Gov. Gavin Newsom's campaign donor says his Panera Bread restaurants will follow minimum wage law

A wealthy campaign donor of California Gov. Gavin Newsom said the Panera Bread restaurants he owns will start paying workers at least $20 an hour on April 1 after controversy over whether a new state minimum wage law for fast food workers applies to his businesses.

California's statewide minimum wage is $16 per hour. Newsom signed a law last year that says fast food restaurants that are part of a chain with at least 60 locations nationally must pay their workers at least $20 per hour beginning April 1. But the law does not apply to restaurants that have their own bakeries to make and sell bread as a stand-alone menu item.

That exception appeared to apply to restaurants like Panera Bread. Last week, Bloomberg News reported that Newsom had pushed for such a carve-out to benefit donor Greg Flynn, whose company owns and operates 24 Panera Bread restaurants in California.

The Democratic governor and Flynn denied the report, with Newsom calling it “absurd." Newsom spokesperson Alex Stack said the administration's legal team analyzed the law “in response to recent news articles” and concluded Panera Bread restaurants are likely not exempt because the dough they use to make bread is mixed off site.

Flynn has not said whether he agrees with the Newsom administration’s interpretation. But on Tuesday, he announced that all of the Panera Bread restaurants his company owns and operates will pay all hourly workers pre-tip wages of “$20 per hour or higher.”

“At Flynn Group, we are in the people business and believe our people are our most valuable assets,” Flynn said. “Our goal is to attract and retain the best team members to deliver the restaurant experience our guests know and love.”

Flynn had previously said the exemption has “very little practical value” because — even if Panera Bread restaurants were exempt — its competitors in the fast-food world were not exempt and Panera would have to pay similar wages order to attract and retain workers.

He declined an interview request through a spokesperson.

There are 188 Panera Bread restaurants in California. Panera Bread representatives did not comment on Wednesday as to whether they believe the minimum wage law applies to all of their restaurants.

Chris Micheli, a California lobbyist and adjunct professor of law at McGeorge School of Law, said Flynn likely would have had a good case had he chose to challenge the Newsom administration's interpretation of the law. The law defines what a fast-food restaurant is, and says it is not an establishment that “operates a bakery that produces for sale on the establishment’s premises bread."

The law goes on to say the exemption only applies “where the establishment produces for sale bread as a stand-alone menu item, and does not apply if the bread is available for sale solely as part of another menu item.”

“On its face it appears that it would be applicable, however a court might have to determine what is included in the word 'produce' in order for the exemption to apply," Micheli said.

As for which businesses would be exempt from the law, Newsom's office said the newly created Fast Food Council “may develop regulations and the Labor Commissioner has enforcement authority over individual claims based on the facts of individual cases.”

“Ultimately, the courts may have to make the final ruling,” said Alex Stack, Newsom's spokesperson.

Last week, Flynn denied asking for an exemption or “special considerations.” He said he did participate in a group meeting with some of Newsom’s staff and other restaurant owners. He said if the intent of the bill was to address labor code violations in the fast-food industry, he suggested the bill make a distinction between fast-food restaurants and “fast-casual restaurants.”

In an interview with KNBC in Los Angeles earlier this week, Newsom said negotiations about the law included “some discussions around bakeries and this and that,” but he said those talks were only “as it relates to the carve-outs and the details that were done with this deep coalition” that included labor unions and fast-food industry representatives.

The political effects of the issue could linger. Republicans in the state Legislature have called for an investigation. While Flynn now won't benefit from the exemption in the law, that likely won't deter Newsom's opponents from using the allegations against him.

“Anyone who wants to take a shot at Newsom will use this. That's just politics,” said Kevin Liao, a California-based Democratic political consultant. “When you have someone who many think has national aspirations, they are going to pick at any scab that exists and try to exploit it.”