The Deal That Led to a Wage Bump for California's Fast Food Workers May Be Unraveling

Both sides billed the high-profile California fast food deal last year as a resolution to two years of escalating political tensions.

One of the workers’ biggest wins in the Legislature during “hot labor summer,” the agreement in the session’s final week resulted in a minimum wage hike for employees and some guarantees for companies. In exchange, the industry agreed to stop fighting the issue at the ballot box, and lawmakers backed off on even stricter regulations.

But a month before the new wage — $20 an hour for workers at fast food chains with 60 or more locations nationally — goes into effect, the temporary truce is unraveling.

As the Legislature pushes through a bill exempting fast food restaurants in airports, hotels and convention centers, Republican lawmakers who had vehemently pushed back on the wage hike are calling for the deal to be investigated after Bloomberg reported that Gov. Gavin Newsom pushed for a bakery exemption that benefited a donor who owns two dozen Panera locations in California.

On Thursday, Newsom’s office denied the story and said their lawyers believe Panera and other chain bakeries aren’t actually exempt — a decision that could lead numerous additional businesses to scramble to prepare for a wage hike. In a Bloomberg story Friday, billionaire Greg Flynn says he did not seek a special exemption, though he met with the governor’s staff along with other restaurant owners to suggest a carve-out for “fast casual” restaurants. On Saturday, the California Restaurant Association weighed in, saying there was never any discussion of any brand seeking an exemption, including Panera. And in an interview with KNBC aired Sunday, Newsom, himself, called the report “absurd.”

The Service Employees International Union, which pushed for the legislation, said it agreed with Newsom’s reasoning. Senate Republican leader Brian Jones called for scrapping the fast food agreement altogether.

The renewed fights have moved to the local level, too.

Some franchise owners are cutting jobs in advance of the minimum wage increase, while workers have begun pushing for additional benefits in San Jose and Los Angeles, prompting businesses to gear up to lobby back.

Worker advocates are also pledging to push for job security measures once a first-in-the-nation fast food regulatory council (another part of the deal) is in place. On Friday, Newsom announced his seven appointees to the council, including Chairperson Nicholas Hardeman, chief of staff to state Senate leader emeritus Toni Atkins. The governor’s other picks are a mix of franchisees, workers and others. Legislative leaders picked the final two members, both union leaders.

And some McDonald’s franchise owners, who have complained they were frozen out from last year’s deal-making, are retaliating against state lawmakers who supported it as they seek other public offices in Tuesday’s primary. The new California Alliance of Family Owned Businesses PAC formed earlier this year as an offshoot of prior lobbying by owners of local McDonald’s restaurants.

Its opening salvo: attack mailers against Assemblymembers Chris Holden, a Pasadena Democrat running for the Los Angeles County Board of Supervisors, and Kevin McCarty, a Sacramento Democrat running in a crowded primary for mayor.

“In order to protect our family businesses in California now and into the future, it has become clear that we must more actively engage in politics across the state,” Kerri Harper-Howie, an alliance board member and a McDonald’s owner in Los Angeles County, said in a statement. “Politicians should know that if they agree to carry water for those who threaten our businesses, they will be opposed.”

Holden authored the bill forming a fast food council and mandating the wage hike, while McCarty was one of many Democrats who voted for it. The PAC has spent more than $300,000 against each. McCarty’s campaign manager, Andrew Acosta, said business owners are “trying to punish him for standing up for workers’ rights and higher wages.”

The PAC is also spending in an Inland Empire Assembly primary and in favor of Assemblymember Tim Grayson‘s bid for the state Senate. Grayson, a Concord Democrat, voted in favor of the fast food deal last year.

The franchisee committee has spent more than $1.8 million so far this year. That’s not much compared to the tens of millions of dollars fast food giants such as McDonald’s and national industry groups poured into a campaign account for the effort to repeal the 2022 fast food law. The referendum was ultimately pulled from the ballot in last year’s deal. However, it indicates the increasing activity of franchise owners in state and local politics.

Marisol Sanchez, who owns 14 McDonald’s restaurants in the High Desert north of San Bernardino and helps run her family’s larger franchise business, said she never got involved in politics before last year. But when SEIU pushed a bill forcing fast food corporations to share liability for labor violations with franchise owners, Sanchez saw “the destruction of the franchise model, and basically … the destruction of my livelihood.”

“It was a quick jumping into action,” she said, which involved meeting with lawmakers and now, contributing to the PAC.

The joint liability bill ultimately became a bargaining chip to force a deal on the $20 wage. Sanchez said franchise owners were the “collateral damage.” She attributes that in part to a prior lack of political organizing by franchise owners.

“We weren’t communicating and organizing,” she said. “I think we took for granted that the community understood that we were not all corporate-owned restaurants.”

She said she’s always tried to offer starting wages of $1 more than the minimum wage and had been in the middle of an expansion in recent years, buoyed in part by more Californians moving inland during the COVID-19 pandemic. But she’s cutting back in advance of the wage hike, putting off a drive-thru remodel and slowing down hiring.

The union that pushed for the deal criticized the new PAC but said it would be unsuccessful.

“It’s shameful for these multibillion-dollar corporations to attack these pro-worker champions — and voters are going to see right through it,” Arnulfo De La Cruz, president of SEIU Local 2015, said in a statement.

Restaurant giants and a handful of local franchise owners have also registered this year to lobby in San Jose, where the new Fast Food Workers Union is pursuing a city ordinance mandating employers provide paid time off, predictable scheduling and “know your rights” training.

In recent weeks, the union has accused one city council member, David Cohen, of reconsidering his support in response to industry influence. Several franchise owners this month contributed to a new PAC whose main spending so far has been sending $18,000 to another political action committee that has bought ads against Cohen’s opponent in his re-election bid.

The contributions were first reported by San Jose Spotlight. Cohen’s office did not respond to a request for comment, but he told Spotlight he hadn’t withdrawn any support and was only considering if the proposed ordinance would work.

Celeste Perez, a Burger King shift leader in San Jose who has been advocating for the ordinance, said she wants a firm commitment from council members and accused Cohen of shutting workers like her out after meeting with industry lobbyists.

Perez, 43, makes $17.75 an hour and said the wage hike to $20 in April was supposed to help her keep up with inflation. This year, the restaurant cut her hours by five a week due to the upcoming wage increase and slow sales at the beginning of the year, she said, but she still has the same amount of work to do and often deals with threatening customers.

She wants to afford to take a family vacation for the first time in seven or eight years, or at least attend her son’s soccer games, she said.”It’s really important for us to keep (moving) forward, not backward,” she said. “I think $20 is only one step.”

On Friday, the union called for a similar proposal in Los Angeles. Neither ordinance has been formally introduced yet.

As part of last year’s deal, the state’s new fast food council is prohibited from enacting new policies on time off and scheduling — and the deal also prohibited cities from raising fast food wages beyond the new statewide minimum. But there’s nothing to stop local governments from pursuing other regulations, which would further raise costs for operators.

The proposals and the bakery exemption controversy are likely to be more fuel for franchise owners to fight back.

Brian Hom, the owner of two Vitality Bowls health food restaurants in San Jose, said he’s begun using his relationships with city council members to oppose the local proposal. He said he already sets employee schedules two weeks in advance but is wary that a predictable scheduling requirement may prevent him from asking workers to come in last minute if someone calls out sick.

Hom said he has the option to open a third store but has declined to do so due to the prospect of new requirements. He and other franchise owners are discussing with the company how much to raise prices in April and hope that’s enough to cover the wage increase without cutting staff or their hours.

“Businesses are going to speak up,” he said. “The $20 is already going to cause restaurants to close.”