Santa Monica’s minimum wage ordinance is not responsible for changes to the local economy, according to a report recently released by City Hall.

The City’s minimum wage ordinance will increase the wage to $15 per hour by July 1, 2021, and then increase annually by the Consumer Price Index. Paid sick leave mandates began in 2017 and increased in 2018 to a required 72 hours for large businesses and 40 hours for small. Staff released a report this week that highlights the education efforts around the law and concludes that changes to the local economy cannot be attributed to an increasing minimum wage.

Staff said outreach efforts had made over 3,600 in person and phone contacts with businesses and workers, including approximately 1,600 worker and 2,000 business discussions. Partner organizations also presented at community events and business gatherings and conducted focused workshops. Communicating directly with workers was a challenge as the city has no database of workers and workers are often unable to leave work to attend outreach events. Everyone, workers and employers, were confused regarding sick leave rules and that was making it difficult to measure compliance.

“The City’s interpretation that vacation or paid time off policies do not satisfy the paid sick leave requirement has been challenging, particularly for businesses that have existing paid time off policies with total hours in excess of the law’s requirements,” said the report. “Businesses have expressed concern that implementing the law according to the City’s requirements will result in less desirable time off for workers.” While finding workers was a challenge, staff said inserting information into paycheck envelopes proved an effective way to reach many employees. Businesses were most responsive to direct mail efforts. In both cases, employers and employees initially said they knew about the law but staff found their knowledge to often be incomplete or incorrect.

Enforcement of the rule is being handled by the Los Angeles County Department of Consumer and Business Affairs (DCBA) Wage Enforcement Program. The division conducted 10 investigations resulting in four notices of violation. In addition, two significant cases were routed through the City Attorney’s office.

“The first case involved both minimum wage violations and retaliation against a reporting employee at JW Marriott LA Boutique Gift Shop (“LA Boutique”), a local hotel-based retail business. On November 21, 2017, the owner of LA Boutique was convicted of three misdemeanor counts of violating the City’s wage laws and placed on 36 months of probation. Additionally, the owner was ordered to perform 150 hours of community service, and pay over $11,000 in back wages to employees and approximately $3,000 in investigative costs to the City,” said the report.

“Then on January 19, 2018, the City Attorney’s Office, in coordination with DCBA, favorably resolved a second significant wage enforcement case against Merchants Building Maintenance, LLC (“Merchants”), a janitorial and security services company. As part of this resolution, Merchants admitted to dozens of counts of minimum wage violations, and agreed to pay over $23,000 in back wages to 36 employees and an additional $36,000 in penalties to the City.”

Overall, staff said the minimum wage can’t be singled out as a cause in local economic change despite a reduction in overall jobs in the city and a loss of sales tax in recent months.

“There has been a slight decrease in the total number of jobs in Santa Monica overall, but that cannot be explicitly tied to the wage increases. Similarly, in the retail sector, the wage increase is one factor among several (operating costs, including high rents, and shifting consumer sales to online) that contribute to expected continued reductions in brick and mortar retail employment (e.g. retail sales clerks),” said the report.

According to the report, sales tax is declining across the state and is mainly attributed to a shift towards digital shopping.

Staff said they will continue to monitor the economy in the coming months and will continue to mount education efforts.

“Finally, staff intends to increase the administrative fines for minimum wage law violations, which are currently at the City’s default level of $75,” said the report.

editor@smdp.com