California Gov. Gavin Newsom signed a new bill into law on March 25 that adds exemptions to a controversial fast-food law passed last year that raised the minimum wage to at least $20 per hour for some restaurants in the industry.
The governor approved Assembly Bill 610—authored by Assemblyman Chris Holden—which exempts restaurants in certain locations, including in hotels, event centers, theme parks, stadiums, corporate campuses, and on public lands, among others from Assembly Bill 1228, which takes effect on April 1.
Costs of Allowing Exemptions
The new law will increase costs to the Department of Industrial Relations—which oversees workplace conditions and helps employers comply with labor laws—by about $1.1 million annually because of a lack of understanding regarding the exemptions, the department advised legislators earlier this year.“This bill could result in confusion such that employees working in restaurants in exempted locations believe that they are subject to the new $20 per hour minimum wage when this is not the case,” Senate Appropriations staff wrote in the committee’s analysis in February. “Consequently, [the industrial relations department] anticipates increased administrative workload resulting from the bill’s exemptions.”
Such costs would be driven by processing inquiries and wage claims filed by workers employed by exempted restaurants, as well as investigative and legal services required to resolve them.
Supporters of the bill said the measure is needed to protect pay rates at facilities where workers are not typically employed by a fast-food company or franchise—arguing that some employees are earning more than required by the new law, some because of existing labor contracts.
“By recognizing the separate status of such restaurants, AB 610 upholds the original intent of AB 1228—that is, to improve conditions in the fast-food restaurant industry, which employs some of California’s lowest income workers,” labor unions Unite Here and the SEIU said in legislative analyses.
But critics argue that exemptions included in AB 1228 and AB 610 are suggestive of a law that fails to fairly serve California businesses and residents.
“What a coincidence—all the big boys got an exemption,” Andrew Gruel, a restaurateur with several locations in California, posted March 25 on X. “If you fundamentally believe in a bill, there should be no exemptions.”
As AB 1228 defines the restaurants it regulates as limited-service chains with at least 60 locations nationwide that use similar branding, Mr. Gruel’s restaurants are not directly affected by the bill. However, he told EpochTV’s “California Insider” that all establishments will be indirectly affected because they will have to pay more to compete with the higher wages.
One lawmaker agreed that no exemptions are needed when bills are adequately crafted and said the laws should apply to all restaurants or none.
“The underlying policy that we’re exempting from here is bad policy. If the policy is so just and so great, why are you exempting people and certain industries?” Minority Leader Assemblyman James Gallagher said while debating the measure before the vote was called. “Either the policy is good or it’s not, and it should apply to everyone equally.”
With some restaurants cutting jobs and hours, increasing automation, and raising prices in anticipation of the law taking effect, he said businesses, workers, and consumers in California will ultimately pay the price.
“And what we’re also going to see is more automation and the taking away of jobs that people rely on,” Mr. Gallagher said. “The cost of living that is already hurting families across the state is only going to get worse because of this policy.”
One California resident said the new law is a communist-style approach to regulating businesses.
Concerns Over Transparency in Lawmaking Process
Controversy surrounding the new regulations arose after Bloomberg reported last month that Greg Flynn, a donor to Mr. Newsom’s campaigns and restaurant owner, successfully lobbied to create an exemption for bakeries that some said would benefit his two dozen Panera Bread locations in California.The governor rejected the allegations, as did Mr. Flynn, and state attorneys interpreted the text of the bill to not include Panera Bread based on technicalities.
While AB 1228 exempts restaurants that “produce” bread onsite, the labor commission advised the newly formed Fast Food Council on March 15 that to qualify, establishments must mix dough and bake onsite in addition to selling loaves of bread as a standalone item.
Countering claims that exemptions for the bills were potentially crafted behind closed doors and reportedly with nondisclosure agreements involved, the bills’ author stated that the process was legal and aboveboard.
“This was a process that was transparent, and like a lot of negotiations that happen around very difficult bills, they require both sides coming together and trying to figure out how to reconcile,” Mr. Holden said on the floor of the Assembly on March 18 while bringing the new measure up for a final vote. “There was consensus between the business community and labor.”
AB 610 was passed with an urgency clause and took effect immediately.
