Did the California governor have his cake and let an old friend eat it, too? Late last month, Gavin Newsom was accused of providing a schoolmate’s businesses with an exemption from the minimum wage hike coming on April 1. Both parties deny there was any favoritism. Yet it still looks … funny.
On Feb. 28, Bloomberg reported that “the governor pushed for a carve-out that’s perplexed industry observers and benefited a donor.” The headline noted that the Panera Bread chain “Ducked California’s New $20 Minimum Wage Law.” It turns out that Greg Flynn, founder, chairman and CEO of the Flynn Group, the world’s largest franchisee, which owns several Panera franchises in California, and Newsom attended the same high school.
Flynn says the pair “didn’t know each other until decades later,” according to Sacramento’s KCRA. Could be. But their arcs definitely crossed a decade ago.
“In 2014, Flynn’s company purchased The Carneros Inn and Napa from Newsom’s company, PlumpJack, for $60 million, according to the Napa Valley Register. Flynn has also made political contributions to Newsom, including $100,000 to fight his recall and $64,800 to his reelection campaign in 2022,” says KCRA, which added that “Flynn was a vocal opponent of the new fast food worker law as it neared the end of the legislative process” – as any business owner should have been.
Flynn has also contributed to Newsom’s campaign treasure chest, donating $100,000 to help him skate through the 2021 recall and $64,800 to his 2022 reelection campaign.
Bloomberg suggests that Flynn used his connection to Newsom to lobby his office in the hope it would “reconsider whether fast-casual chains such as Panera should be classified as fast food.” The union bosses behind the legislation agreed with the exemption “as a means of winning the governor’s support for the legislation.”
The minimum wage increase, Assembly Bill 257, targeted fast-food restaurants and does not directly exempt Panera. The law says that “an establishment that … produces for sale on the establishment’s premises” is not “considered a fast food restaurant, so long as it continues to operate such a bakery.”
KCRA said “multiple sources” claimed “the governor pushed for the exemption in the late stages of the bill’s negotiation in 2022 with Flynn’s influence.”
Other factors, however, muddy the already murky waters.
For one, the governor’s “legal team has said because Panera mixes its dough off-site, the exemption does not apply,” KCRA says, and Flynn has promised that his California Panera locations will comply with the wage increase.
For another, Flynn’s San Francisco-based company owns some, but not all, Panera locations in California.
Then there’s the fact that his group owns a number of fast food restaurants that would be negatively affected by the law – if they were in California. They’re not.
It’s also worth mentioning that we might never know what happened during the final negotiations for AB 257, because the participating interests signed non-disclosure agreements, KCRA says. “The powerful Service Employees International Union,” which sponsored the bill, “required the other groups at the negotiating table to sign” the NDAs.
Assembly Republican Leader James Gallagher and Senate Minority Leader Brian Jones are calling the affair “Paneragate” and want the “crooked deal” to be investigated.
“Can any franchisee get an exemption from the $20 minimum wage law or do they need to donate more than $150k to Newsom first?” Gallagher asks.
KQED public radio in San Francisco recently wondered if Paneragate is “a Real Scandal or Politics As Usual?” But that doesn’t quite capture the events that have unfolded. Maybe the question should be rephrased as a statement with the “or” replaced by an “and.”
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute.
