Los Angeles is on track for a $15 minimum wage by the year 2020 thanks to the Los Angeles City Council’s recent vote to approve an annual increase schedule. For almost a year, the California Restaurant Association (CRA) has strongly advocated for factors to mitigate minimum wage increases, such as a more prolonged implementation rather than the 50 percent increase in the next five years that was approved. The Association has expressed extreme disappointment at the Council’s actions.
How Much of an Increase?
Beginning in 2016, the minimum wage in the City of Los Angeles will increase annually according to the following schedule:
- July 1, 2016 – $10.50
- July 1, 2017 – $12.00
- July 1, 2018 – $13.25
- July 1, 2019 – $14.25
- July 1, 2020 – $15.00
Starting in 2022, the minimum wage will increase annually according to the previous year’s Consumer Price Index (CPI) for the Los Angeles metro area.
This is a trend that began after the president’s 2013 State of the Union address calling for an increased minimum wage. Since then, 17 states have increased their minimum wages, and many large companies including Walmart and Target are raising wages as well.
California Restaurant Association Views
The CRA is disappointed that the Los Angeles City Council approved the minimum wage increase, believing it will cost jobs for working families and the closure of small businesses, especially restaurants and minority and women-owned businesses.
The CRA opposes the City Council’s policy on the grounds that it excludes total compensation and limits a teen wage to those between 14 and 17 and only for 160 hours. The CRA states this will restrict access by youth to the entry-level jobs they need for experience, and that attaching future wage increases to the CPI will ignore economic impacts.
The CRA strongly advocated with L.A. employers, avoiding an additional 12 paid leave days, which was proposed along with the minimum wage increase. The CRA plans to continue to advocate for a more targeted approach to minimum wage changes.
Los Angeles County to Follow Suit
On the heels of the city of L.A.’s minimum wage increase being signed into law, L.A. County Supervisor Sheila Kuehl reportedly introduced a motion to match L.A.’s wage increases for the entire county.
In a survey conducted by the Los Angeles County Economic Development Corp., 1,000 businesses in the county were randomly selected to provide insight on their perception of a minimum wage increase. Kuehl stated, “We find that very few employers surveyed foresee substantial negative impacts from raising the minimum wage, and in fact a commanding percentage believe their businesses and employees will be better off in key respects.”
The L.A. County Board of Supervisors is expected to consider the motion before the month of June closes.
What Businesses Should Do Now
Gene Marks, president of Philadelphia consulting firm The Marks Group, advises businesses operating where the minimum wage is going up to take some actions to deal with the economic impacts. He advises business owners not to get emotional or panic. Instead, he suggests increasing prices to match the cost increases, meeting with an accountant to plan for cutting costs and improving profitability, investing in technology that will allow more to be done with fewer resources and less labor, and planning to do more work themselves.
The Society for Human Resource Management (SHRM) also advises employers take the following action to prepare for the minimum wage increases.
- Employers should check with a lawyer to make sure they are in compliance with all wage and hour laws.
- They should review commissioned salesperson exemptions that will require wage increases so that commissioned salespeople are earning more than one and one-half the state minimum wage for all hours worked.
- California employers should also review “white collar” overtime exemptions which requires that executive, administrative, and professional employees are paid a monthly salary at least two times the California minimum wage for a full-time 40-hour work week.
- Review job descriptions and revise them to clearly explain and define employees’ exempt status and functions.
- Conduct an internal hour and wage audit to compare for compliance and make and necessary changes.
Whether you operate a business in Los Angeles or another location where the minimum wage is increasing, you’ll need to review the changes to wage and labor laws now to prepare for upcoming increases and their impact on your business operations and profitability.