Panera flap typifies how Capitol works

Few measures epitomize the cliché about ugly process of legislative sausage making than California lawmakers’ efforts to boost pay in the state’s fastfood industry. It was a long process, as unions pushed for a European-style sectoral-bargaining council that shifted wage and working-condition decisions from industry to government — a radical departure from the American free-market approach.

Gov. Gavin Newsom in 2022 signed into law Assembly Bill 257, which established a fastfood council and also required “a fast food restaurant franchisor to share with its fast food restaurant franchisee all civil legal responsibility and civil liability for the franchisee’s violations of prescribed laws and orders.”

That measure would have destroyed the franchising model and eliminated the independence of these small-business owners. Facing an existential threat to their business model, the industry promoted a statewide referendum in an attempt to overturn the noxious legislation.

To avoid a costly ballot campaign, both sides agreed to a compromise. Assembly Bill 1228 approved the council and boosted wages to $20 an hour, but it reduced the power of the council and scuttled franchise-destroying provisions. The law is problematic, but it avoided immediate calamity in exchange for a slow-moving disaster. Fast-food restaurants already are laying off workers and raising prices.

Through it all, the public expressed little outrage mainly because the whole process was too convoluted to easily understand. But sometimes a simple scandal can crystallize a complex matter. Just as Newsom’s upscale dinner at the French Laundry restaurant during COVID-19 restrictions galvanized concern about his stay-at-home orders, so too has an allegation regarding an exemption in the new law garnered public outrage at this fast-food fiasco.

Bloomberg reported last week that Panera Bread — the fast-casual restaurant known for its bakery items — will benefit from a carve-out from the law for bakeries and restaurants that bake bread on site. The article claims that the governor “pushed” for the exemption, which benefits a wealthy Panera franchise owner who has contributed to his campaign.

Legislative Republicans sent Attorney General Rob Bonta a letter demanding an investigation into the matter. And the governor adamantly denied he had anything to do with the law’s exemption and also claims that the exemption doesn’t apply to Panera, although that point remains unclear.

In a statement to the Associated Press, the franchisee, Greg Flynn, said he opposed the initial legislation and argued that all delis and bakeries should be exempt from a bill targeting fast-food restaurants – but he never lobbied the governor for a special exemption. He also argued, correctly, that a special exclusion would be of no use if his competitors had to pay the higher wage given that his 24 Panera restaurants have to compete for workers.

The bakery language was placed into the bill somehow, but it’s not particularly outrageous. Whenever lawmakers pick and choose economic winners and losers, they have to define the specifics of who wins and who loses. Every business-regulation measure details the size, number of employees or type of establishment that must pay higher wages or conform to some regulation.

Instead of being outraged at Panera or any exemption, we should be alarmed that legislators micromanage business decisions rather than let the marketplace sort things out. Consider this fracas a welcome lesson into the typical, ugly inner workings at the Capitol.