Corporate-backed minimum wage ordinance goes to City Council

Draft law creates two-tiered pay system that targets tipped workers and youth

The Sacramento City Council is set to consider a new local minimum wage law on October 13 that would exempt many workers – including tipped workers, workers who receive health care, workers under age 18 and workers in training programs – from some or all of the increase.

“This is a bad deal for Sacramento’s working families,” said Sacramento Central Labor Council executive board member Lino Pedres. “It’s a proposal that caters to special corporate interests and will create greater income inequality in our city.”

Under the proposal, the city would slowly increase the minimum wage to $12.50 an hour by 2020. The first local increase would take place on January 1, 2017 to $10.50 an hour. That would represent a fifty-cent increase above a $10.00 per hour state minimum that will go into effect next year.

Tipped wage carve-out

The plan also would allow employers to opt into a so-called “total compensation” model of pay. Any employer regardless of industry could choose this pathway if employees receive tips. It would require employers to certify in writing each pay period that an individual employee made at least $15 per hour during that pay period.

If the employer says that threshold was met through the inclusion of tips, then the employer could pay that employee the lower state minimum wage for the next pay period, regardless of what income the employee actually earned during that future time.

Enforcement issues

The proposed ordinance offers few protections for workers who dispute employers’ claims that they are making $15 an hour. The ordinance would offer a 90-day period in which an employer cannot retaliate against an employee for reporting violations. After that, retaliations would likely become a civil matter, although a provision exists for the city to apply misdemeanor charges against employers abusing the law.

The plan stipulates that anyone can report a violation, but does not guarantee confidentiality – instead mandating that “the city may disclose the identity of the person reporting the violation as necessary to enforce,” the law. The proposal also says that the city could investigate claims, including examining the financial records of employers opting into the total compensation model, but fails to specify what department of city government would be charged with enforcement, timelines or procedures for investigations, or how enforcement would be funded.

“There is simply no way to enforce this plan,” said Sasso. “It would cost the city millions of dollars to come up with an entirely new way of monitoring wages, and every two weeks, there would be new violations that needed to be investigated.”

Health care carve-out

Under the proposal, employers could also lower wages by applying a “healthcare credit” towards wages. An employer paying the new local minimum wage could in the first year of the plan reduce pay by 37 cents an hour if they can document that they are paying at least $2 per hour towards a policy premium for that employee. That credit rises to $1.50 an hour by 2020, effectively lowering the minimum wage to $11 per hour in 2020 for any minimum wage worker whose employer provides health insurance.

The plan also includes an “exemption for job training program participants.” This would allow an employer to avoid paying local minimum wage to any worker up to 25 years of age “in a youth job training program” or a “re-entry or release job training program” operated by a non-profit or government agency.

Corporate interests

The proposal is strongly championed by the California Restaurant Association. A local lawyer, Mark Spring of Carothers, DiSante & Freudenberger (CDF), who represents that special interest group, has agreed to defend the proposed law in court should it pass City Council.

“In order to help the City of Sacramento become the first in California to approve a total compensation model designed to reduce income inequality within restaurants, the CDF attorney has agreed to serve as representation in the face of any legal challenge for up to 300 hours pro bono,” the California Restaurant Association announced in a press release on Sept. 10.

But critics of the proposal question why the city would rely on a corporate-sponsored lawyer to defend a proposal that is more about furthering corporate agendas than protecting city interests.

“Why would we enact a law that we know is going to face serious legal questions?” said Sasso. “Shouldn’t we work to find a fair minimum wage for our city, rather than setting Sacramento up to be a legal test case for special interests trying to attack workers’ wages statewide?”