OpEd: Highest minimum wage in the country is bad for WeHo

Residents will pay more at their local shops. Local businesses will have to charge more than similar businesses across the border. Most workers who receive the benefit do not live in West Hollywood.

Beverly Hills follows the state law, and their minimum wage is $15 per hour with no CPI (cost of living increase) and up to 24 hours paid vacation time/sick leave. Los Angeles minimum wage is $15 with one CPI increase annually and 48 hours of paid vacation. West Hollywood’s ordinance calls for $17.64 plus two cost of living increases calculated every six months and 96 hours of paid vacation time. The City Staff report presented at Friday’s meeting pegged the minimum wage at $18.77 beginning Jan. 1, 2023.

In addition, the plan has not been properly thought out. Our City Hall has no method of enforcement. West Hollywood will have to create a new layer of code enforcement to listen to hearings from employees and businesses. The WeHo Labor Board will need to oversee all the businesses. The California Labor Board is not in charge of enforcing this local West Hollywood ordinance. There will be a tremendous cost to the City of West Hollywood and this ordinance will produce zero additional revenue. At the current level of management structure there will need to be a head of the ‘labor board’ who will be making in excess of $250,000 plus pensions. Then there is Code Enforcement, and outreach. City Hall will be the de-facto ‘Manager’ of all the employees in the City. One business owner called this ‘communism’, in West Hollywood. The businesses in our 1.9-square-mile city will be at a big disadvantage to our neighbors.

We have a city council without the benefit of business experience. At the City Council meeting, Councilmember Erickson was absolutely perplexed that the wages are tied to workmen’s compensation and employer matching funds. Councilmember Horvath, a candidate for County Supervisor, asked how the wages are tied to workmen’s compensation, trying to figure out if employers can follow the state law anyway. Not a single council member understood that an employer pays matching payroll taxes, unemployment insurance, and other taxes that are based on the wage, and then workmen’s compensation and insurance liability based on that all added up together.

A simple example of the cost on a $19 wage to the employer. a) add one hour vacation for each 30 hours worked, or an additional .65 cents per hour. One would also add in the unemployment insurance 6.1% of the wage as well as other federal matching funds and other state and federal taxes on wages. The total compensation is the basis for the employer’s workmen’s compensation insurance and other liability policies. Together, West Hollywood businesses are paying more across the board and will be at quite a disadvantage to our neighbors.

David Reid, a resident who lives just outside West Hollywood borders, often shops in West Hollywood. Today he was shopping for two iPhones. He went to T-Mobile at Target Center in West Hollywood and the sales tax was 10.25%, so then he went to T-Mobile on Sunset in Hollywood and paid a half a point less in the sales tax. City Hall policies are forcing business outside of the West Hollywood borders.

It’s going to cost local residents more and more to shop in our city with current tax policies. The minimum wage increase is a giant tax on local residents who have to shop in West Hollywood or are forced to travel outside of West Hollywood for more affordable options.

Just yesterday Alexandria Stafford from Fiesta Cantina and Cabo Cantina announced that Fiesta will close for lunches and save 25 shifts per week and cut out 6 jobs. At the open Chamber meeting businesses discussed their plans. Kitchen 24 discussed moving into technology to keep staff low and evolving to a night-bar type setup limiting staff during he slow days. A number of speakers mentioned The Abbey plans on paring day shifts and cutting back on slow nights. Many discussed moving forward with adding technology that will eliminate jobs. “It’s a job killer” was the catchphrase of the day.

Two businesses cancelled plans to open in West Hollywood. A number of businesses at the weekly business meeting held between the Chamber and City Staff, reported they were looking at leases outside of West Hollywood to move staff. One kitchen is moving its new facilities to Beverly Hills instead of expanding their current kitchen in West Hollywood. Beverly Hills wages and vacation and sick leave follow the State of California minimum wage laws.

Employers have no say on when employees call in their sick or vacation time. It would be possible for an entire staff to want Christmas week off. Part-time employees are also required to get vacation pay. A number of businesses were moving to eliminate all part-time staff due the the extra costs. An employee working 12 hours per week would be required to get a month of vacation and sick pay leave. Most businesses were confused as to the lack of understanding as presented and the rushed process. City Staff was also learning ‘on the go’ and said they would come back with answers to the many questions proposed.

Another problem with the ordinance is that it asks businesses to use employment records from 2019, pre-Covid pandemic. One restaurant owner stated he had 60 employees in 2019 but only 40 in 2021. How can we bring all those people back to work in this economy and with the labor shortage?

Managers on salary are required by state law to make double the minimum wage, which puts a minimum salaried worker in West Hollywood at about $85,000 per year. Many businesses are now looking at moving their offices outside of WeHo. Some with delivery services are moving right across the border so they will not be bound by the West Hollywood disadvantage.

The businesses are now exploring options including a tax similar to San Francisco. (The SF Mandates tax). The WeHo surcharge tax would appear on your receipt as a cost of doing business in West Hollywood. Soon to be the highest in the nation.

The sellout of West Hollywood was evident in the press conference held by Unite Here, Lindsey Horvath, John Erickson and Sepi Shyne. All politically ambitious and without regards to West Hollywood’s unique business community. Business were described as evil predators. Councilmember D’Amico gave a pre-written speech at the last City Council meeting about the ills of capitalism. It was clear he did not come to the meeting to listen to the concerns of the local businesses.

Sadly, it was pointed out by many that the new City Manager David Wilson had no valuable input into this discussion.

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Below are some questions and comments made by local businesses during the public comment period at Wednesday’s City Council meeting and during the business roundtable this past friday.

Will extensions of COVID-related policies will continue into 2022? So this are these increases compounding? City Staff Paolo Kespradit  replied that yes these are on top of the other increases and on top of the hazard pay.

Was there outreach to the Russian community, Design District or along the corridors? The City Staff answer was very weak. “The business roundtable was a large factor, we asked for data, tried to put that into the staff report. But this item went faster; there was not a lot of time to do outreach that we would normally do in our normal course of action. But with back to back council meetings on this item we did not have the time to do the normal outreach. “

“The CPI is 4.5 %, and if you’rE adding 2 CPI increases a year this will get out of control. Nobody has calculated this. It’s a runaway train. They are hiding the actual number. Businesses have cap on their leases 2% or 3% now we are adding 2% CPI increases per year. Thats crazy. Businesses cannot calculate.” Then a speaker said to Simon Mani, “If I were you I’d annex your property to Beverly Hills.”

One commenter mentioned, “If you’re in Beverly Hills or Los Angeles, there is no union carv-out, as in West Hollywood. There is no CPI in Beverly Hills. Both Beverly Hills and Los Angeles follow the state minimum wage of $15 per hour. “We are now looking to move our business outside of the West Hollywood borders to Melrose Avenue in Los Angeles. We can still serve West Hollywood residents but at a much lower cost.”

One speaker commented they asked Councilmember Horvath how many residents are impacted by this, and she answered that she had no idea.

Sick time and vacation time, is considered delayed compensation and would need to be paid out on termination. City Staff was unprepared and did not have the answer. The employer must provide a payout for each 30 days worked upon termination. Paid sick leave is not paid out on separation. Paid vacation time is considered earned and is paid upon separation. The City Staff was not knowledgable of these issues and replied, they would like to clarify their statement, and in West Hollywood that it’s now compensated and uncompensated time. Council was not aware of these rules during the deliberations.

“Forced service charges must go to the persons that provide the service. For example, if we collect $100 in service charges and have to pay $10 in the tax the restaurant loses money on each charge. ” City staff replied they did not know the answer and would have to get back to the business owner.

“Historical CPI is a low inflation over a 10-year period, but is increasing quickly. So the wages as presented are not clear, and can continue. There would need to be a cap on CPI increases. The part-time employee issues are very confusing to many of us. The 96 hours of paid time off, should not be getting vacation pay and benefits. A 12-hour employee will be getting 2 months paid free. To implement changes like this are expensive and then twice per year increases, and overlapping increases between payroll periods is hard to manage. In fact, you can’t split the payroll into two calculations.” City Staff had no knowledge of how implementing CPI increases would affect employers.

A question was asked about the study done to support this data. City staff representative which Paulo Kespradit  “We kind of pulled from a couple of different studies, the MIT study that looked at the living wage calculator that gets posted every year. It’s an average of spending by an individual without children in LA county, but it doens’t count for the more expensive costs of being in our region on the westside.

Tara Worden answered that they took the study from Seattle, San Jose and Boston to presented to council. That is the extent of the information that was provided. There was no money provided for an economic study as related to West Hollywood. In fact John Erickson commented at the city council meeting that he had no desire to see an economic study.

“We just completed our budgets for next year and this leaves us little time to implement. How can a city implement this in 60 days?” That is just 3 pay periods away and the final ordinance has not been codified.

“A done deal before we got there. We need clarity on sick pay, vacancy tax, alot of our businesses are not aware of what’s going on.” There is a concern on a minimum wage study study session for hotel workers. It expanded without notice.

Craig Susser from Craig’s: “I’ve always found West Hollywood to be a reasonable place to do business. We stand with our employees, our services are making in excess of $45 an hour, busboys are making $36. The ordinance is trying to solve a problem that does not exist. “

Catch, Cecoonis, Boa, – we are only as good as our staff. we would not have employees here 8-10 years – and we value them. There are supply chain issues, labor shortages, covid issues and this is an in=opportune time to enact this ordinance. The green ordinance that forces all restaurants into sustainable packaging is also making it hard to secure supplies and adds rising costs.

Alexander Stafford representing the Cabo Cantina and Fiesta Cantina spoke at the City Council meeting. “We have lost five restaurants due to the pandemic and already eliminated 200 jobs. I live in West Hollywood since moving from New Orleans in 2017. After this takes place in two or three years you will see the effects and our community will not look the same. Many businesses and residents will be pushed out of West Hollywood to find affordable services. ”

“We need to be on the same level or Beverly Hills or Los Angeles. With tips all make more much more than this proposal. This will destroy many businesses in West Hollywood.“

“We don’t want to go away from West Hollywood but with this proposal we need to look at other options outside of West Hollywood. “

“We cherish our employees and our family. We have experience bumping up our prices. We have tried this over the past increases. Last time we raised prices it hit a threshold. This will push a price of our burger over $20. People are going to LA, its just a few blocks away. The other option is to turn the K24 model into a bar and less of a restaurant. This has less costs to operate. “

Cary Mosier from Gracias Madre: “When you say you want a level playing field with LA and Santa Monica you are talking about hotels. This will be the highest mininum wage in the country. The policy is trying to bring people out of poverty, servers are making $40-50 per restaurant. The only people who get this increase is only going to the top earners. All the cost are going up. I implore you to slow it down and carve out tipped employees.“

Chris Bonbright spoke of the concept of paid time off. “In the restaurant business everybody has a specific position. So if someone is out we have to pay a second person for that position. So with 96 hours time off, we are paying double that replacing. Then 80 hours of unpaid time off, so we have to recruit and train someone for that posotion. For 34 years we have had an incredible city based on an incredible relationship with the city. We have always worked together to create a relationship that works. “

David Juarez: “The Russian community has been devastated from the Covid pandemic. Adding these increases many businesses will not be able to sustain. All the costs tied to the wage, payroll taxes, workman’s compensation are all increasing. The total compensation model that includes tips makes sense.“

The road to recovery is steep. Questioning the severity of the losses, you need to only look at your own experience, the city experienced significant and financial hits. Revenues dropped 22% in 2020 with only 4 months of Covid. A decrease in 21% in sales taxes. The city has a 17 million dollars deficit. This also is how the hotels and restaurants too. Please give these business time to get on their feet. Why give an advantage to the surrounding cities? “

Walter Shild: “If this is implemented on our medium size restaurant would impact us to $400,000. Across the street is LA, and they have a $15 minimum wage. To have West Hollywood businesses who are in this community and want to stay pay 20-30% more does not help West Hollywood residents or businesses. We have 24 hours paid sick leave in Beverly Hills, 48 in LA. We cannot absorb 96 hours of paid sick leave and another 80 hours of uncompensated leave. I just ask the city council to keep us competitive. “

Brett Latteri, owner of the Den on Sunset. “We are still in a pandemic and businesses are still struggling to survive. The Delta variant has screwed up any progress that was made. September and October have been the slowest months in 12 years. Our small business will have to absorb $200,000 per year expensed as a direct result of this ordinance. We are still large loans and paying back rent. We will respond by raising prices, reducing service, cutting positions, cutting hours or closing. People will be out of work. The ordinance will harm the people who need it the most. Restaurants will also have to raise prices. We are giving a significant advantage to the businesses outside of West Hollywood. “

David Anawalt, owner of Anawalt Lumber has been on Robertson since 1948. “My concern is the minimum wage will change the attributes of the city. Free thinking small businesses that are interesting we are going to stifle entrepreneurism. I beg you to please slow down. you are going to drive small businesses out of our community.“

Is anybody listening?

This item was first appeared on the November 1st agenda and is expected to come back to the city council for its second read on November 15th. If you have questions email the city council at council@weho.org.