Court Upsets Calif. Plan for 2-Tier Minimum Wage

In a blow to the Deukmejian Administration and a victory for waiters and taxi drivers, an appellate court has ruled against a state plan to set a lower minimum wage for workers who earn tips.

The 3rd District Court of Appeal said a two-tier minimum wage system scheduled to take effect July 1 violates a California labor law that says workers’ tips don’t reduce their bosses’ obligation to pay a minimum wage.

A plan approved last December by the state Industrial Welfare Commission would raise the $3.35 hourly minimum wage to $4.25 for all California employees except those who make more than $60 an month in tips. The minimum for the tipped workers would have been $3.50 an hour.

Karla Yates, executive officer for the commission, said the state will enforce the $4.25-hourly wage for all workers while appealing the court’s decision.

The commission’s five members, who were appointed by Gov. George Deukmejian, voted 3-2 in San Francisco Friday to petition the state Supreme Court to review the case and issue a stay of the appellate court ruling.

The new minimum wage that begins in two weeks is the first increase since the federal government set it at $3.25 an hour six years ago.

The state Legislature voted last year to raise the hourly rate to $4.25 beginning last Jan. 1, but Deukmejian vetoed it. The Republican governor said he supported the increase, but wanted the Industrial Welfare Commission to handle it.

Labor organizations and public interest law groups who sued the state predicted the appellate court decision in their favor ultimately will be upheld.

“It was just a faulty position that the commission took,” Jack Henning, executive secretary of the California AFL-CIO, said Friday in a telephone interview. “We’re quite confident the Supreme Court will rule as did the Court of Appeal.

“Tips should be sacrosanct,” Henning said.

Panel Reverses Position

A bill sponsored by the AFL-CIO and passed by the state Legislature in 1975 prohibits employers from deducting tips from their workers’ minimum wage.

Attorneys for the Industrial Welfare Commission argued that the law didn’t preclude it from establishing a lower wage, a reversal of a position taken a decade ago by previous members appointed to the commission by then-Gov. Jerry Brown.

The appeals court opinion issued Thursday by Justice Robert Puglia was based on a 1980 Supreme Court ruling to uphold the commission’s previous rejection of a lower wage for tipped employees. Joining Puglia in the opinion were Justices Coleman Blease and Frances Newell Car.

Jan Chilton, a San Francisco attorney representing the commission, said the 8-year-old Supreme Court decision “doesn’t preclude the IWC from changing its mind.”

‘Murky’ Legislative History

He said he believes the state can win a hearing with the high court because ‘the legislative history is a bit murky. It’s not at all clear.”

Dennis Hyashi, an attorney for the Oakland-based Asian Law Caucus which joined the AFL-CIO in the suit, said the appellate court decision is a “complete victory” for workers.

“I hope this shows the IWC, the Industrial Welfare Commission, that they should think twice about trying to reverse the protections workers have had for 15, 20 years,” Hyashi said.

“You can’t just unilaterally change the law. They thought they were beyond the law for some reason. They just went ahead and did it.”