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Not So Fast, Please

By Frank Gruber

When I attend a public hearing until way past my bedtime, ideas start percolating from the depths. You know, "while I pondered, weak and weary."

Tuesday night, watching the public comment on, and City Council come to grips with, an actual living wage ordinance, a bit of forgotten law school lore came tapping at my mind's chamber door: "formal realizability."

But what did it mean? I couldn't remember. Was this some raven just come to remind me of my dark law school past, or was "formal realizability" a revelation?

"Google" to the rescue. I searched the web. My screen soon danced with references to "formal realizability." What's more, many of them were in articles that included a reference to my Contracts professor from way back in 1975. This was no bird at the window, but instead something someone taught me a quarter-century ago.

So what is formal realizability? A law has formal realizability to the extent it can be applied in all circumstances. For instance, we think that only mature people should vote. The law says that a specific age, 18, denotes maturity. That law has formal realizability, even if it may unwisely allow some immature 18-year-olds to vote, and unfairly prohibit some mature 17-year-olds.

Another example. A law that applies only to businesses that have gross receipts more than, say, $5 million, has formal realizability. A law that does not apply to a business if application of the law would make the business "nonviable," has less formal realizability, because viability depends on circumstances.

The living wage ordinance the City Council passed on first reading Tuesday night includes both of these provisions. Once finalized, and assuming it survives a threatened initiative, businesses will challenge it in court.

It is hard to predict what will happen. Conventional wisdom, or at least the wisdom those lawyers who wish to be employed to challenge the law are calling conventional, is that the law is a dead duck. I am not so sure.

This is not a legal column and, in any case, even with my lawyer hat on I know a lot more about the Writers Guild Credits Memorandum than the Equal Protection Clause, but I know something about how lawyers think.

If Latham & Watkins, the expensive attorneys for Shutters and Casa del Mar, were confident about their Equal Protection and municipal powers arguments, why would they have had their client buy an expensive environmental study to support a far-fetched claim under the California Environmental Quality Act? In lawyer parlance, this is called "reaching."

But then, instinctively, one wonders about the legal viability of any new regulation of business in favor of workers' rights. My aforementioned Contracts professor, Duncan Kennedy, had a healthy skepticism about the legal system. His view was that the predictability of the legal system is based less on laws and precedents, and more on how judges view the world.

This is where formal realizability comes in. Judges like it. They favor laws that are easy to administer, and that do not have internal contradictions, as opposed to laws that require subjective judgments or that are vague or at cross-purposes. That does not mean they won't find an exception if they believe application of the bright-line rule would be unjust, but all things being equal, they like certainty and they don't like to make value judgments.

The City Council made a fair attempt Tuesday night to enact a law that would pass muster politically. The council did not include in the ordinance the fifteen paid days off that living wage proponents wanted, nor the "hiring hall" concept included in the Pollin report. Council also increased the threshold to $5 million, primarily to exempt small and mid-sized restaurants.

I mean no disrespect to the council to say that the skill of the City Attorney's office in drafting a straightforward law (one the City Attorney presumably feels she has a better chance of defending) has saved the council majority from its understandable political impulses to enact something that tries to make everyone, but particularly its supporters, feel good.

But I hope the City Council takes the time to have another "first reading" of the ordinance because it needs to do more work to make sure that the law will survive. Now that people know what the law will be, this is a perfect moment to solicit input from businesses who have concerns but who would prefer not to litigate.

There are other deficiencies, as well. The definition of "Employer" appears not to include the City itself, which seems inconsistent with the City's intent, since the staff report included estimates of the costs to the City of complying with the law.

By simply raising the threshold, the council did not adequately deal with the issue of tipped workers. Tipped workers have never been the target of the ordinance. This is not because of a soft spot for restaurants, but simply because, with the notable exception of fast food restaurants where workers are not tipped, most restaurant workers make more than the living wage.

But some restaurants have more than $5 million in receipts. Hotels also have restaurants. The law will require these employers to pay more money to tipped workers who are already receiving more than $10.50 per hour.

This inconsistency with the purposes of the law is the kind of circumstance that opponents can use politically, in an initiative campaign, or that a judge, who may be disposed against governmental regulation in the first place, can use to invalidate a law in its entirety, by calling it "overbroad," regardless of the availability of a hardship exemption.

Rather than including all lessees at a hotel, the council should try to figure out how to exempt hotel restaurants to protect the law as a whole.

While state minimum wage law prohibits giving a credit for tips, theCity Council should look into a blanket exemption for the food-service business based on the unique aspects of that business. There is nothing unusual about government regulating business on an industry by industry basis.

(On the other hand, in an ideal world I would vote for an exception to the exception, and cover fast food restaurants. City Council is prepared to give a hardship exemption to McDonalds based in part on its employing youth, but the fact that fast food restaurants pay peanuts to high school students who should be doing their homework, instead of real wages to grown-ups, is just as much an externalization of their costs as the styrofoam cups that litter our streets and parks. But exceptions to exceptions make laws not formally realizable.)

Another issue the City Council should take a second look at is the criminal penalties included in the ordinance. Civil enforcement, including action by the City Attorney, with the possibility of punitive damages, is sufficient deterrent. It would be a meaningful gesture to the city's business community for the council to drop the threat of prosecution.

A little more work can make a much better law. For evermore.

The views expressed in this column are those of Frank Gruber
and do not necessarily reflect the opinions of The Lookout.
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