Marcos Bretón

Marcos Breton: Fight brewing over minimum-wage ‘carve outs’

Raising the minimum wage in Sacramento from $9 an hour to $12.50 by 2020 is a policy debate that’s shaping up to be a fistfight.

It’s political theater revealing the Byzantine way Sacramento works under Mayor Kevin Johnson. It’s an idea whose proposed details seem to be liked by few. It’s an argument some wonder why Sacramento is having given statewide efforts to raise the minimum wage.

But mostly, it’s a brawl that influential people expect and are quite prepared to have.

Lawsuits? You can bet on them if this thing goes forward.

A new minimum wage won’t be considered by the City Council until Oct. 13, but critics already are speaking out about part of the proposed ordinance, saying it violates state labor law.

The controversial section – brought to the City Council via a task force hand-picked by Johnson – is an idea that’s been shot down in other California cities. Called “total compensation,” the plan would count tips as wages for restaurant servers and others such as nail salon employees. Those tips would be taken into account by employers who could pay less than the city’s minimum wage to workers who earn gratuities, the idea being that between tips and salary, these workers make more than that rate.

As Ryan Lillis recently wrote in The Bee: “Sacramento would be the first California city with a total compensation carve out in its minimum wage law.”

If passed, it would work this way: “Under that provision, employers who register with the city as total compensation businesses won’t have to pay employees the minimum wage if they paid those workers at least $15 in total compensation for the previous pay period,” Lillis wrote. “Total compensation would include tips earned by restaurant workers and other service employees. In order to qualify for the total compensation provision, businesses would have to pay other employees who didn’t make $15 an hour in total pay at least $11 an hour starting Jan. 1, 2017.”

Fabrizio Sasso, the executive director of the Central Labor Council who also sat on the minimum-wage task force, didn’t mince his words about total compensation. “You do realize this is illegal,” said Sasso, recalling a conversation he had with a City Council staff person about the issue recently. “There is no established law in California that uses tips or commissions to establish the wages of an employee. This is new language.”

Sasso pointed to California Labor Code Section 351: “No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer.”

He said other cities such as Los Angeles and Berkeley considered similar wage carve outs but dropped them in fear of violating state labor law.

Sacramento is a restaurant town with a food scene central to an emerging civic identity. Servers are essential ambassadors of our farm-to-fork movement. We want them to be smooth and accomplished. We want them to be compensated for their hard work. We also want restaurant owners to thrive. However, this ordinance would affect more than just those who work in restaurants.

Sasso argues that there’s a social element at play here. “Most tip earners are women, mostly women of color,” he said. “For an employer to take the tip away is just another form of control of the employee.”

There is already trepidation that Sacramento is going too far too fast by even taking up the minimum-wage issue when neighboring communities have not. The total compensation carve outs are seen by business interests as sweetener to help swallow an issue that makes them nervous. If the carve outs die on the City Council dais on Oct. 13, then business support for the proposed ordinance could die with it.

So why even do this? It’s an example of how Johnson will act like an “executive mayor,” even though voters denied him his bid of formally being one. The former head of the U.S. Conference of Mayors, Johnson wanted minimum wage to be considered in Sacramento, and so everyone fell into line though few wanted to take up the issue.

As is almost always the case, one of Johnson’s allies – this time, it was Councilman Jay Schenirer – took charge of running the show behind the scenes once Johnson had announced the effort. But first, Johnson was sure to place influential business voices – such as Jot Condie of the California Restaurant Association – on his minimum-wage task force.

A moderate, business-friendly Democrat and a thoughtful believer in the big picture, Schenirer was perfectly suited for this effort. He’s smart and not afraid when things get messy. He understands Sacramento and the special place restaurants have in the city structure.

Restaurants have tiny profit margins and big overhead. They are vulnerable to market forces. Schenirer and others were willing to listen to the restaurant lobby’s concerns. The CRA believes that the state labor code on tips can be challenged. Schenirer believes that taking this approach could accomplish the goal of raising the minimum wage – which he believes in – but also acknowledge the economic factors affecting key Sacramento businesses.

And he hopes to help restaurant employees in the back of the house – employees who sometimes don’t get tips. “We’re trying to help the most in need without causing sticker shock among businesses,” Schenirer said of the work done by Johnson’s task force.

What about potential lawsuits?

“I would expect to be challenged,” Schenirer said. However, he believes this is a discussion worth having. Condie did not respond to messages on Friday, but Schenirer said the CRA is ready to help pay for a legal challenge on carve outs if this deal ever gets that far (although a private-interest group spending money on a city’s legal defense would certainly raise questions).

The plan would first have to be approved by the City Council on Oct. 13. Council members are often allergic to risk, and this idea may get shot down. Some members of the City Council are already leery of the entire issue.

“There doesn’t appear to be a deal here, from what I can tell,” said Councilman Steve Hansen. “Ideally, we should be trying to figure out what the state is going to do on minimum wage and other jurisdictions around us.”

The upcoming City Council meeting likely will be a contentious one. But Schenirer is right. This is a conversation worth having. Johnson pushed Sacramento into a minimum-wage discussion. Once there, it was framed by an acknowledgment that Sacramento has a different economy. It’s not a coastal city. Sacramento businesses just now are stabilizing after the recession.

Securing a minimum-wage deal on Oct. 13 has plenty of risks for Sacramento. But doing nothing is risky as well. Because if nothing is done, Sacramento could see a ballot measure pushing for a $15 minimum wage similar to those approved by cities such as Los Angeles.

Schenirer’s way may be the best: Have a difficult conversation now instead of a harder one later.

Workers who sought a $15 an hour minimum wage express their anger at a Sacramento task force that recommended a lower requirement.

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