Santa Monica's proposed minimum wage will get a second chance at a first reading on Jan. 12.
Council took a first pass at the rules in September of 2015. At that time, council identified several outstanding issues and asked for staff to return with a revised ordinance. That discussion picks up Jan. 12 with refined rules governing hotel workers, service charges, seasonal jobs, paid leave and enforcement.
The Council asked staff to reconcile the citywide minimum wage rules with Los Angeles' rules governing wages for hotel workers. Staff based their recommendation on a similar proposal in Los Angeles but chose to apply the rules to all hotels.
“Staff recommends a phased approach applying to all non-union hotels, matching the Los Angeles hotel wage by July 2017,” said the staff report. “The wage would increase to $13.25 per hour on July 1, 2016 and $15.37 on July 1, 2017, followed by annual consumer price index (CPI) increases. Like Los Angeles, the wage increase would take place over two years, and would reach the same rate. Unlike Los Angeles, the wage increase applies to all hotels regardless of size. Also like the Los Angeles ordinance, the recommendation includes a one-year waiver upon application for hotels that demonstrate that, to avoid bankruptcy, they would need to lay off an appreciable number of staff or significantly decrease hours to accommodate the increased wage cost. Again like Los Angeles, the hotel wage would apply to leased spaces connected to hotels, and to employees of contractors working on site.”
Council has the option of accelerating timeline for the hotel wage but staff said a slower approach would allow more time for employers to adapt. The minimum wage ordinance specifically states a collective bargaining agreement can override the wage, and therefore the hotel rules will apply to non-union businesses.
Members of Santa Monica's restaurant community were particularly opposed to a provision in the minimum wage rules that sought to govern service charges. Some councilmembers were concerned that restaurants charging a “service charge” were undermining tips and thereby decreasing wages for employees. Staff's recommendation is to recommend that “service charges” be defined and regulated like tips, with money going directly to employees in the chain of service.
In addition, the rules establish “surcharges” that can be applied to a bill to cover specific costs such as employee healthcare.
“In using a more specific service charge definition and affirming businesses' ability to use other surcharges, the recommended ordinance language takes into consideration that a reasonable customer would understand certain types of charges, such as delivery or health surcharges, as distinct from a service charge that might replace the traditional tip,” said the staff report.
The rules also require transparency to allow customers to understand what they are being charged.
During the September discussion, council asked for information about exempting seasonal workers from the rules. Concerns were raised that increasing the cost of labor would make employers less likely to hire individuals without experience and as many inexperienced workers begin their careers with seasonal work, a seasonal exemption could boost hiring for that class of worker.
Staff are recommending a provision that mirrors state law allowing any employer to pay 85-percent of the minimum wage for 480 hours or six months, whichever is sooner, for employees without experience in their assigned jobs.
“This provision would maintain an incentive to hire first time workers, would not create a significant wage gap in future years if the State wage does not increase, would apply to all businesses, and is a reasonable amount of time for a seasonal worker,” said the staff report.
Council also asked staff to add a provision for paid time off in ordinance. While much of the Santa Monica law is based on Los Angeles, in this case, no paid leave provision exists in that city. Instead, staff is recommending rules similar to those that exist in other cities.
“Employees would earn one hour of sick leave for every 30 hours worked (same accrual rate as the State law), and would be entitled to accrue at least 40 hours (five days) for businesses with 25 or fewer employees, and 72 hours (nine days) for businesses with 26 or more employees. Employees could carry balances over from year to year up to a maximum of 40 hours for small businesses and 72 hours for large businesses, but would not have the option to cash out,” said the report.
According to the staff report, local outreach, education and enforcement mechanisms are needed. The proposed rules allow for criminal penalties and also authorize civil remedies, including a private right of action, fee-shifting provisions, and treble damages for willful violations. Staff recommends working with the county on enforcement and has requested $80,000 for initial education and outreach.
Perhaps the most controversial aspect of Santa Monica's proposed rule is an exemption for union worker known as Supersession. Under the clause, employees covered by a collective bargaining agreement can forgo the minimum wage in exchange for other negotiated benefits. A similar proposal was stripped from the Los Angeles law but local officials declined to discuss the matter in September.
“I think we can assure people that we're rock solid on that issue,” said then Mayor Kevin McKeown at the time.
Supersession opponents have said the rule puts non-union businesses at a competitive disadvantage and said the rule exists as a tool to pressure businesses into accepting unionization.
