A Crazy Quilt of Wage Laws

By Hansen, Fay | Workforce Management, August 28, 2006 | Go to article overview

A Crazy Quilt of Wage Laws


Hansen, Fay, Workforce Management


The Insider

Myriad minimums set by states, cities are a compensation headache for firms

As Congress stumbled through yet another doomed attempt to raise the federal minimum wage this summer, aldermen in Chicago took matters into their own hands and passed a new "big box" ordinance that sets minimum wages and benefit spending for the city's largest retailers.

The Chicago ordinance is now one of hundreds of state and local laws that form a crazy quilt of minimum wage regulations across the United States. Worse yet, this regulatory mess is increasingly incorporating mandatory benefit provisions that push well beyond the already complex assortment of legally required benefits.

The Chicago ordinance forces stores inside the city limits with more than 90,000 square feet and $1 billion in annual parent company revenues to pay a minimum wage of $9.25 per hour plus $1.50 per hour in benefits, effective July 1, 2007. That rises to $10 per hour in wages and $3 per hour in benefits by 2010 and is indexed to inflation thereafter. Stores with less than 90,000 square feet remain subject to the Illinois state minimum wage of $6.50 an hour and can look forward to a huge labor cost advantage over their competitors.

If the Chicago ordinance survives a possible mayoral veto and legal challenges, it will spur on the national movement to regulate wages and benefits on state-by-state and city-by-city basis.

"We're staring at this patchwork right now," says Jim Hendricks, a partner in the Chicago office of law firm Fisher & Phillips. "If the ordinance survives, any municipality could pass these laws."

Employers already cope with minimum wage rates set higher than the federal level in 22 states, each with their own set of rules. Add into this mix the more than 100 "living wage" city ordinances for local government contractors, plus a half a dozen cities with their own all-sector minimums and other cities pushing for sector-specific minimums and mandatory benefits, and you have a compensation headache of unprecedented proportions.

"Employers should be deep in prayer," Hendricks says with a long laugh. "And they should be moving proactively to gain more political influence. In Chicago, we call it 'clout.'"

But clout was ineffective in Emeryville, California, where employers faced not the city council, but a ballot initiative that allowed 194 citizens to cast the deciding votes in setting minimum wages for the city's hotels. The November 2005 Emeryville law mandates a minimum wage of $9 per hour and an average wage of at least $11 per hour for employees at hotels with more than 50 rooms. Like the Chicago ordinance, the Emeryville initiative was spearheaded by unions.

Employers operating in the "tourist zones" in Santa Monica and Berkeley, California, must pay a higher minimum wage rate than employers in other parts of these cities. In Santa Fe, New Mexico, employers with 25 or more employees-less than 10 percent of all employers in the city-must pay a minimum wage of $9.50.

A Washington, D.C., big box bill under consideration would require retailers with at least 75,000 square feet to pay a minimum wage of 115 percent of the federal poverty level for a family of four, plus at least $3 an hour in benefits. Advocates in Spokane, Washington, are collecting signatures for a big box ballot initiative that would set minimum wages at large retailers at 135 percent of the state minimum wage if the employer provides health benefits, or 165 percent if the retailer does not.

The November 2006 elections will include minimum wage ballot initiatives in six states and dozens of cities. I landing over minimum wage and benefit regulation to the voting public is a development that few employers envisioned a decade ago when the last federal minimum wage increase passed but failed to include an indexing mechanism that would ensure its efficacy.

UNLIKELY TARGETS

Wal-Mart is the whipping boy for both the wage and benefits issue in Chicago and across the country, but the big box retailers are unlikek targets for advocates who are truly concerned about minimum wage workers.

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