Democrat California Gov. Gavin Newsom has sparked outrage and calls for an investigation from Republican lawmakers after allowing an odd exemption to the state's $20 minimum wage law that benefits one of his donors.
Newsom reportedly pushed for an exemption that allows restaurants baking and selling bread as a standalone item to continue paying its employees the current rate of $16 an hour. The peculiar carve-out means billionaire Greg Flynn, a longtime Newsom donor, could save hundreds of thousands of dollars at his two dozen Panera Bread franchise locations across California, Bloomberg first reported Thursday.
The move has since prompted calls for a probe from the top Republican lawmaker in the state.
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"Can any franchisee get an exemption from the $20 minimum wage law or do they need to donate more than $150k to Newsom first?" California Republican Caucus Chairman James Gallagher wrote in a social media post.
"This crooked deal needs to be investigated," Gallagher said.
California Senate Minority Leader Brian Jones also criticized the exemption, calling it "crony capitalism."
"Panera couldn't afford Democrat lawmakers' $20 minimum wage requirement for fast food restaurants," Jones said in a statement. "Lucky for them, their franchise owner donated over $160,000 to Governor Newsom, who got them an exemption. Unfortunately, other restaurants lacked such substantial donations and now must comply with the new minimum wage by all means necessary, including layoffs and replacing workers with automation."
"Campaign contributions should not buy you carve-outs in legislation," Jones added. "This isn’t 'sausage making' as the governor suggests, it’s crony capitalism. Corrupt and UNACCEPTABLE."
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Bloomberg's report noted that Flynn was previously involved in business dealings with Newsom. It also noted his opposition to the law that initially included the new regulations, known as the FAST Act, which led him to lobby Newsom's office to exclude Panera Bread as a fast food chain, sources told the publication.
Talks between labor groups and the fast food industry ultimately led to repealing the law last year – which initially set the minimum wage higher than $20 – and implementing compromised regulations that included the bread exemption and the $20 minimum wage.
According to the report, Flynn is the largest franchisee in the U.S. and owns thousands of Taco Bell, Pizza Hut, Wendy's, Panera Bread and Applebee's locations. He donated $8,400 to Newsom's 2018 campaign, $100,000 to help the governor push back against his 2021 recall, and $64,800 to his 2022 campaign.
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When reached for comment, a Newsom spokesperson told FOX Business, "This legislation was the result of countless hours of negotiations with dozens of stakeholders over two years. The Governor's office met with labor unions, business leaders and dozens of franchise owners through the course of negotiations. No one person or company held sway over the final outcome."
FOX Business also contacted Flynn's holding company and Panera Bread on Thursday but has not received a response. Flynn told Bloomberg he played no role in formulating the exemption.
