Why wouldn't they just switch to paper plates instead?
It's not unusual in the UK.
But wooden objects do biodegrade within human time scales if just left in a meadow. The same is true of polylactic acid objects. Neither wooden nor PLA objects break down in a home composting system like orange peels do, but both biodegrade much faster than e.g. polystyrene.
So tl;dr: paper is a worse user experience. Worth it IMHO but many people will certainly not agree.
Disposable plates and paper boxes covered in grease and food bits or soggy with liquid also shouldn’t be tossed in the recycle bin (except in places which explicitly accept them), with or without a coating.