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Minimum Wage Law Has Had No Major Impact on Santa Monica Economy, Report Finds

 

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By Jorge Casuso

August 2, 2018 -- Two years after being implemented, Santa Monica's minimum wage law has apparently had no "substantive impact" on the local economy, although some consumers may have been feeling the pinch, according to an update by City staff.

The report to the City Council found that the law, which was implemented on July 1, 2016, has created "hiring and operational challenges" for some businesses but has not resulted in any closures.

The local law set the minimum wage at $10.50 in 2016, phasing it up to $13.25 this year and reaching $15 by 2020.

"There have been no specific reports to the City or its outreach contractors of any businesses facing economic hardship, bankruptcy, or closure due to the minimum wage ordinance," said the report from the City finance and economic development officials.

"Anecdotal feedback received during the City’s business outreach efforts conveyed that businesses face a variety of pressures in maintaining operations, including the minimum wage law requirements that create hiring and operational challenges."

In the food sector, which includes restaurants, bakeries and ice cream vendors, some businesses "have introduced service charges, adding to consumer prices," officials said.

From the fall of 2016 through April 2018, that Los Angeles County Department of Consumer and Business Affairs (DCBA), which is under contract with the City to enforce the law, has responded to 19 inquires, according to the report.

These led to ten investigations involving 110 employees that resulted in four notices of violation and two cases filed -- against the JW Marriott LA Boutique Gift Shop and Merchants Building Maintenance, LLC.

In the case against the hotel gift shop, the owner was convicted last November of "egregious" violations of the law ("Marriott Hotel Gift Shop Owner Becomes First Convicted of Violating Santa Monica Higher Minimum Wage Law," November 28, 2017).

The owner pleaded no contest and was ordered to pay back wages, costs for prosecutors and perform community service, City officials said.

In January, Merchants Building Maintenance admitted to dozens of violations of the local wage law and agreed to pay full restitution to the 36 affected employees, totaling more than $23,000, officials said.

It also agreed to pay $36,000 in penalties ("Santa Monica Prosecutors Resolve Second Case of Minimum Wage Law Violations," January 24, 2018).

"A number of other significant wage enforcement cases are currently being actively investigated," City officials said.

Staff said it intends to increase the administrative fines for minimum wage law violations, which are currently at the City’s default level of $75.

In addition to responding to the inquiries, DCBA staff also has conducted proactive enforcement visits to "discuss the minimum wage law’s requirements in detail with business owners and managers" and provide information about the law.

"Many of these proactive visits were generated at the request of City staff, based on information or leads from the worker outreach partners," staff wrote.

The report found that employees and workers are particularly confused about paid sick leave under the law.

"Employers have had the greatest number of questions about navigating sick leave requirements and it has proven an ongoing challenge for them to implement and manage," staff said.

"Workers have reported difficulty understanding the paid sick leave rules and identifying non-compliance of their employers."

Last year, the City hired three organizations to conduct outreach to businesses and workers -- Lee Andrews Group, Restaurant Opportunities Center Los Angeles (ROC-LA) and the Korean Immigrant Workers Alliance (KIWA).

Through January 2018, the organizations made more than 3,600 "in person and phone contacts with businesses and workers," including some 1,600 worker and 2,000 business discussions, City officials said.

The organizations also "presented at community events and business gatherings, and conducted focused workshops," officials said.

"Traditional approaches like workshops are not particularly effective, due to an inability to directly contact or market to minimum wage workers," according to the update.

If renewed, the four-year contracts for the three organizations would total $307,400 ("Santa Monica Council Expands Outreach for City's Minimum Wage Law," August 11, 2017).

Santa Monica approved its minimum wage law in January 2016 ("Santa Monica City Council Votes to Hike Hourly Minimum Wage to $15 an Hour by 2020," January 14, 2016).

Starting on July 1, 2016, it raised the minimum wage to $10.50, moving up each subsequent year to $12, $13.25, $14.25 and $15 by 2020.

The law gives unions the right to exclude their members.

 


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