Will Sacramento's minimum-wage plan fall apart?

Sacramento City Council will soon vote on a contentious new minimum-wage plan—that is, if the deal doesn’t go to pieces beforehand.

It very well could: Labor groups, who want to raise the minimum wage, actually remain opposed to the ordinance, even though it would bump the city’s hourly pay for many workers to $12.50-an-hour by 2020.

And business interests, and in particular restaurateurs, halfheartedly endorse the plan—but some individuals told SN&R in private that they’re getting cold feet.

If it fails, it would mean that Mayor Kevin Johnson would not cash in on one of his major policy proposals of the year.

The proposal, which likely will go in front of council on October 20, involves increasing the city’s minimum wage for businesses with more than 40 employees, incrementally, until reaching that final $12.50 number.

Labor leaders have been against the ordinance since it was announced early last month. “It’s too low, and it’s too slow. We’d like to see council do better,” says Fabrizio Sasso, the Central Labor Council’s executive director, who’s an advocate for a $15 minimum wage. Stasso actually sat on the mayor’s Task Force on Income Inequality, which set forth the minimum-wage-ordinance recommendation on September 2.

But stakeholders disagree on more than just dollars and cents. At the heart of Sacramento’s minimum-wage controversy is the idea of counting tips as part of wages, a concept otherwise known as “total compensation.”

Total compensation zeroes in on whether restaurants or businesses with tipped or commission-earning employees can count those monies toward total paid wages. State law says this is illegal—but Sacramento is proposing that employees who earn $15 an hour, including tips, be exempt from any minimum-wage gains.

Wage-equality activists say that this plan won’t hold water in court—and have threatened a lawsuit if council gives it the green light. Sasso told SN&R this special carve-out rule for businesses with tipped workers is “pretty dangerous.”

“The narrative out there is that your boss wants to steal your tips,” is how he put it.

The business community, including the Sacramento Metro Chamber of Commerce, says the ordinance is a no-go without total compensation—and they’re confident that it will survive any legal challenge. “We feel that the exemptions are critical,” Chamber President Peter Tateishi told SN&R.

Sasso has criticized the task force for working behind the scenes with the California Restaurant Association on a “backroom deal” to include total compensation in the ordinance, a provision that has never made it into any wage law elsewhere in the state.

The CRA has been quick to fight back, however, pointing out that the ordinance does not allow business owners to steal or withhold tips—and actually contains language protecting tipped earners. “Nothing in this chapter entitles the employer to withhold gratuities from the employee,” the ordinance itself reads. The CRA also noted that, if total compensation is thrown out by a judge, the rest of the minimum-wage plan will still move forward—which would, of course, upset the Chamber.

“Absolutely, there’s a huge concern,” Tateishi said of total compensation failing down the road. “That is why a lot of folk wished that we didn’t” work on or support the ordinance.

Joe Devlin, chief of staff for task-force leader and minimum-wage-increase advocate Councilman Jay Schenirer, is optimistic that city leaders will find a workable solution amid this disagreement.

“I think the council is going to make it their own,” he said, adding that he anticipates a thoughtful discussion, one that focuses on “finding something that works for the city and for the workers of Sacramento.”

“I don’t think it falls apart,” he said.

This past July, Johnson convened the special task force to explore raising the city’s minimum wage. The group—which included two council members, labor and minority-group representatives, and business leaders—met for six weeks, including four well-attended public meetings. On the first Wednesday in September, they announced their recommendation: raising Sacramento’s hourly minimum wage to $10.50 in 2017, $11 in 2018, $11.75 in 2019 and finally $12.50 in 2020.

But there were exemptions: workers under 18 would not get the pay bump, same for disabled workers; employers that provide sufficient health care to employees would be eligible for credit against the higher hourly pay; and businesses with fewer than 40 employees wouldn’t have to pay the new wages at all. And, of course, the total compensation catch.

The city itself estimates that some 540 of its own workers will be impacted by the minimum-wage increase. Plus, the city will have to hire three new full-time employees to enforce the ordinance, at the cost of around $450,000. The city also estimates an economic impact of $84 million during the five years of pay increases.

A staff report says that 19.2 percent of all Sacramento County workers make less than $10 an hour—a majority of them women, and a majority of them between the ages of 36 and 45.

Tamie Dramer, an activist with Raise the Wage, says the city’s exemptions unfairly discriminate against female workers. “This is targeting women,” she said. “Woman are disproportionately low-wage workers, and tipped workers.”

Businesses that apply for the total-compensation exemption would have to pay workers at least $11 an hour by January 1, 2017, to qualify. They’d also need to register with the city.

Council members Steve Hansen and Jeff Harris, the latter who sat on the mayoral task force, also have spoken out publicly against aspects of the proposed ordinance. Both would like to see the city dialogue further on its minimum-wage plan and wait to see what the state does regarding minimum wage next year.

It’s uncertain as to whether there are five council-member votes for its passage. According to sources, only the mayor, Schenirer, and Council members Rick Jennings and Allen Warren are sure-thing “yes” votes. Councilwoman Angelique Ashby has not shown her cards.

Restaurateur Chris Jarosz told SN&R that he’s worried the process is getting too political.

“That’s the problem with the city council right now: We can’t get them to work together,” he said.

Jarosz, who operates multiple restaurants in the central city and West Sacramento, says he supports living wages and equity, but also thinks that total compensation is “a good piece” of the plan that is fair to businesses. He also reminded that, while this is an exciting time of development for Sacramento, “we need to be very careful about our growth.”

Devlin reiterated that coming to a consensus on minimum wage will be a delicate process. “How do you balance this? How do you help workers and raise the minimum wage, as an island city?” meaning that other cities surrounding Sacramento will not be increasing wages.

“The fact that we’re going at this alone made the task force conversations that much harder,” Devlin said. “It’s a challenge, but ultimately [Schenirer] sees raising the minimum wage is the right thing to do.”

If Sacramento fails to pull the trigger, the state might raise the wage itself next year. Sen. Mark Leno already has a bill, Senate Bill 3, in circulation. This would bump the minimum wage in the Golden State to $13 an hour by 2019.

Activist and labor groups also have threatened to put a minimum-wage measure on the November 2016 ballot, a prospect that Gov. Jerry Brown will want to avoid. The mayors of Oakland and San Francisco are pushing for a measure to raise the statewide minimum wage to $15 by 2021. Some think that the governor will strike a deal with Leno and get a bill through both houses of the Legislature and onto his desk sometime next year in order to avoid a ballot proposition.

“Everybody feels that there is going to be some push on the state level to equalize the minimum wage,” observed restaurateur Jarosz.

Yet, in an odd twist, both labor and the mayor’s contingent agree that Sacramento should control its own minimum-wage destiny despite what happens at the Capitol.

“The city should take the lead in determining what’s right for the city,” is how labor leader Sasso put it.