City of Sacramento Approves Measure to Increase the Minimum Wage

Earlier this year, the Assembly Appropriations Committee announced its decision not to take up Senate Bill 3, which sought to increase the minimum wage to $13 by 2018. The postponement, according to the Assembly Committee on Labor and Employment, was in part due to an effort to preserve local control by allowing for collaborative agreements on a local level to take place as opposed to mandating wages. The past couple years have been characterized by a wave of local minimum wage increases throughout California. In step with San Francisco and Oakland legislatures, the City of Sacramento has finalized its minimum wage proposal. In a 6-3 vote on October 27th, 2015, the Sacramento City Council approved Ordinance No. 2015-0036 raising the minimum wage from the statewide rate of $10 (effective Jan. 1, 2016) to $12.50 in the next four years, with inflationary adjustments to be determined by the city manager thereafter.

Beginning January 1, 2016, employers will be required to pay the increased minimum wage amount for each hour that an employee works within the geographic boundaries of the city in a particular workweek. However, an employee must perform at least two hours of work in a particular workweek within the geographic boundaries of the city for the minimum wage provision to be applicable.

For employers with more than 100 employees, the minimum wage increases are set to occur in four increments, starting with an increase to $10.50 in 2017, $11 in 2018, $11.75 in 2019 and $12.50 in 2020. In an effort to mitigate the financial strain on smaller companies with fewer than 100 employees, the ordinance allows for smaller companies to implement the minimum wage increases one year later than larger businesses. A company’s number of employees is to be determined based on the average number of people employed during each pay period of the previous calendar year, excluding people who have been employed for 90 consecutive days or less (5.158.030. Sec. D). Further, new companies who do not have record of having provided employment during the previous year are subject to the timeline that applies to companies of 100 employees or less.

Exemptions
The final plan identifies two (2) classes that are exempt from the minimum wage requirement. First, employers are not required to pay the minimum wage to participants of a nonprofit corporation-run or government agency-run youth training program who are 25 years of age or younger (5.158.050. Subsection A). Secondly, an employee working in “an occupation in which he or she has no previous, similar or related experience,” referenced as a “learner,” is also exempt from the state minimum wage. Pursuant to Order 14-2001 of the Industrial Welfare Commission of the State of California, learners may be paid “not less than 85 percent of the state minimum wage” during their first 160 hours of employment “rounded to the nearest nickel” (5.158.050. Subsection B).

Healthcare Credit

A provision of the plan that is likely to spark controversy provides for a “health credit” incentive plan that allows for employers who pay at least $2 per hour per employee toward the premium cost of the employee medical benefits plan to pay the employees a reduced minimum wage. In order to qualify for the health credit, the employee medical benefits plan must provide “a level of coverage equivalent to a bronze level plan under the Federal Patient Protection and Affordable care Act (Public Law 111-148),” which amounts to 60 percent coverage by the employer. For qualifying employers, a specified reduction amount is allowed depending on the minimum wage rate: Minimum wage rates of $10.50, $11.00, $11.75, and $12.50 will see a reduction of $0.50, $1.00, $1.50, and $2.00, per hour, respectively (5.158.060. Subsections A-D). Starting in 2022, the healthcare credit system is to be adjusted “in direct proportion to the percentage change in the Consumer Price Index based on data from the preceding year (5.158.060. Subsections E).

Other Provisions
• Notice and Posting: Employers are required to post an announcement of the minimum wage increase in a conspicuous location within each workplace and ensure accessibility to all employees. The city each year publishes a notice that may be used by employers that can be accessed on the City of Sacramento webpage (5.158.040).

• Waivers Are Prohibited: A waiver by an individual to be paid at least the minimum wage rate is considered “contrary to public policy” and thus unenforceable (5.158.070).

• Payroll Inspections: As part of ensuring compliance with this ordinance the city may, upon reasonable notice and at an agreed upon time, inspect employer records (5.158.080).

• Investigations: Section 5.158.090 of the ordinance holds that “any person may report to the city” a suspected violation or failure of the employer to pay the required minimum wage. The city is authorized to investigate purported violations which may include an inspection of the workplace, interview of employees, and inspection of payroll records. Where an employer fails to produce adequate documentation or refuses the city access to pertinent records, an employee’s account of underpayment “shall be presumed to be accurate, absent clear and convincing evidence otherwise (5.158.100).

• Retaliation Prohibited: An employer may not “discharge, penalize, take adverse action on, or discriminate in any manner against any person in retaliation” in response to an employee reporting a violation to the city in good faith. Further, if within 90 days of the employee reporting a violation or exercising any rights under this chapter an employer takes adverse action against the employee, a “rebuttable presumption that the action was taken in retaliation for the exercise of such rights” will be raised (5.158.110).