PUBLIC COMMENT: Minimum wage update and administrative fees

Written correspondence to City Council regarding Item 4C on Monday’s agenda:

Honorable Mayor Meister and City Council,
As a West Hollywood resident and long-time hotel worker, I urge you to reject the language in the proposed Minimum Wage Ordinance regulations that would allow businesses to charge “administrative fees.”
Last summer, we made history by passing the highest minimum wage in the country. The proposal before you would undermine this victory, and create a terrible precedent for minimum wage laws everywhere.
We are the backbone of the city’s hospitality industry. While the industry comes roaring back, many of us continue to struggle. Many of us depend on gratuities to make ends meet. Unfortunately, wage theft is rampant in the hospitality industry, and has been for decades. To this end, the West Hollywood City Council drafted the current ordinance in response to employers who charge customers “service charges” that customers believe go to workers, even though these amounts are actually kept by the employer.
It is difficult enough for us to ensure that the money we work hard to earn actually ends up in our pockets.
Please do not create language that would undermine the law’s bright line rule regarding service charges.

Jorge Seperak

Dear Mayor Meister and Honorable Councilmembers,
My name is Sophie Brower and I’ve been in the service industry for 16 years. I’m a banquet server at 2 different hotels in West Hollywood. I’ve been with one hotel for about 9 years and the other for about 2. I also lived in West Hollywood for 6 years and I love West Hollywood. I would have stayed if I could have afforded to buy in the area.
As a West Hollywood hospitality worker, I urge you to reject the language in the proposed Minimum Wage Ordinance regulations that would allow businesses to charge “administrative fees.” We all know that when a guest sees an additional fee on their restaurant check, they assume it’s a tip to the staff, and therefore they tip less. Why would the city provide a road map to take money away from restaurant workers? Last summer, we made history by passing the highest minimum wage in the country. The proposal before you would undermine this victory, and create a terrible precedent for minimum wage laws everywhere.
The few co-workers I’ve talked to about this, some of whom live in West Hollywood, are concerned. The cost of living is extremely high compared to neighboring cities, and therefore it makes sense that the minimum wage would be higher as well.
Serving, bartending, bussing tables, etc is backbreaking exhausting labor. We work very hard for these businesses. I like my work, I take pride in my work, but it is not easy work. We deserve to be compensated, we deserve to protected by minimum wage laws. We do this work knowing that if we do well we might make more through tips or service charges.
Service staff were some of the hardest hit people during the covid pandemic, and most of us still haven’t recovered financially. Unfortunately, wage theft is rampant in the hospitality industry, and has been for decades. To this end, the West Hollywood City Council drafted the current ordinance in response to employers who charge customers “service charges” that customers believe go to workers, even though these amounts are actually kept by the employer. I support the language that states these charges must go to employees, however the instructions on adding an “administrative fee” would be misleading to customers. Please do not support language that would hit us workers again, something that would affect all the years in the future of this career, not just the years that this pandemic has taken from us.
Thank you, Sophie

Dear Mayor Meister and Honorable Councilmembers .
On behalf of UNITE HERE Local 11, we urge you to reject the inclusion of “administrative fees” in the section on service charges in the draft administrative regulations.
This council made history last summer by passing the highest minimum wage in the country. This language would undermine the ordinance and create a new, harmful precedent for minimum wage laws.
Please feel free to call me if you have any questions. Thank you for your time and attention.
Best, Danielle
Danielle Wilson
Research Analyst
UNITE HERE Local 11

Dear Mayor Meister and Honorable Councilmembers:
On behalf of UNITE HERE Local 11, we urge you to reject the inclusion of “administrative fees” in the section on service charges in the draft administrative regulations.
Last summer, the West Hollywood City Council made history by passing the highest minimum wage in the country, including strong language around service charges to help fulfill the Minimum Wage Ordinance’s (“Ordinance”) overall goal of increasing the minimum wage to help workers meet their basic needs and avoid economic hardship. The proposed “administrative fee” provisions in the draft administrative regulations would undermine this central goal.
Service charge policies like the one West Hollywood has enacted were created in response to efforts by hospitality employers to charge customers amounts that the customers would reasonably believe go to workers and therefore not leave workers tips, even though these amounts are actually kept, in whole or in part, by the employer. Following the basic structure of Labor Code Section 351, which ensures that tips must go exclusively to workers, service charge protections like WEHO’s ensure that amounts collected as service charges must likewise go only to workers and may not be kept by the employer. To accomplish this, it establishes a bright line rule prohibiting employers from keeping any part of service charges.
The draft regulations create a novel new type of charge called an “administrative fee” which conflicts with and undermines the Ordinance’s bright line rule. Like a service charge, the administrative fee may be mandated by the employer on customers and may be in amounts similar to those of traditional tips – the example in the draft regulations suggests a charge of 20%. But unlike a service charge, under the draft regulations, the employer—in its exclusive discretion—”can choose to remit a portion of the administrative fee to Employees” or, if it prefers, keep some or all of the fee for itself. Since the draft regulation does not specify either a required distribution or obligate the employer to describe its chosen distribution to customers, the public is left to wonder whether these amounts go to employees, the employer, or some combination of the two. Some customers will invariably assume that some of the amounts do go to workers and will decline to leave tips, creating the very problem the service charge provision was intended to prevent.
The Ordinance and the draft regulations already set forth a category of mandatory charges that must go to workers: “service charges.” The inclusion of the new category of “administrative fees” conflicts with these provisions by creating an exception for mandatory fees, in amounts similar to tips, which the employer can choose whether or not to give to workers. Yet this exception appears nowhere in the Ordinance. The grey area it creates would undermine the bright line rule the City Council established, all to the detriment of the class of people the law was intended to protect. The example offered in the draft regulations is likewise problematic because it suggests an employer can satisfy its disclosure obligations without explaining in clear terms who the administrative fee would actually go to, merely referring to the name of the “Restaurant,” without specifying that the funds would actually go to the owner or well-paid managers of the restaurant.
Finally, there is no logical policy rationale for adding the new category. As we understand, the justification companies have made for adding “administrative fees” to the regulations is they may wish to use the funds the administrative fee generates to supplement worker wages. But employers can already use mandatory “service charges” to supplement worker wages. The use of the “administrative fee” option simply gives the employer the option of keeping some of the amounts for themselves, which is, again, the opposite of the purpose of the service charge provision of the Ordinance.
Please uphold the intent of the ordinance and reject this harmful and unnecessary language.

Sincerely,
Danielle Wilson
Research Analyst
UNITE HERE Local 11