ATTACHMENT 1-1
1 STAFF REPORT
DATE: April 13, 2021
TO: Justin Hess, City Manager
FROM: Patrick Prescott, Community Development Director VIA: Simone McFarland, Assistant Community Development Director – Economic Development and Housing
BY: Erika De Leon, Administrative Analyst II
SUBJECT: Discussion of Enactment of a Local Minimum Wage and/or Hero Pay
RECOMMENDATION
1. Direct Staff on whether or not to pursue increasing the minimum wage in Burbank through an ordinance; and, if so, provide specific direction on the potential rate and whether the ordinance should sunset.
2. Direct Staff on whether or not to bring back an ordinanc e for H ero Pay; and, if so, provide specific direction on potential recipients, employers, amount of pay and sunset date.
BACKGROUND
This is a first step report requested by Council Member Anthony at the February 9, 2021 Council meeting on whether the City could enact a higher minimum wage for employers within the City of Burbank during the pandemic . Council Member Anthony had already requested information about state and local minimum wage laws, which was provided to the Council via a memo in the City Manager’s Weekly Management Report on February 5, 2021 (see Attachment 1). Besides requesting information about the minimum wage, Council Member Anthony also requested information on increased pay for targeted jobs (Hero Pay).
DISCUSSION
Minimum Wage
As of January 1, 2021, t he state minimum wage for large employers ( 26 or more employees) is $14 an hour and small employers (2 5 or less employees ) pay $13.00 an hour. The minimum wage increases one dollar an hour for large and small employers on January 1, 2022, and by January 1, 2023, the minimum wage for all employers in
COMMUNITY
DEVELOPMENT
2 ATTACHMENT 1-2
California will be $15 (See Attachment 1, page 2.) The City of Burbank is a large employer and is currently subject to the $14 minimum wage for its employees and will be subject to the $15 rate in 2022.
Other cities across the state have adopted their own local minimum wage ordinance and many have been in effect for several years (see Attachment 1, page 3, Table). These ordinances have differentiated between large (26 or more) and small (less than 26) employers using the S tate’s definition. On July 1, 2021, the minimum wage for all employers in unincorporated Los Angeles County and the cit ies of Los Angeles, Malibu, Pasadena, and Santa Monica will be $15 an hour.
The Council may enact and enforce its own minimum wage law under its police powers and pursuant to Labor Code Section 1205 . Minimum wage laws are enacted to ensure employers within a certain jurisdiction provide workers with wages that are commensurate to their cost of living. As such, if Council wishes to consider such an ordinance, then there should be consideration to cost of living in Burbank and current wages . Council should keep in mind that we have a very large jobs to housing imbalance (3 workers for each unit) and thus approximately 128,000 people drive into Burbank each day from other areas. Average earnings per job for an individual employee in Burbank is $80,000
1. Hero Pay
Many of our neighboring cities and cities across the state have adopted H ero pay for grocery workers. Locally, the first city to do so was Long Beach. Within a day of adopting its ordinance, the California Grocers Association (CGA) sued the City of Long Beach on constitutional grounds including violations of the Equal Protection Clause for treating grocery workers differently than other essential workers, as well as arguing the ordinance was preempted by the National Labor Relations Act. The CGA continues to sue cities and counties over “H ero Pay” ordinances given the increased costs to employers associated with these mandates.
In the Long Beach case, the trial court rejected CGA’s request for a preliminary injunction.
The judicial standard for reviewing ordinances for violations of the E qual Protection Clause is whether the City Council had a rational basis in exercising their police power.
Long Beach’s ordinance applied to grocery stores with 300 or more employees nationwide and 15 or more employees in the City . At the trial, the City provided news articles and press releases showing that large grocery stores r eaped significant profits during the pandemic while their employees’ wages had remained more or less the same, despite the increased risk of exposure to COVID -19 that grocery workers face. This evidence persuaded the court the City had a rational basis for applying the ordinance to large grocery stores. To date, CGA’s request for an injunction to stop these ordinances has not been granted.
The City of Glendale, in its consideration of Hero Pay, conducted a survey of cities with Hero Pay Ordinances or who were also considering such ordinances for grocery store
1 EMSI Workforce Data 2019
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workers, which is shown in Attachment 2. As evident in the survey , several Southern California cities have enacted Hero Pay Ordinances including Los Angeles, Long Beach, Santa Monica, West Hollywood, Irvine and Costa Mesa. Additionally, the L.A. County Board of Supervisors enacted a H ero Pay O rdinance for unincorporated parts of the County. The time period for Hero Pay has ranged from 60 days to as long as a state of emergency due to COVID-19 is in effect. Kroger Co. closed three of its underperforming stores (two Ralph’s and one Food 4 Less) in Los Angeles and one Kroger location in Long Beach when Hero Pay was enacted stating that the increased operating wages made it financially “impossible to operate these stores,” saying that a $20M loss would have occurred during the next 120 days. These stores may have been already identified for possible closures after the pandemic.
If City Council wishes to consider such an ordinance, staff seeks Council direction regarding which workers will receive the pay, what size employers the ordinance may apply to, the amount of pay, and any sunset date.
FISCAL IMPACT
If the City were to enact its own minimum wage law, then the City would need resources to publicize the requirements and enforce the same. This would need to be funded by the General Fund. Such a program will affect staff and neither the C ommunity Development Department nor the City Attorney’s Office has capacity for such a program.
Furthermore, the State Labor Commission currently fulfils this role. According to a 2019 Pasadena staff report, the direct cost to the City for minimum wage/wage theft enforcement and public outreach was estimated to be $110,000 per year. There may be some indirect financial benefits to the City’s local economy from employees having more disposable income. The same impacts are true for Hero P ay but have a limited duration since these ordinances typically have a sunset clause.
CONCLUSION
If Council wished to consider either potential ordinance, both courses of action align with Council’s goal of Economic Recovery and Development by raising employees’ wages and hence their standard of living, although these employees may not necessarily live in the City.
ATTACHMENT
Attachment 1- City Manager’s Office Minimum Wage Memo
Attachment 2- Actions of Local Jurisdictions “Hero Pay”