WAGES, THE ECONOMY & LAWS, OH MY!!?

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© 2015 Wilson Elser. All rights reserved.

Bruno W. Katz

October 27, 2015

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© 2015 Wilson Elser. All rights reserved.

PRESENTER

Bruno W. Katz Partner, Wilson Elser Moskowitz Edelman & Dicker

Maintains a diverse business litigation practice that includes labor and employment, professional liability, corporate litigation and complex, multi-party litigation. Bruno represents a wide variety of clients, including hospitality companies, real estate management companies, transportation companies, and entertainment companies.

Member of Global Alliance of Travel, Tourism & Hospitality Attorneys

Captain in the U.S. Navy Reserves, currently serving as the Force Staff Judge Advocate for Commander, Reserve Component Command Southwest.

Frequent Lecturer on employment practices, liability issues and other risk management matters

Rated by American Lawyer and Martindale-Hubbell as Top Rated in Labor & Employment

FAIR LABOR STANDARDS ACT

National workweek and overtime

National minimum wage ($7.25)

Overtime for nonexempt workers-40 hours

Prohibit “Oppressive Child Labor”

Effective Jan 1, 2015-$10.10 for federal contractors• WARNING: States can implement more onerous

standards.

MINIMUM WAGE AS NATIONAL ISSUE

• President Obama calls for $10.10 minimum wage • Many states raised minimum wage above federal level of

$7.25• Municipalities passing individual ordinances• Labor activists efforts i.e. Fight for $15

HOSPITALITY INDUSTRY AS TARGET-HISTORY

Illinois’ Hotel Room Attendant Amendment-Found to be preempted by the NLRA under the Machinists doctrine-520 South Michigan Avenue v. Shannon (7th Circuit December 17, 2008)

Emeryville, California’s Measure C

-Only applicable to “large hotels” over 50 rooms, living wage ordinance, mandatory employee retention

Los Angeles, CA-LAX Hotel Workers Living Wage, Worker Retention and Tip Protection Policy

WHY HOSPITALITY?

No Fear of Moving of Jobs Overseas/Outsourcing

Less Likely to Respond to New Regulations By Closing or Reducing Employment

Perception that Many Jobs Similar to Janitorial Industries that Already have Labor Code Protections on Worker Retention

Owners Not as Well Organized as Other Industries or Funded to Fight Labor Campaigns

LABOR TURNS TO POLITICS

Unions have a poor record of winning unionization elections under the National Labor Relations Act (NLRA)

Leveraging their political strength to do what their workers will not

Project Labor Agreements in the construction sector

Card check in the hospitality and other sectors, or direct recognition of the union as the exclusive bargaining representative/union security clause

PARTIAL LIST OF MINIMUM WAGE SUPPORTERS

SEIUUNITE-HEREUFCWUFWAFL-CIOROCLAANEFIGHT FOR $15

STATEWIDE INITIATIVES

Alaska: $8.75 per hour. Increase to $9.75 per hour on January 1, 2016.

Arkansas: $7.50 per hour. Increase to $8.00 per hour on January 1, 2016 and $8.50 on January 1, 2017.

Nebraska: $8.00 per hour. Increase to $9.00 per hour on January 1, 2016.

South Dakota: $8.50 per hour.

California: $9.00 per hour. Increase to $10.00 per hour on January 1, 2016.

RECENT MUNICIPAL MINIMUM WAGE

SEATAC and Seattle, WA: $15/hr

Oakland, CA: $12.25/hr plus mandatory sick leave

San Francisco, CA: $12.25/hr. May 1, 2015 with annual increase up to $15/hr by July 2018

Richmond, CA: $12.30/hr by City Council vote

Los Angeles, CA: $15.37 for large hotels passed by City Council in September 2014 but lawsuit filed in December by AH&LA and AAHOA. Citywide minimum wage proposal.

FUTURE CA MIN WAGE MAP?

CALIFORNIA WAGE INITIATIVES

2014-Mark Leno-(D-San Francisco) Efforts to Increase Mininium wage to $13 by 2017 fails to get passed

2015-Leno’s Second Effort also fails to get approval- bill included an CPI increase provision.

California: SEIU-UHW supported petition to raise state minimum wage to $15 by 2021.-Potential November 2016

ballot initiative.

SAN DIEGO MINIMUM WAGE EFFORTS

HISTORY:

2014-Todd Gloria-D proposal to increase City of San Diego Min Wage Approved.

Mayor Kevin Faulconer-R vetoed the bill.

August 8, 2014-Veto overridden 6-2.

Referendum initiated-Successfully gathered close to 55,000 signatures stopped implementation.

City Council voted to place on June 7, 2016 ballot.

SAN DIEGO MINIMUM WAGE EFFORTS

KEY COMPONENTS OF INITIATIVE:

Minimum Wage $11.50 an hour on January 1, 2017.

2015 and 2016 wage hikes not retroactive.

Minimum Wage tied to inflation starting in 2019.

Opportunity to earn up to 5 paid sick days a year.

TOTAL COMPENSATION OPTION

Sacramento: New City Minimum Wage proposed:

– $12.50 city minimum wage – phased in gradually through 2020– Total Compensation – allows employers to opt in to exempt from

the minimum wage increase employees earning a minimum of $15/hr in tips, commissions and total wages

– Teen Training Wage

Vote of City Council 6p.m. October 27, 2015

TOTAL COMPENSATION OPTION

San Diego had a initiative with total compensation model that never forward due to 2014 City Council action.

Total Compensation-not a tip credit but a two tier wage with total compensation wage above highest minimum wage.

Total Compensation includes including hourly wages, gratuities, commissions, piece-rate payments, bonuses and/or other performance payment.

TOTAL COMPENSATION OPTION

RATIONALE: Allows employers to allocate limited labor dollars to non-tipped employees without decreasing the earnings of their servers and bartenders and improves income equality.

OPPOSITION: Tip Credit prohibition of Labor Code 251.

Legal Opinion of San Diego City Attorney Favorable

Legal Opinion of Legislative Counsel Unfavorable-released by Assemblymembers Kevin McCarty (D-Sacramento) and Roger Hernández (D-West Covina).

CALIFORNIA SICK LEAVE LAW

Effective July 1, 2015-provides at least three days, or 24 hours, of equivalent paid time off per year.

Accrual: Work 30 days or more per year will begin accruing at least one hour of sick pay per every 30 hours worked, as of July 1, 2015, or the first day of work, whichever is later.

Use: After 90 days of employment, paid sick leave can be used in minimum increments of two hours or more.

Carryover: May limit an employee’s use of paid sick days to three days, or 24 hours, per year of employment

Cap: Can limit accrual to six days, or 48 hours, per year.

CALIFORNIA SICK LEAVE LAW

Eligibility and Use: Can be used for the illness or preventative care of an employee or an employee’s family member.

Can also be used for employees who are victims of domestic violence, sexual assault, or stalking.

Compensation: Compensated at the same wage rate as the employee normally earns during regular work hours.

If in first 90 days, varying rate or piece meal or commission, rate divided by total wages (except overtime) by total hours.

Unlike paid vacation days, paid sick days do not have to be paid out at the termination or separation of employment.

CBA-exemption with paid sick leave terms and certain wage rates

EXECUTIVE EXEMPTION

Primary duty is managing the business or a customarily recognized department or subdivision of the business;

Customarily and regularly direct the work of at least two other full time employees or their equivalent and

Primary duties include the exercise of discretion and independent judgment with respect to matters of significance (i.e. hire and fire, advancement, promotion)

Earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.

ADMINISTRATIVE EXEMPTION

Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers

Primary duties include the exercise of discretion and independent judgment with respect to matters of significance (i.e. human resources managers, accountants, team leaders)

Earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.

PROFESSIONAL EXEMPTION

Primary duty is the performance of work requiring advanced knowledge predominantly intellectual in character and includes work requiring the consistent exercise of discretion and judgment;

The advanced knowledge must be in a field of science or learning (i.e. law, medicine, accounting, engineering, architecture, chefs with academic degree in culinary arts); and

Earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.

PROPOSED NEW DOL RULES-EXEMPTION

The salary level will be $970 per week, or $50,440 per year. Adjusted to inflation.

Federal law, but not California law, provides one additional overtime exemption for Highly Compensated Employees. Under federal law, employees earning at least $100,000 per year are exempt from overtime so long as they customarily and regularly perform one of the duties if an exempt executive, administrative or professional employee.

New Highly Compensated Employee Rule: the 90th percentile, which was $122,148 per year for 2013.

PROPOSED NEW DOL RULES-EXEMPTION-CALIFORNIA POSITION-

OFFICIAL STATEMENT FROM CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS:

. . .employers and workers in the state of California are minimally impacted by those changes. The changes to federal law have no impact on private employers. However, state and local government workers may be impacted.

Wages, hours and working conditions - including overtime pay requirements - for California's private sector employees are governed by the Industrial Welfare Commission (IWC) wage orders, which supercede federal regulations.

NEW CALIFORNIA 2016 LAWS

Piece Rate. AB 1513, Effective January 1, 2016, employers must pay piece-rate employees for rest and recovery periods (and all other periods of “nonproductive” time) separately from (and in addition to) their piece-rate compensation.

PAGA. AB 1506, effective October 2, 2015. PAGA, as thus amended, now gives employers a limited right to cure certain wage-statement violations before an aggrieved employee may sue under PAGA i.e. wage-statement statute (Labor Code section 226(a)).

NEW CALIFORNIA 2016 LAWS

Expansion of Labor Commissioner Enforcement Authority. AB 970, authorize the Labor Commissioner to enforce local laws regarding overtime and minimum wage provisions and to issue citations and penalties for violations, provided the local entity has not already cited the employer for the same violation.

Labor Commissioner: Judgment Enforcement. SB 588, effective January 1, 2016,  authorizes the Labor Commissioner to file a lien on the employer’s property in California for unpaid wages, and other compensation, penalties, and interest owed to an employee.

NEW CALIFORNIA 2016 LAWS

Gender Wage Equality. SB 358,  effective January 1, 2016, prohibit employers from paying any employee at a wage rate less than that paid to employees of the opposite sex for doing substantially similar work—when viewed as a composite of skill, effort, and responsibility.

Kin Care. SB 579, effective January 1, 2016, amends California’s Kin Care law (Labor Code section 233) to tie its protections to the reasons and definition of “family member” (i.e., paid sick leave law). Expands coverage of California’s school activities leave to include school related activities including day care.

CALIFORNIA 2016 BILLS NOT PASSED

CFRA Leave. SB 406 would have extended the protections of the California Family Rights Act (“CFRA”), to care for grandparents, all children (removing any age restriction), and grandchildren, as well as siblings, domestic partners, and in-laws. Vetoed October 11, 2015.

Arbitration and Pre-Employment Waiver Restrictions. AB 465 would have banned employers from requiring workers to agree to use binding arbitration to resolve employment disputes as a condition of employment. Vetoed October 11, 2015.

CALIFORNIA 2016 BILLS NOT PASSED

Paid Family Leave Benefit Extension. AB 908 would have required the family temporary disability insurance program to provide up to eight weeks, rather than the existing six weeks, of wage replacement benefits to workers who take time off work to care for specified persons, or to bond with a minor child within one year of the birth or placement of the child.

Expansion of Paid Sick Leave. 2 bills offered both did not pass: one expand to include child care emergencies and eliminate employer’s ability to use pre-existing policy.

POTENTIAL IMPACT OF PATCHWORK MINIMUM WAGE LAWS

Higher wages for employees and increased productivity

Narrowing of income gap

Reduced revenue due to lower demand

Loss of Jobs

Increased competition

Decreased value of hospitality products

Increase cost to consumer of products

OVERALL: Lower Profits esp. to small businesses

RECENT STUDIES

Congressional Budget Office: Loss of 500,000 jobs

Penn State School of Hospitality Management:

-$2.53 billion loss from $10.10 minimum wage to hotel industry

-$15.37/hr rate in Los Angeles estimated loss $255.4 million to hotels

POTENTIAL ENGAGEMENT EFFORTS

Know your Neighbors

Build Industry and Business Coalition

Engage your local legislators

Coordinated Lobbying

Offer Alternative Legislative Proposals

Jointly Funded Litigation if necessary

THE PROACTIVE CAMPAIGN

Develop a clear vision/policy

Communicate the vision to all allies

Train on the vision and message

Educate on the issues and know the facts better than opponents

PERFECT COMMUNICATION IS ESSENTIAL!

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© 2015 Wilson Elser. All rights reserved.

Thank you for attending!

Contact

Bruno W. Katz

Partner

San Diego, CA

619 881 3317

Bruno.katz@wilsonelser.com

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© 2015 Wilson Elser. All rights reserved.