California Governor Under Fire for Bizarre Minimum Wage Carveout That Benefits Donor

Gavin Newsom (Jerod Harris/Getty Images for Vox Media)
February 28, 2024

California Gov. Gavin Newsom (D.) has come under fire for allegedly pushing to exempt a chain of restaurant franchises owned by one of his most generous donors from the state’s new minimum wage law. 

The fast-food wage law, which will raise California’s minimum wage at fast-food chains from $16 to $20 an hour starting in April, comes with an exemption for restaurants that bake and sell bread, which would include the two dozen Panera Bread locations owned by Newsom’s billionaire donor Greg Flynn. 

Newsom advocated for the bread exemption, which legislators eventually included in the bill to win over the governor, due to his "longstanding relationship with a Panera franchisee," one person familiar with the law’s passing told Bloomberg

Flynn has been involved in several business deals with Newsom and made large donations to his campaigns, including $100,000 to quash a Republican-led recall effort against the governor and $64,800 to help him get reelected in 2022. The business magnate also said he knows Newsom well enough to be able to reach him via text, Bloomberg reported. 

Flynn denied he played a role in bringing about the exemption, although sources have told Bloomberg he privately urged the governor’s team to not classify Panera as a fast-food chain. According to Newsom, the wage law, known as the FAST Act, was the "result of countless hours of negotiations with dozens of stakeholders over two years." 

The exemption for bread-selling restaurants came as a surprise to many, including Michelle Korsmo, head of the National Restaurant Association, who said "everyone’s scratching their head" about the exemption. "You may be celebrating or you may be lamenting the bakery exemption. But remember, all of that comes through relationships," she told Bloomberg

Even the bill’s lead author, Assemblyman Chris Holden (D.), claimed to be unsure about the exemption’s origins, with his chief of staff Willie Armstrong telling Bloomberg, "We don’t know how that came about." 

The wage law faced immediate backlash from fast-food chains operating in California. McDonald’s described the increase in minimum wage as a "devastating financial blow" that will cost each of its locations in the state an estimated $250,000 a year. Other chains such as Chipotle are reportedly eyeing a price increase to counter the rise in wage costs.