SPECIAL REPORT * With living wage law largely unenforceable, city attorney’s advice raises eyebrows and concerns that . . . : L.A. May Have Played Too Cautiously

By making a legal mountain out of an issue that lawyers in other cities dismissed as a molehill, Los Angeles city attorneys have hobbled a local law aimed at raising the pay of several thousand low-wage workers employed by firms under contract with the city.

In rendering the city’s living wage ordinance largely unenforceable, the lawyers’ actions illustrate the vast power that municipal attorneys wield in advising lawmakers about what is probably legal and what is probably not. This kind of advice, sometimes delivered informally and seldom examined by the news media or challenged by lawmakers, shapes public debates and policies more frequently and profoundly than usually is acknowledged.

Los Angeles lawyers were worried that the federal government might someday sue the city, demanding a refund of any federal money used to give the working poor a raise.

Although the city’s lawyers concluded that such a suit would have no merit, they gave extremely conservative advice to the City Council, aimed at making sure the city gave no opportunity to the federal government to file one.

Questions about the quality of that advice provide an opportunity to critically examine the performance of veteran City Atty. James K. Hahn, who is widely regarded in political circles as a serious candidate for mayor in 2001.

Known as a liberal Democrat, Hahn defends his office’s actions on the largely symbolic living wage law, passed last year over the objections of the business community and a mayoral veto, as an example of fiscal prudence.

But some of Hahn’s municipal law colleagues around the country described the advice he gave another way--as an example of excessive caution.

The lawyer who drafted Portland’s living wage law, Chief Deputy City Atty. Madelyn Wessel, laughed when she heard what Hahn and his office mates had done, saying, “I love hearing this kind of stuff. Somebody got nervous.” She went on to describe the Los Angeles lawyers’ concern as “one of those Nervous Nellie concerns that can’t ever become real.”

Government attorneys or others involved in drafting living wage laws in Baltimore, Boston, Chicago, Madison, Milwaukee, Minneapolis and Oakland expressed similar, though more understated, views. They said the concern voiced by Los Angeles lawyers never crossed their minds or, if it did, was dismissed as too far-fetched to worry about.

Chris Owens, a lawyer who monitors living wage developments nationwide as assistant director for social policy of the AFL-CIO, confirmed that “nobody has ever raised this question other than L.A.”

In Los Angeles, lawyers prevailed upon the council to insert a provision into the law that excluded a large number of workers who would have otherwise been covered. These were workers paid at least in part with the $560 million per year in federal grant funds the city receives. The council voted to exclude the workers until the federal government, in effect, promised not to sue.

Chasing such a promise, which officials in other cities regarded as unnecessary and probably unobtainable from a bureaucracy as complex as that of the federal government, has proved fruitless.

In one telling exchange, the federal Office of Management and Budget responded to a letter from the Los Angeles city attorney’s office, which argued that there was no problem, by agreeing that the local law was “not inconsistent” with federal regulations.

But the Los Angeles city attorney’s office concluded that the federal response was insufficient and that a more “affirmative determination” was required.

In Boston, officials considered the likelihood of just such a stalemate when they rejected the Los Angeles approach. David Passafaro, chief of staff to Mayor Tom Menino, who was the main force behind his city’s living wage law, said he informally asked some federal bureaucrats who handle the city’s community bloc grants if they thought there was a problem and the bureaucrats said no. But he did not seek, as Los Angeles has, someone who could speak authoritatively on behalf of the entire federal government.

Oakland Rejects L.A. Approach

“In our experience, to get them to act in an affirmative way is like lifting a big log,” Passafaro said. “We began with the assumption that there is no prohibition [against use of federal funds and decided] we’re not going to ask for permission. We’re going to ask for forgiveness.”

In Oakland, Deputy City Atty. Doryanna Moreno, one of three attorneys who drafted her city’s law, said she and her colleagues specifically rejected the Los Angeles tactic, relying instead on Oakland’s unchallenged experience in applying other local rules, such as a requirement that local contractors be hired to contracts funded with federal grants. “It has not been our tradition to assume there could be or would be a conflict” between locally specific contract requirements and federal laws, Moreno said.

Hahn declined to be interviewed for this article. But he has previously explained his office’s approach as a concern that the city not run afoul of federal rules forbidding a locality from imposing competitive bidding requirements that “unduly burden someone trying to bid” and, therefore, raise costs.

“Our issue is: Are we imposing a requirement on bidders that frustrates the goal of the federal government to get contracts let at a reasonable cost?” Hahn said.

He said the stakes are high: “We want to make sure that [the federal government is] not going to come after us three years from now in an audit and disallow their costs.”

Officials of other cities with living wage laws said they viewed it as implausible that the federal government would sue to recoup funds under a theory that contracts let under a living wage law artificially raised contract costs and thus wasted federal funds.

“I’m not sure the government could make that argument with a straight face, given the other inefficiencies the government requires,” said Minneapolis City Councilman Jim Niland, the prime force behind his city’s law.

The chief administrative officer for the Chicago City Council Finance Committee, lawyer Stephen Murray, who helped draft his city’s law, made a similar point, citing federal requirements that construction contracts involving federal funds be let at prevailing union wage rates, whether or not the contractor runs a union operation.

“I doubt that a regulatory agency is going to punish a city for paying more than the minimum wage,” Murray said.

‘A Difference of Opinion’

Still other lawyers made the point that many federal grant funds are earmarked to help the working poor; to sue a city for using them to help the working poor would seem inconsistent.

Los Angeles lawyers rejected the suggestions from colleagues around the country that they were foolish to ask for federal permission. Asserting that Los Angeles receives special scrutiny from federal auditors in part because of its size, Senior Assistant City Atty. Frederick N. Merkin said: “It’s a difference of opinion, and who’s to say they are necessarily right.”

Asked if the federal government had ever come after Los Angeles for imposing its own rules, Merkin and a colleague could cite no examples except for a bad experience with a 1982 case in which the city had to repay $1 million for violating unrelated federal procurement procedures.

Merkin said he believes Los Angeles is not entirely alone in seeking permission. He said he has been told that the officials who run California’s summer job program recently asked for and received permission from the U.S. Department of Labor to use federal money to pay workers at a new voter-approved state minimum wage of $5.75 per hour, rather than the federal minimum wage of $5.15.

Most living wage laws cover employees such as parking lot attendants, janitors and child care workers whose services are contracted for by cities. The laws require that the workers’ private employers--the city contract holders--pay them significantly more than the minimum wage; usually an amount pegged to the federal poverty standard for a family of three or four. The living wage in Los Angeles was initially set at $7.25 an hour with health benefits or $8.50 without.

The exact number of workers affected by the federal exemption is not clear. The best indication comes from a study by a UCLA law professor hired by the City Council to monitor enforcement. The professor, Richard H. Sander, found that as of last month, the city agency responsible for enforcement had ruled that six of 10 contracts it considered were exempt. Sander said that although the reasons for the exemptions were not specified, the main reason appeared to be that federal funds were involved.

Madeline Janis-Aparicio, a lawyer who heads a local advocacy group called the Living Wage Coalition, said there is another reason for a significant number of these exemptions--a decision that the work involved is not covered by the ordinance because it would not normally be done by city workers. Advocates are mounting a campaign to persuade the City Council to get rid of this exemption.

Goldberg Wants City to Remove Exemption

The law’s leading proponent within city government, Councilwoman Jackie Goldberg, said she plans to recommend that the City Council also get rid of the federal funds exemption by interpreting the lack of a “no” from the federal government on the issue as a “yes.”

Goldberg said she would have tried to remove the federal fund exemption sooner, but she did not realize until the law professor’s report that so many workers were being affected. She said she had assumed that the vast majority of contract workers were paid exclusively with city funds.

Goldberg said the city attorney’s office is being “too cautious.” But she noted that voters apparently like that approach, having resoundingly returned Hahn to office for a fourth term last year.

The history of the federal grant exemption is traceable to a concern voiced by Assistant City Atty. Jessica Heinz, when a predecessor to the living wage law was under consideration in 1996.

Heinz said she was concerned that the ordinance might be placing federal grant funds at risk.

The city attorney’s office had developed a policy on this subject a decade earlier, when researching the legality of an anti-apartheid ordinance that forbade the city from contracting with firms with South African ties, Heinz said. City lawyers concluded then that eliminating such firms as competitive bidders might force the city to accept higher bids from others companies. That, said Heinz, an expert in federal funding issues, would violate federal procurement rules in cases where federal funds were used and leave the city vulnerable to having to repay them.

“They may call us Nervous Nellies,” she said. “I think we’re simply being prudent.”

Legislative and union advocates for the worker retention ordinance had already spent much of their capital fighting another city attorney’s office opinion. They had enjoyed a rare success in persuading the City Council to ignore the city attorney’s advice that only mayorally appointed city commissions, and not the City Council, had the authority to tell three of the city’s biggest departments--airport, harbor, and water and power--how to handle their contracts.

Compromise Had Loophole

The advocates decided not to push their luck by also asking the council to defy the city attorney’s advice on the federal funding question.

Instead, they compromised. Rather than an outright ban on coverage for workers paid with federal grants, advocates negotiated a “sunrise clause” that would cover these workers once the sun rose on a federal decision that the city law was “consonant with” federal rules.

The same compromise language was carried over into the more hotly contested living wage ordinance when it passed the next year.

Janis-Aparicio of the Living Wage Coalition recalled having taken heart in an assessment by an assistant city attorney that it would be a relatively simple matter to get a federal OK. “We unfortunately just didn’t take [this issue] on.”

Instead, she said, she took the lead in trying to get the issue resolved in Washington, beginning what has resembled a long, if sporadic, merry-go-round ride that has involved not only letters to various federal officials but the enlistment of a prominent liberal Democrat and former Los Angeles Police Commission President Stanley Sheinbaum to put in a word with President Clinton.

Hahn, the second-ranking elected official in the nation’s second-largest city, has not gotten involved in any effort to resolve the problem on a political level, Janis-Aparicio said. In fact, the former private land-use lawyer said, she never thought of approaching him for a mission of that kind.

Asked why, she responded: “I have never seen him play that role or take that kind of action. I’ve seen him over the years with a kind of hands-off style, letting his staff take the initiative.”

Records show that efforts to resolve the impasse began in 1996, when the city attorney’s office wrote an official whom Janis-Aparicio had identified as authoritative and sympathetic within Los Angeles’ designated oversight agency, the Department of Labor.

The city got a letter back from another Labor Department bureaucrat the next month, saying that the agency was “not in a position” to provide an OK. This official referred the city to the federal Office of Management, which wrote back to say that the city’s approach was “not inconsistent” with federal rules.

This did not satisfy the city attorney’s office. But no more attempts were made to resolve the matter until the following summer, when the living wage law was being considered by the City Council.

The Living Wage Coalition raised about $7,000 to hire a UCLA law student who spent the summer researching federal rules.

At the end of the summer, the city attorney’s office tried again. Merkin wrote the secretary of labor, asserting that his office “believe[s] that both pieces of local legislation are fully compatible with federal law.” He cited a legal analysis prepared by the Living Wage Coalition and, once again, asked for a federal OK.

Months went by. In February 1998, another high-ranking Labor Department official responded in writing--but, in a classic bureaucratic twist, he responded to a different question. This official said that the city laws did not conflict with federal wage statutes. The letter did not address the question city officials were trying to get an answer to--whether the laws were compatible with federal procurement guidelines.

In April, Merkin wrote back, once again asking for an OK.

Late in the summer, he was directed to write to 37 different grant administrators for determinations. He said Friday that he was encouraged that he has already heard back from one who said it would be OK.