Fast Food Workers Face Significant Layoffs Due To New Minimum Wage Increase In California

The fast food industry has undergone a huge transformation In California, increasing its minimum wage to $20 effective on Monday April 1st. Per a report by The Wall Street Journal, restaurant chains, particularly pizzerias, are preparing for this adjustment by reducing their workforce. These businesses have plans to reduce their employee base by the hundreds, and put a stop to all new hiring, in an effort to mitigate the increased labor costs. This development comes as more restaurant chains brace for the financial impact of the wage increase.

Pizza Hut Makes Adjustments

Pizza Hut is one of the chains that is making notable adjustments to its workforce, in response to the increased labor costs they are cutting more than 1,200 delivery jobs by December.

Despite this, Pizza Hut claims that delivery services will remain available through the mobile app, website, and phone ordering, ensuring a consistent customer experience.

Pizza Hut Driver

A 29-year-old Pizza Hut driver in Ontario, California, Michael Ojeda, was given notice in December that his employment would be terminated by the end of February.

Ojeda, who dedicated almost a decade of his career to Pizza Hut made this statement, “Pizza Hut was my career for nearly a decade and with little to no notice it was taken away.”

The FAST Act

Initially presented to California lawmakers as the FAST Act, this legislation was meant to provide raises to all fast-food employees, in an effort to help ease the pains of the increased cost of living in California.

A significant number of these employees were still not making enough to earn a viable living. So, the California government decided to make some changes to force major fast food chains to pay their employees a living wage.

Reduce Workforce

Excalibur Pizza, operating under the Round Table Pizza brand, has announced its plans to reduce its workforce by 73 drivers in April, this makes up 21% of their workforce.

The company will be handing their delivery services over to third-party providers.

No Exemptions

Governor Gavin Newsom has been firm about his stance on zero exemptions from this new wage policy. This legislation encompasses businesses that serve ice cream, coffee, boba tea, pretzels, or donuts as part of the fast food industry.

The National Law Review’s analysis of the bill suggests that the broad range of establishments that fall under the law’s provisions expands its impact.

Panera Asks For Exemption

Greg Flynn, who oversees Panera franchises in California, has sought out an exemption for his restaurants by contending that in-house bread productions should be qualified for an exemption.

Despite this argument the claim was dismissed by Newsom’s office as “absurd.”

Newsom And Panera Bread

Newsom faced criticism following the suggestion that his office advocated for Panera Bread to be exempt from this new minimum wage law.

Although Newsom has refuted these allegations, critics highlight the how odd it is to have a law that doesn’t include any exemptions for fast food restaurants that bake their own bread.

Panera’s Connections

What is most intriguing is Newsom’s long standing history with Greg Flynn. Flynn has previously endorsed Newsom in his political campaigns.

Despite this, both Flynn and Newsom have made statements that they did not push for these exemptions, something that critics claim is inaccurate.

Confusion

Even if Newsom’s office did advocate for an exemption for Panera Bread, it remains uncertain if eateries would even qualify for this exemption.

According to some analysts, Panera Bread would still be ineligible for an exemption, as it doesn’t make the dough for its bread onsite.

A Response From Flynn

Amid mounting criticism towards Flynn and Newsom in the media and press, Flynn made a statement expressing that he did not push for an exemption. Eventually, he also insinuated that he would follow the law, even if Panera Bread was exempt from it.

This led to Flynn stating that he would be raising the employees minimum wage at Panera Bread to $20 in California.

Increase In Price

Numerous restaurants have cautioned that they will have to raise their prices to offset this minimum wage law in California. According to the New York Post, this is already taking place.

For example Burger King has raised the price of its Texas Double Whopper meal from $15.09 prior to the legislation to $16.89 after the law was enacted.

Starbucks Closes

In light of this new legislation, Starbucks has closed seven of its stores in California. The company claims that these closures are part of their efforts to enhance compensation and the overall experience for its partners.

Starbucks’ comprehensive compensation package for United State’s hourly partners averages $30 per hour, showing their efforts to share their success with employees of all levels of the company.

Adjustments To Fast Food Menus

Well known fast food chains like McDonald’s and Chipotle are making adjustments to their menus in California in an effort to fund the minimum wage spike that passed in September

These adjustments are a direct response to the state’s legislative changes.

Difficulties For Small Business Owners

In San Jose, Brian Hom, who is the owner of two Vitality Bowls restaurants, shares another perspective of the minimum wage law’s impact.

To manage the rise in labor costs, Hom will be forced to reduce his staff down to two employees per location, half of the typical number, resulting in longer wait times for customers and necessitating higher prices to cover the added expenses. Hom stated,  “I’m definitely not going to hire anymore.”

Significant Wage Increase

The hike in  minimum wage for California fast food workers marks a significant increase for the state’s overall minimum wage which is $16 per hour.

This is clearly a notable financial improvement for those that work in the fast food industry.

Complications

Since the law passed there have been a few complications, and some confusion surrounding it. Panera Bread isn’t alone in wondering if they are exempt from the law or not.

Several fast-food eateries around California are grappling with similar concerns about the law, simply because they can’t sort out whether they are exempt or not.

Affect Reach More Than Fast Food Restaurants

Although much discussion has centered on how fast-food workers are affected,

Several other restaurants and establishments are also having to raise their minimum wage so they can remain competitive.

Places That Are Exempt

Under the provisions of the new minimum wage law, only fast-food chains will have to pay their employees at least $20 an hour. Establishments that have 60 locations or more throughout the country are impacted by this legislation.

This means that small businesses that only have one or two stores are exempt.

Supporters

Proponents of the legislation anticipate that things will even out eventually. According to these analysts, the fast food industry always sees a lot of demand in California.

This means that more employees will be hired, and hired with an increased paying wage.

An Uncertain Future

Opponents of this law don’t agree, they believe California businesses will continue to suffer.

The truth is that the future for this sector of California’s economy is uncertain.

Making Its Way Into Restaurants

These  also anticipate a higher wage to make its way into other restaurants or eateries that are currently exempt from the new minimum wage legislation.

It is possible that individuals may choose to leave lower paying jobs for these new $ 20-an-hour ones. Causing other businesses to consider increasing their own wages.

California’s Fast Food Industries Future

With the implementation of the new minimum wage law, California’s fast food industry is at a pivotal moment.

The changes being made by fast food chains, from job cuts to price increases, showcase a bigger adjustment to new economic realities.