Nov 10, 2003 Wage & Hour Issues

San Francisco Enacts Municipal Minimum Wage Ordinance

On November 4, 2003, San Francisco voters approved Proposition L, a minimum wage ordinance that requires virtually all employers to pay at least $8.50 per hour for work performed within the geographic boundaries of the City and County of San Francisco. The ordinance takes effect on February 2, 2004.

Significantly, the new San Francisco ordinance is not limited to businesses that contract with the city. The ordinance broadly defines “employer” to include “any person . . . including corporate officers or executives, who directly or indirectly or through agent [or] any other person, including the services of a temporary services or staffing agency or similar entity, employs or exercises control over the wages, hours, or working conditions of any employee.” The ordinance defines “employee” to include any person who performs at least two hours of work per week for an employer within the geographic boundaries of the city. This broad sweep covers nearly every private employer with operations in San Francisco. The requirements of the minimum wage ordinance can, however, be waived for employees covered by a bona fide collective bargaining agreement.

Compliance for small businesses (employing fewer than ten people in total) and not-for-profit corporations will be phased in over a two-year period beginning on January 1, 2005. During 2005, small businesses and not-for-profit corporations must pay a minimum wage of $7.75 per hour. Beginning January 1, 2006, these employers will become subject to the same minimum wage requirements as other employers. Retaliation or discrimination by any employer for exercising rights under the ordinance is prohibited, and violators may be subject to an administrative penalty of $50 per day in addition to reinstatement, back wages and other appropriate relief.

Drafters of the ordinance reportedly settled on a rate of $8.50 per hour by adjusting the federal minimum wage to account for thirty years’ worth of price increases. Currently, the federal minimum wage is $5.15 per hour, and the California minimum wage is $6.75 per hour. The ordinance provides for automatic increases each January 1 corresponding to the increase, if any, in the Consumer Price Index for urban wage earners and clerical workers in the San Francisco-Oakland-San Jose, California metropolitan statistical area. With its new ordinance, San Francisco joins Washington, D.C. and Santa Fe, New Mexico as the only cities in the country to set a municipal minimum wage higher than that required by state and federal law.