Senate on Thursday with a 31-4 vote.

Senate Minority Leader Brian Jones, R-Santee, said “pay to play is not acceptable,” and his body should have held the bill pending an Ethics Committee investigation.

“AB 1228 is an unmitigated disaster for small business in California,” Jones said. “The impact that it’s already having on these fast food workers — and look, if they care about the fast food workers, they want to create opportunities for more fast food places to open up.”