State to Apply 2-Tier Wage Law While Legal Issue Is Resolved

Despite a pending legal challenge, the state Friday will begin enforcing a two-tier minimum wage that will raise the wage floor to $4.25 per hour for most California workers but will place perhaps a million others in a special “sub-minimum” category of $3.50 an hour, officials said Wednesday.

The state Division of Fair Labor Standards Enforcement announced that workers who normally get $60 or more a month in tips will be eligible for the $3.50-an-hour rate, at least until the courts resolve the constitutionality of the sub-minimum wage.

The state Industrial Welfare Commission in December agreed to increase the minimum wage effective July 1, giving California workers the highest such rate in the nation. But it also created the separate sub-minimum category, mainly for restaurant and other service workers who normally receive tips.

A state appeals court overturned the sub-minimum wage June 16, ruling that all workers must be paid at least $4.25. But that ruling will not become final until Aug. 15 because an appeal is pending before the state Supreme Court.

The court action threw the enforcement question into confusion, state labor officials said. “The phone was ringing off the hook yesterday and today,” James Curry, deputy chief of the fair labor division, said in a telephone interview from San Francisco.

He said the agency decided late Tuesday to enforce the minimum wage order “as it is written, that is, permitting the $3.50 minimum wage for tipped employees who receive $60 a month in tips.”

Representatives of restaurant and hotel owners, who employ most of the tipped workers, applauded the decision. “We are pleased that the labor commissioner is going to recognize the Supreme Court’s point that the appellate court is not yet official and therefore the $3.50 is the level they will enforce,” said Stanley Kyker, executive vice president of the California Restaurant Assn.

Workers’ Spokesmen

But representatives of the affected workers expressed dismay. “It seems strange to us that anybody would be suggesting that people should be receiving less than $4.25 an hour,” said the Rev. Gary Smith, an activist with the United Neighborhoods Organization (UNO), a community group that helped to persuade the commission to raise the minimum wage.

Curry and Simon Reyes, another official of the labor standards division, said agency personnel are cautioning employers that if the Supreme Court ultimately invalidates the sub-minimum wage, employers may be required to pay back wages to July 1.

“If they can, the employers may want to consider an escrow arrangement in which an additional 75 cents will be placed pending a decision of the state Supreme Court,” Reyes said.

“We’re encouraging our members to do that very thing,” Kyker said. “We think it makes sense, showing a good-faith effort to do the right thing. Secondly, it makes sense from the point of view of prudent fiscal management.”

Doubt on Collection

John True of the Employment Law Center, a public interest group, said he fears that many of the workers would have difficulty collecting back pay if the sub-minimum wage is invalidated.

Alexandra Carpenter, a Livermore waitress who is one of the plaintiffs in the case, said she is disturbed by Wednesday’s announcement. “All they’re doing is hurting the little people,” she said.

On the other hand, for non-tipped employees Friday will be a more momentous day. The 90-cent increase in the minimum wage will be the first since since Jan. 1, 1981, and comes after a long political struggle. The primary advocates were Southern California community groups, such as UNO, affiliated with the New York-based Industrial Areas Foundation and organized labor.

“It was a long fight to get it up there,” said Smith, who noted that UNO had initially pushed for an increase to $5.05 an hour. “We’re hoping employers will comply with the new minimum wage. And we’re looking forward to the Industrial Welfare Commission reviewing the adequacy of the $4.25 later this year as they promised they would do last December,” he added.

Welcomed Increase

Lenny Martin, a food preparer who currently makes $3.75 an hour at a Naugles restaurant in Artesia, said the extra 50 cents an hour he will be making will enable his family of four to “eat a little better and help pay our bills on time.”

Most major California business organizations opposed the increase, saying it would put the state at a competitive disadvantage. They also argued that it could cause some employers to lay off workers to cut costs and to reduce hiring of entry-level workers.

It will be months before the effect of the change can be measured. In the interim, legislation to raise the federal minimum wage, currently $3.35 an hour, is pending.