California’s New Minimum Wage Law Triggers Massive Layoffs for Fast Food Workers

According to a report by The Wall Street Journal, restaurant chains, particularly pizzerias, are preparing for this adjustment by reducing their workforce. These businesses plan to cut hundreds of jobs, reduce working hours, and halt new hiring to cope with the increased labor costs. This development comes as more restaurant chains brace for the financial impact of the wage increase.

Despite these cuts, Pizza Hut assures customers that delivery service will remain available through their mobile app, website, and phone ordering, ensuring a consistent customer experience. 

Ojeda, who devoted nearly a decade of his career to Pizza Hut, expressed his dismay, stating, “Pizza Hut was my career for nearly a decade and with little to no notice it was taken away.”

The company is shifting its delivery services to third-party providers. This move is described as a job transfer rather than a loss, indicating a trend among California restaurant operators to adapt to rising operating costs by changing their staffing strategies.

Many of these employees were still not earning enough to make a living. So, the California government decided to make some changes to force major fast food chains to pay their employees a living wage.

The National Law Review’s analysis of the bill indicates that a broad range of establishments could fall under the law’s coverage, extending its impact beyond traditional fast food restaurants.

However, this claim was dismissed by Newsom’s office as “absurd.” 

While Newsom has denied these allegations, critics couldn’t help but point out how odd it was that those creating the law did include an exemption for fast food restaurants that baked their own bread.

However, both Flynn and Newsom have stated that they did not push for these exemptions — something critics continue to say they’ve done.

This resulted in Flynn stating that he would raise employees’ minimum wage at Panera Bread to $20 in California.

According to some analysts, Panera Bread still wouldn’t qualify for this exemption, as they don’t make the dough on-site. They make it off-site and then ship it to each individual store. This alone could disqualify Panera Bread from the exemption.

Burger King is one example. Before the law, a Texas Double Whopper meal cost $15.09. After the law went into effect, it increased to $16.89.

Chipotle’s CFO discussed the necessity of this action with Yahoo Finance, while a Starbucks spokesperson told USA TODAY that the company is committed to improving compensation and the overall experience for their partners. 

Starbucks’ comprehensive compensation package for U.S. hourly partners averages $30 per hour, reflecting their approach to sharing success with employees at all levels.

This adjustment is a direct response to the state’s legislative changes, affecting how businesses operate and price their offerings. 

This increase is a notable financial improvement for workers in the industry.

To cope with increased labor costs, Hom has reduced his staff to two employees per store, half of the typical number, resulting in longer wait times for customers and necessitating higher prices to cover the added expenses. “I’m definitely not going to hire anymore,” Hom declared, highlighting the strain on small business owners.

Many fast-food eateries around California remain concerned about the law, simply because they can’t figure out if they are exempt or not. Unfortunately, when they try to connect with the government to better understand what they should do, they’re left with more questions.

Therefore, small businesses that only have one or two stores — or even ten stores — are exempt.

Places like coffee and boba shops are not exempt. Some ice cream parlors may also be impacted by this new legislation.

High demand often results in more employees being hired — and hired at a higher wage.

People may leave lower-paying jobs for these new $ 20-an-hour ones. This then could naturally force other businesses to raise their own wages to try to keep employees in a very busy industry.

The future is unknowable. Though there have already been immediate layoffs, the industry could easily bounce back once it gets used to these new minimum wage laws.

The changes being made by fast food chains, from job cuts to price increases, reflect a broader adjustment to new economic realities. The impact of these adjustments will likely shape the industry’s future, affecting both employees and consumers in the state.