Food companies in California are laying off employees ahead of the new minimum wage law

In anticipation of California’s upcoming minimum wage increase to $20 per hour, several fast-food chains across the state have started to lay off workers, aiming to mitigate potential financial impacts. The impending law, set to be implemented in April, has prompted establishments, especially pizza franchises, to reassess their workforce numbers, with notable layoffs already taking effect.

Michael Ojeda, a 29-year-old Pizza Hut driver in Ontario, California, expressed his dismay after being notified by his employer, Southern California Pizza, a Pizza Hut franchisee, that his employment would end in February. Ojeda, who viewed his decade-long tenure at Pizza Hut as a career, highlighted the suddenness of his job loss.

The workforce reduction trend is not isolated to Pizza Hut alone. Reports indicate that multiple Pizza Hut franchises in California had previously signaled intentions to curtail delivery services, primarily affecting delivery driver positions. Southern California Pizza Co., in particular, announced a significant cut, laying off approximately 841 drivers across various counties, including Los Angeles and San Bernardino.

Pizza Hut, in response to franchisee staffing adjustments, reassured customers that delivery services would remain accessible through its digital platforms, ensuring a consistent ordering experience despite the staffing changes.

Similarly, Round Table Pizza and its parent company, FAT Brands, announced a reduction of around 1,280 delivery driver positions, transitioning these services to third-party providers. FAT Brands described the move as a reallocation of employment, projecting an uptick in third-party delivery businesses and, consequently, new job openings within those entities.

Despite these shifts, the transformation in delivery models is expected to lead to increased delivery fees and higher prices for consumers, reflecting the broader economic pressures faced by the restaurant industry, including those articulated by Brian Hom, owner of Vitality Bowls locations in San Jose.

Hom has adjusted to the staffing challenges by operating his establishments with fewer employees, which has resulted in longer customer wait times and higher operational costs.

The upcoming wage adjustment applies specifically to fast-food workers employed by chains with 60 or more national locations, challenging the industry’s traditional labor dynamics. Advocates of the wage increase argue that the majority of fast-food workers are adults, countering the perception that these roles are primarily held by teenagers in their first job.

The policy shift has sparked criticism from some political figures, such as California Assembly Republican leader James Gallagher, who claims that the new wage mandate exacerbates the state’s unemployment issues.

The law’s rollout has also been marred by controversy, with exemptions initially made for establishments like Panera Bread, leading to allegations of political favoritism linked to California Governor Gavin Newsom. However, in the face of scrutiny, Newsom clarified that Panera would be subject to the same wage requirements as other fast-food entities, amid ongoing debates over the law’s implications and fairness.

As California’s fast-food industry braces for the wage increase, the broader effects on employment, service delivery, and consumer prices remain focal points of discussion, reflecting the complex interplay between labor legislation and economic sustainability.