Bloomberg recently broke a story about a bizarre exemption from California’s new fast-food franchise regulations—which include a $20 minimum wage and oversight of working conditions from a politically appointed council—for those franchises that “produce and sell bread as a standalone item.” The exemption first drew media attention last fall when it was signed into law by Governor Gavin Newsom. When a reporter asked Newsom about the strange carve-out, Newsom responded, “That is how the sausage is made,” with no further explanation.
Newsom now regrets his “sausage” comment from last September, because Bloomberg was told that the exemption is not just your generic sausage but was included to satisfy none other than Newsom. Why? Because a key beneficiary of the exemption was Greg Flynn, the owner of 24 Panera Bread franchises in the state. Flynn and Newsom attended the same high school, they had a business transaction about 10 years ago, and Flynn has contributed over $160,000 to Newsom’s campaigns.
Bloomberg’s story went viral, including articles in the New York Times and the Washington Post. After the story broke, Newsom responded a few days later that the appearance of “pay for play” for Flynn was “absurd,” but he again provided no explanation for how the exemption came to be.
State lawyers are now claiming that Panera is in fact not exempt, even though they produce bread on site and sell it as a standalone item. Why? Because the lawyers are now saying the exemption requires that the bread dough must be made from scratch on the premises. Panera bakes the bread on site, but the dough is made at another facility. Regarding the exemption, the law says nothing about where bread dough is made to qualify for the exemption. This is obviously revisionist history that happens to be extraordinarily politically convenient for Newsom and state legislators.
Flynn has not commented on whether or not Panera is exempt from the law, but he stated he would pay the $20 minimum wage, which will take an uncomfortably hot political spotlight off him.
Since the Bloomberg story broke, the claim that Flynn’s relationship with Newsom had nothing to do with the exemption is becoming harder to swallow, and the degree of influence that political lobbyists had on the bill is being shown to have been far beyond any previously reported.
No one in Sacramento is willing to say why or for whom the exemption is there. The bill covers the state’s major fast-food franchises, including McDonald’s, Burger King, Taco Bell, Jack in the Box, Wendy’s, Del Taco, Chipotle, Panda Express, Jersey Mike’s, and Carl’s Jr., among others. None satisfy the exemption. So just who qualifies? KCRA, the NBC news affiliate in Sacramento, confirmed Bloomberg’s story with multiple sources who indicated that the law’s exemption was included to obtain approval by the governor and reflects Flynn’s influence. There are no plausible explanations for the carve-out other than Panera. In fact, there are no alternative explanations for the exemption whatsoever.
Someone knows—perhaps many people know—but won’t talk. Certainly, the author of the bill would know, yes? No. Assemblyman Chris Holden wrote the bill, but he doesn’t know how the Panera exemption got there. How is this even possible? Because Holden was not part of the final negotiations on the bill.
So, just who was crafting the legislation if the bill’s author wasn’t? The Service Employees International Union (SEIU), that’s who. Despite the unwillingness of those involved to go on the record, KCRA reporter Ashley Zavala, who has been covering the story closely, managed to get an SEIU director to admit that there was a political impasse regarding the bill’s final negotiations and that state leaders asked the SEIU to “figure this out.”
There is a line between political advocacy and political influence. And beyond that, there is a line between political influence and who ultimately makes policy. “Paneragate” shows that both of those lines have been blatantly crossed. Advocacy groups provide input. They certainly don’t write laws. Even worse, the SEIU required those involved in finalizing the bill to sign nondisclosure agreements. The SEIU claims this was done to create an atmosphere of trust. I suspect everyone else sees it as a way of keeping those involved from talking about what appears to be “pay for play.” The use of nondisclosure agreements in the legislative process is highly unusual and clearly flies in the face of political transparency.
The involvement of the SEIU, one of the largest labor unions within the state, has a huge political influence component itself, because California’s new fast-food law exempts franchisees who have a collective bargaining agreement. In California, more than 300,000 employees work in fast-food franchises, with few covered by a union contract. By creating a fast-food minimum wage that significantly exceeds the statewide minimum of $16 per hour, and by creating a fast-food employee relations oversight council, the new law has made collective bargaining much more palatable for franchisees. Like California’s awful 2020 law that forces many independent contractors to become employees (AB 5), the new fast-food law is a union payoff.
Nineteen Republican state lawmakers have signed a letter sent to state attorney general Rob Bonta requesting that his office investigate Paneragate. Thus far, Bonta, who was originally appointed to his position by Newsom, has not responded to the request, and I can’t imagine he ever will pursue an investigation.
To sum up, here’s what’s in Newsom’s “sausage”: A nondisclosure agreement crafted by a labor union negotiating the final stages of legislation, without the author of the bill. A one-off political carve-out that no one will own, and that ex post facto appears to benefit no one, despite multiple sources reporting it was created for a significant Newsom donor. An attorney general who is unresponsive to an investigative request from 19 lawmakers.
California needs new political transparency laws. A good model would be Florida’s transparency law, which permits anyone to inspect and copy any state, local, or municipal record. No nondisclosure agreements there.
Paneragate shows just how far California lawmaking has declined. And what should be an embarrassing stain on the state’s political leadership is simply business as usual, with all involved parties clamming up and hoping it dries up and blows away. Why do we accept such an abysmal level of governance?
