Good morning, welcome to my latest edition of Monday Morning Briefing, and happy Tax Day. I for one am getting a little bit of a reprieve with people being away for Spring Break, and I am definitely using my weekends for time outside, both in my garden and out in the beautiful lush hills on hikes. Both of which have given me time and energy to give you a nice, fully stocked Briefing this morning, so off we go!
EMPLOYERS OF 100 OR MORE – DON’T FORGET THOSE NEW PAY REPORTING RULES!
Employers of 100 or more should have always been aware of their obligation to file EEO-1 reports with the federal government (although I am shocked how often my clients have been ignorant of this long-standing requirement). However, since 2020, California has invoked its own reporting requirement regarding workforce data. California, being California, also requires we provide pay data along with the EEO breakdown. And pretty much every year, it has required increasing amount and detail in this data. This past year is no exception.
In 2022, the California Legislature passed SB 1162 to require the inclusion of labor contractors, as well employees. SB 1162 also requires employers calculate both the mean and median hourly rate of its payroll employees and labor contractor employees, “by establishment, pay band, job category, race/ethnicity, and sex.”
The deadline to file is May 10, 2023.
Don’t forget that it’s this same law that now requires that most employers in California must post pay scales in their job postings – that part of the law is not limited to employers of 100 or more.
The FAQs for this lovely law can be found here: https://calcivilrights.ca.gov/paydatareporting/faqs/ at the California Civil Rights Division, formerly known as the Department of Fair Employment and Housing. Yes, they came out of the pandemic and got a rebrand. The good news is, if you haven’t done all this before, the website does seem to provide a portal, a user guide, excel templates, CSV file templates, and other resources. I do think they walk you through this pretty well.
Don’t let this one sneak up on you – this year, there are increased penalties for employers who fail to file such reports. Good luck, and may the odds ever be in your favor.
HOLD ON, EVERYONE – JULY 1 IS ALMOST HERE! TIME FOR (S0ME) LOCAL MINIMUM WAGE HIKES, AGAIN
And in my part of the world, that means, minimum wage is going up again. As an aside, “my part of the world” has, for the entirety of my legal career, meant Los Angeles. But now that I live a stone’s throw from the great Sunset Strip, it also kind of means West Hollywood, and their minimum wage is about to go through the bloody roof.
So I have to admit, I had not been paying careful attention to the minimum wage increases for July, and I missed the initial announcement about the Los Angeles increase when it came out back on February 1. But I figured, fine, I still had a few months. But now we are 45 days out, so it was a good time to post about the local ones at least. Well, this turned out to be a job. I figured there would be a “list” somewhere. Not so much. Most of these municipalities are now past their initial five year plans to raise minimum wage and are tying their annual increases to some consumer price index, but each of them are analyzing their OWN, local jurisdiction when it comes to their cost of living increase. So of course, the cost of living increase in Los Angeles, will look somewhat different from that in Santa Monica, or Malibu, or Pasadena. Hence, they have all done a different analysis of how much to raise their minimum wage this year. Except for WeHo, because West Hollywood had passed a bill two years ago that set out a very specific rate plan, already delineated. So we have known this rate was coming.
But because all these calculations were done differently by different municipalities, they all came up with different wages. Last year, Los Angeles had a minimum wage different from the County and from the other cities like Santa Monica, Malibu, Pasadena, etc. But at least THEY were all the same as each other. Not this year. This year, they are all different. (Actually, Malibu and Santa Monica are the same – I guess the beaches got together). The rest are all different. And this year, Malibu, Pasadena and Santa Monica are HIGHER than LA! Go figure.
For those of you with multiple locations, this is going to be a nightmare. Here are just a handful of the July 1, 2023 changes of minimum wage (I don’t think they are even all announced yet – Pasadena JUST announced theirs. I still can’t find the one for unincorporated LA County – maybe they are still working the numbers). But check these out. Arguably, people in West Hollywood are now going to be making over $3.50 an hour more than someone just down the street who works in Beverly Hills and is governed by the State minimum wage at $15.50.
City of Los Angeles: $16.78
San Francisco: $18.07
Santa Monica: $16.90
Pasadena $16.93
Malibu $16.90
WEST HOLLYWOOD: $19.08 – highest in the COUNTRY! (all sizes of employers)
Now remember, for those of you lovelies who are outside of any of these metro areas or the other metro areas, such as San Diego, who went to $16.30 on January 1, you will remain at the respectable rate of $15.50, which is the state of California’s minimum wage. That is, until January 1, when I am sure the rest of the state will raise its rate again. By the way, there is talk of a bill to take the state up to $18 an hour over the next few years, but that should not surprise any of you, when you see where the local wages are going or at already. Having the state be at $18/hour in the next few years seems inevitable, frankly.
Now before you groan about how expensive it is to live here, there are many cities that are not that far behind us. In fact, there are some that are ahead of us. Seattle’s minimum wage is $18.69. Denver’s is $17.29, and Washington DC is at $17.00. Even Chicago is up at $15.40. New York, Boston and Phoenix are all at $15, and I know that my NYC clients all pay above that to find and keep employees.
So buckle down and get ready, because the cost of that missed meal break is going to be that much more expensive.
RECENT BENCH TRIAL IN SF SERVES AS REMINDER ABOUT TRANSPARENCY SURROUNDING SERVICE CHARGES
This one is for my hospitality clients, but I had to take the opportunity to remind you all, again, about the importance of being absolutely crystal clear when setting out SERVICE CHARGES on catering contracts, charges for large parties on menus, or automatic charges on menus in restaurants.
In a 31 page decision, a San Francisco Superior Court Judge issued a ruling indicating that he felt what the Marriott had called a “service charge” on its catering contract was too vague, and without greater explanation, could be interpreted by the general public to be a gratuity. The evidence presented at trial was that at least 15% percent of the banquet patrons at the Marriott were not sophisticated, business customers, who may not understand that “service charges” were retained by the Marriott. Without more explanation, the Judge believed that these consumers would be misled into believing that this money was a gratuity, paid to the banquet servers. Therefore, he felt that this money should be paid to them. He therefore ordered Marriott to pay $8.97 million to its banquet servers.
This industry has been fighting this “service charge v gratuity” battle for years now. It has not helped that many in this industry for years have referred to “service charges” as “auto-grats,” which just confuses servers, consumers and judges even further. Here, the term service charge was even used correctly, and the court still thought it was not clear enough that some of that money may be retained by Marriott.
But rather than be appalled, there is an easy fix here, and one that I have been preaching about for years now. And it’s actually how Marriott remedied their practice in the above case, and the Court goes on to explain that their later practice was fine. IF you are going to add a service or surcharge and retain any of the money (not disburse it all to your employees), then be extremely transparent it. Say that you are retaining all or part of the money and the intent of it (to help fund the rising cost of benefits and wages and other overhead), or (to help us pay competitive wages and to help recover from the pandemic), or whatever. Also remember that if you do pass along money from a service charge to your employees, that is income to them, and it impacts their regular rate, overtime rate, meal break and sick pay rate. It is NOT a gratuity and should not be treated as such. It is income to your company, you must pay sales tax on it, and it is wages to your employee when paid to them.
The language about how service and surcharges are treated should be large and conspicuous, on menus, catering contracts, websites, and again on guest checks before guests sign. Both your guests and your employees should be well aware of how this money is treated. And in cities like Santa Monica and West Hollywood, ALL service charge money MUST be paid to the employees. It is unlawful to retain any of it.
This is only a very small bit of information on this topic; I have long articles if any of you want more information. This case was just a good excuse to remind you all about this very hot topic.
Okay, this was a pretty packed Briefing, and of course, now my phone and emails are blowing up. I was going to devote a much larger discussion to talking about some of the challenges we have been seeing with our employees these days. I have had so many calls from clients lately regarding employees who are just . . struggling. But I want to give it more time than this, so I am going to kick it over to a day when I can give it more appropriate attention. Just do know, in the meantime, keep making sure you are getting yourselves that needed balance. I know so many of you are the support systems in your lives for your families, friends and employees. We have to make sure we are putting that oxygen mask on first. I spent ten minutes doing yoga for my back this morning so I could sit and type for three and half hours. That was my oxygen.
And the birdsong, of course.
Next week, we will once again try to talk about taking care of those around you. Enjoy Spring.
#StandWithUkraine