California Fast Food Workers Hit With Layoffs Ahead of Law Raising Minimum Wage to $20 an Hour

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All business owners would love to treat employees to big pay increases, especially for people working fast-paced, often underappreciated jobs in businesses with high employee turnover. But a growing number of small restaurants and fast-food franchises in California are laying off workers ahead of what they fear will be a budget-busting, legally mandated minimum wage hike to $20 an hour. The new law takes effect next month.

News that fast food workers across California will receive a 25 percent hourly raise April 1 may sound unlikely, but it’s the legal reality–and significantly higher cost–thousands of restaurant businesses across the state will face next Monday. It’s the result of a compromise between owners, unions, and negotiators following the state’s decision to increase the minimum wage of fast-food workers above the $16 per hour rate of other employees.

While bosses successfully opposed the initial $22 hourly directive, even the increase to $20 risks many companies saying it is too expensive to shoulder. In advance of the crunch, many are moving to reduce labor reserves before the law takes hold.

Franchise owners of the roughly 400 Pizza Hut and Round Table Pizza restaurants in California have already begun cutting a planned 1,280 delivery jobs this year, according to a Wall Street Journal report. Chicken chain El Pollo Loco told investors it is automating certain tasks like salsa-making to avoid higher labor outlays the minimum wage hike is expected to generate, the paper said.

The National Owners Association of McDonald’s franchisees previously estimated California’s mandated fast-food wage increase will cost each outlet $250,000 per year. But it’s not just multi-restaurant and chain owners having to find ways to finance the added expenses-or proactively eliminate them.

Shahan Derian, proprietor of Lee’s Hoagie House in Pasadena, told TV station KABC he’s now opening fewer hours–and putting more time in on the job himself–to balance the 25 percent minimum wage increase and his ability to finance it. Inevitably, though, Derian says he and other restaurant entrepreneurs will have to offset the state-mandated expense the way all businesses do to avoid going into the red.