With minimum wage set to explode next year, many California businesses are planning huge layoffs to save money.
Two large operators of Pizza Hut franchises in the state announced recently that they would be laying off every one of their delivery drivers. This comes just before a new law in the state will raise the minimum wage for people who work in the fast food industry to $20 per hour.
The operators said that more than 1,200 delivery drivers would be laid off as a result. That will impact operations in San Bernardino, Ventura, Riverside, Orange and Los Angeles counties, as well as the city of Sacramento.
Business Insider obtained federal employment notices recently, which show that the layoffs will take place before the end of February. California’s increase in minimum wage will go into effect in April.
The franchisee said in its federal WARN Act notice:
“PacPizza, LLC, operating as Pizza Hut, has made a business decision to eliminate first-party delivery services and, as a result, the elimination of all delivery driver positions.”
The WARN Act requires all employers to provide official notification at least 60 calendar days before they plan a mass layoff.
About 841 other delivery drivers will be laid off by a second franchise of Pizza Hut called Southern California Pizza Co., according to a WARN Act notice they filed.
Assembly Bill 1228 will increase the minimum wage in California from $16 an hour to $20 an hour. Its goal is to aid workers in the fast food industry as they try to cope with inflation and the increased cost-of-living that’s happening in California.
The authors of the bill claim that a majority of workers in the fast food industry either live below or at the federal poverty line. Many also seek out safety net programs that are run by the state.
Their solution was to raise the minimum wage to help these workers. In the process, though, they are forcing the hands of many business owners who say they simply can’t afford that big of a spike for their entry-level employees.
Other fast food chains in the state such as McDonald’s and Chipotle have announced an increase in menu prices in California as a way to offset this sharp increase in worker compensation.
California isn’t the only state where the minimum wage will rise in 2024.
As of January 1, 22 states will increase their minimum wage laws, which is expected to affect nearly 10 million total workers.
The Economic Policy Institute – a liberal-leaning group – said this will give around $7 billion in additional wages annually to an estimated 9.9 million employees.
In addition to California, both Washington state and New York will increase their minimum wages to $16 per hour.
In addition to these state-mandated increases in minimum wage laws, 38 counties and cities across the country will increase minimum wages in their locales in 2024.