Starting Monday, more than half a million fast food workers in California will get a 25% bump in hourly wages from $16 to $20, now that a new law has kicked in statewide.
Governor Gavin Newsom signed Assembly Bill 1228 into law last September, which only affects fast food workers at chains with at least 60 locations nationwide.
New California minimum wage for fast food workers goes into effect
Franchises and some small food business owners have voiced concerns over the change, feeling pressure to compete financially and find the best way to balance the margins, which for some could include raising menu prices.
Chipotle CFO Jack Hartung previously commented on the new cost of doing business in California, saying that the new law meant "a pretty significant increase to our labor."
At the time, on a November earnings call Hartung explained, "It's going to be a mid to high single digit price increase, but we are definitely going to pass this on [to customers]. We just haven't made a final decision as to what level yet."
McDonald's CEO Chris Kempczinski previously said on the company's Q3 earnings call, "[it] is an impact that's going to hit all of our competitors" and that McDonald's will explore other areas outside of raising prices to offset increased labor costs, which is ultimately at the discretion of franchisees, and can vary by location.
Last month week, the California General Assembly passed a bill that alters the Golden State's new law raising the minimum wage for fast food workers to $20 an hour, which goes into effect on April 1.
Assembly Bill 610, written by Assemblymember Chris Holden to amend the Labor Code section of Assembly Bill 1228, clarifies "the scope of fast food restaurants and fast food restaurant workers covered by its terms."
Gov. Gavin Newsom signed AB 1228 into law last September, which will apply to fast food chains with more than 60 locations nationally beginning next month.
California bill adds exemptions for fast food restaurants raising minimum wage
AB 610 adds exemptions for a wider array of establishments that would not be considered "fast food restaurants" and therefore would not be affected by implementing increased wages if Governor Gavin Newsom passes this new bill.
"This bill would exempt additional restaurants from the definition of 'fast food restaurant,' including such restaurants in airports, hotels, event centers, theme parks, museums, and certain other locations, as prescribed," the legislation states.
Among the proposed exemptions are restaurants located in office buildings or within a campus of buildings "primarily or exclusively by a single, for-profit corporation and its affiliates" that "primarily or exclusively serves employees of that corporation or its affiliates rather than the general public" and is "part of, or subject to, a concession or food service contract covering the building, group of buildings, or campus."
"AB 610 makes technical amendments to clarify that certain workers at restaurants that are operated in conjunction with larger enterprises, many of whom have historically established compensation and working conditions in excess of the new standards set by AB 1228, do not fall within the fast food industry covered by the law,” Holden stated in a bill analysis last month.
According to Holden, certain workers at those establishments already have unions and may be making more than the $20 minimum set to be imposed by AB 1228.
"Examples include fast food workers at San Francisco International Airport who have wages starting at $22.50 per hour, plus benefits," he said, speaking with ABC Sacramento affiliate KXTV. "Fast food workers at casinos who make $23 per hour, plus benefits."
Exemptions under scrutiny
The exemptions have come under scrutiny from Assembly Minority Leader James Gallagher, Senate Minority Leader Brian Jones and other Republican lawmakers in the state, who sent a letter to Newsom earlier this month asking for records to be released to learn about how certain exemptions were determined.
Gallagher voted no on AB 610 on Monday. The assembly passed the bill by a margin of 55-5, sending the bill forward to Newsom.
"I guess it was a bit of a protest vote because of how shady the process surrounding AB 1228 was," he said, speaking with KXTV. "There's been all these exemptions, you know, the one that got the most attention was Panera-gate."
Under the new law, any establishment that "operates a bakery that produces for sale on the establishment's premises bread" is exempt from the $20 minimum, so long as it "produces for sale bread as a stand-alone menu item," but not "if the bread is available for sale solely as part of another menu item."
The carve-out attracted criticism after Bloomberg News reported in late February that Newsom had allegedly pushed for the exemption to benefit one of his political donors, Greg Flynn, who is a Panera Bread franchisee in the state.
Last month, a spokesperson for Newsom told the Los Angeles Times that Panera would not be exempt from the $20 minimum.
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The rep called the Bloomberg report "absurd" and told the LA Times that after its legal team reviewed the legislation, "it appears Panera is not exempt from the law" as the restaurant's bread dough is mixed off-site.
In a press conference on Sept. 28, 2023, Newsom also stated that carving out the exemption for bakeries was just part of "the sausage making" in politics.
A representative for Newsom did not immediately respond to ABC News' request for comment.
Flynn, meanwhile, has denied requesting any special carve-outs, telling CNN in a statement that his restaurant locations will raise the minimum pre-tip wage to $20, regardless of any exemptions.
"At Flynn Group, we are in the people business and believe our people are our most valuable assets. Our goal is to attract and retain the best team members to deliver the restaurant experience our guests know and love," he said.
ABC News has reached out to Flynn for additional comment.
An earlier version of this story was first published March 20, 2024.
