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California’s Minimum Wage is Likely Going Up

Jun 10, 2013

In an aggressive state bill currently being considered by California legislators, employees in this state may be experiencing a substantial increase in compensation over the coming couple of years. On the table now is AB 10 which proposes an increase in the minimum wage of $.25 in 2014, an additional $.50 in 2015 and another $.50 in 2016 for a total of $9.25 an hour. By 2017 this bill proposes to index the minimum wage in CA from that point on. This unfortunately has passed the CA Senate this past week and the bill is now headed to the CA House of Representatives next week.

 

Originally considered unlikely to pass because of both the large increases in wages and the issue of indexing, there now appears enough support to make this pass. Recently the bill passed the Assembly Labor and Employment Committee which is where it was assumed this would stall.

 

Eighteen states have a minimum wage above the federal level of $7.25 an hour, led by Washington at $9.19 an hour and then Oregon at $8.95. Ten of those states provide for annual, inflation-adjusted increases. California’s wage ranks fifth-highest in the country.

 

The minimum wage in CA has not increased in six years so we are due and we understand that it is necessary to take a look at this. The Restaurant Association also understands that without action on the part of the state, individual communities will begin making their own rules – some communities in CA have already started. San Jose implemented a minimum wage of $10.00 per hour just last month while San Francisco did the same last year. The City of Sacramento is currently considering a similar proposal.  The problem is that this is potentially coming at the same time as the PPACA is being enacted. Doubling down on the costs to run your operations is dangerous but that doesn’t appear to resonate with the state officials.

 

Matt Sutton, Vice President of Government Affairs & Public Policy for the California Restaurant Association, said an increase in the minimum wage would benefit only its employees who earn tips as the added cost would force operators to hold down wages for hourly employees to absorb the mandated increases for those making minimum wage. We agree; these staged increases put pressure on the Heart of the House employees in that there is less to offer them after the increases for tipped employees are mandated. A majority of the Heart of the House employees in restaurants are currently paid at a rate higher than minimum. This minimum wage increase will likely keep them exactly at minimum given the upward pressure on costs that individual restaurants will face.

 

We are continuing our efforts to work with all legislatures from both sides of the aisle to come to an agreement on what makes the most fiscal sense – certainly this bill with indexing tagged on at the end does not.

 

Now would be the time to work through labor efficiencies, perhaps as you are also working through plans to implement the Patient Protection Affordable Care Act (Obama Care). No doubt smaller franchise locations and even medium size businesses will consider tight controls on the number of hours that employees who are deemed part-time will be working. Simultaneously in CA that may be necessary for a number of reasons, PPACA is only one of them.