California Governor Gavin Newsom is receiving criticism after Bloomberg reported on private conversations revolving around a ‘bread exemption’ to the new $20 minimum wage increase for fast-food restaurants in the state.
The new minimum wage increase, which is set to take effect in April, is expected to cause a strain on businesses as they struggle to meet the requirements. Reportedly, restaurants like Panera Bread could possibly be exempt, which one of Newsom’s billionaire donors would benefit from.
Donor to Newsom
The Bloomberg News article lays out a story in which Newsom billionaire donor Greg Flynn, who owns affected Panera Bread locations, was keen to get Panera Bread included in this special exemption for specific fast-casual restaurants.
Flynn is the founder of the Flynn Restaurant Group. Forbes reported in 2016 that this group had become the country’s largest restaurant franchisee.
Anonymous Sources
The article from Bloomberg cited “people familiar with the discussions” who told the publication that behind closed doors, Flynn was pushing Newsom’s top aides to decide whether Panera Bread should be considered in the exemption.
The sources asked not to be named in the story because the talks were held in private.
Minimum Wage Increase
As part of recent workplace reforms, California decided to raise the minimum wage in the state to $16 an hour, with an increased $20 an hour being required for specific industries like large fast-food chains.
The rapid increase in the minimum wage has caused a stir in the industry, with chains like Pizza Hut laying off their delivery drivers in California in the wake of the wage rate changes. (via Los Angeles Times)
Puzzling Exemption
Bloomberg reported that the bread exemption meant to provide relief to bakeries and other bread-related businesses had puzzled those watching because of how specific it was.
Newsom told reporters in a press conference the exemption came as “part of sausage-making” in politics. In another response to questions, Newsom’s office previously said the wage law was the “result of countless hours of negotiations with dozens of stakeholders over two years,” according to Bloomberg.
Previous Comments by National Restaraunt Association Head
Last year, the head of the National Restaurant Association, Michelle Korsmo, expressed confusion over the bread exemption.
Speaking at an industry conference she said “Everyone’s scratching their head,” according to Bloomberg. During the talk, she used the bread exemption as an example of why members of her organization should develop political connections so they can get better favorability on laws being passed.
Flynn’s History With Newsom and the Fast-Food Bill
According to Bloomberg, Flynn has had past business dealings with Newsom and has contributed to his political campaigns before. Flynn denies playing a role in crafting the bread exemption for the minimum wage law.
Flynn has been previously critical of the fast-food bill that raised the minimum wage to $20. In a piece he wrote in Capitol Weekly, he decried the effects of this wage increase, saying it “would effectively kill the franchise business model in the state – putting at risk the more than 75,000 local businesses and 728,000 jobs in our franchise sector.”
Newsom’s Denial
In response to the Bloomberg story, Newsom spokesperson Alex Stack came out to deny any wrongdoing. “The governor never met with Flynn about this bill, and this story is absurd,” said Alex Stack, a spokesperson for Newsom. “Our legal team has reviewed, and it appears Panera is not exempt from the law.” (via LA Times)
The reason given that Panera Bread is not exempt is because the chain does not produce the bread it sells on-site as bakeries given the exemption do.
Conflicting Story
Although Newsom is denying Panera Bread’s exemption, the fact the company was exempt from the law has been reported since last year, according to The Guardian. Despite this reporting, the governor’s office didn’t say whether the chain was exempt or not before this, even when asked the question directly.
Some observers are confused as to why the exemption even exists in the first place, which has been complicated by Bloomberg’s reporting of closed-door conversations.
Calls for Investigation
Republican lawmakers are calling for an investigation into Gavin Newsom following the Bloomberg article. California Senate Republican Leader Brian Jones was furious about the story, demanding clarity on the matter.
“Put simply, campaign contributions should not buy you carve-outs in legislation,” Jones said. “That’s crony capitalism. It’s corrupt and unacceptable.” (via LA Times)
Republicans Not Convinced
California Republicans are not convinced by the denial from Newsom. Bloomberg reported Republican Assembly leader James Gallagher called for the attorney general or another separate entity to investigate this conflict of interest.
“There’s no justifiable reason for this exemption that was inserted into the bill language,” said Gallagher. “At the very least, the governor needs to explain why this happened.”
Potential Damage to Newsom
This controversy has the potential to cause political damage to the California governor if he handles it incorrectly. Dan Schnur, a political communications teacher at the University of Southern California and the University of California Berkeley commented on its potential impact.
“It’s more than possible that there is a perfectly reasonable substantive policy-based reason for this exception. But if that reason exists, the governor is obligated to share it with the people of California. Otherwise, they’ll assume that he did a big favor for a big donor,” he said. (via The Guardian)
