A S AP ™ a Littler Mendelson Time Sensitive Newsletter in this issue: Chicago’s Living Wage Ordinance: A Sign of What is augusT 2006 to Come? By D. Chad Anderton and Stephanie Seay Kelly Chicago has passed a unique living wage ordinance targeted at “Big Box” retailers that Overview Living Wage v. Minimum could change the landscape of Wage wage law across the united After weeks of harried lobbying, states, city by city. grassroots protests and dueling full- Living wage ordinances have been page newspaper ads, the Chicago City enacted in more than 70 localities (both Council, by a vote of 35 to 14, passed state and municipalities) across the a controversial ordinance requiring nation. A “living wage” is defined by “Big Box” retailers (defined as stores its proponents as the wage a full-time that occupy more than 90,000 square worker would need to earn to support a feet, whose parent companies gross family of three to four people above the over $1 billion dollars annually) to pay federal poverty line. In most instances, a employees a minimum or “living” wage living wage ordinance requires employers of $10 per hour by the year 2010. The to pay wages that substantially exceed Big Box ordinance, the first such law federal or state minimum wage levels. in the United States to set apart large Typically, a limited set of workers are covered by living wage ordinances, retailers for wage rules, also requires such as those employed by businesses large retailers in the City of Chicago to that contract with a city or county pay an additional $3 an hour worth of government, or those who receive benefits. economic development subsidies from the subject local governmental body. Under the ordinance, minimum wages Anti-poverty organizations such as the at Chicago Big Box retailers will rise Association of Community Organization to $9.25 an hour in 2007, $10 in for Reform Now (ACORN), the catalyst 2010, and will be indexed for inflation of Chicago’s living wage movement, thereafter, representing a significant maintain that city and county increase in hourly pay from Illinois’ governments should not contract with current minimum wage of $6.50 an or subsidize employers who pay at or hour. Smaller retailers will remain below the federally-defined poverty level. subject to the state minimum wage of While there is currently no campaign for $6.50 an hour. a national living wage, local efforts are popping up across the country and are The ordinance, which was ardently supported by national organizations like opposed by Chicago’s Mayor Richard ACORN and Jobs with Justice. Living Daley, has served as a lightning rod for wage ordinances account for wage rates both passionate protests and political ranging from a low of $6.25 per hour in gamesmanship. Indeed, Chicago’s recent Milwaukee, Wisconsin to a high of $12 saga with its living wage ordinance is per hour in Santa Cruz, California. Many the most recent example of what is such ordinances also have provisions becoming a nationwide phenomenon. regarding health benefits, labor relations Littler Mendelson is the largest law firm in the united states devoted exclusively to representing management in employment and labor law matters. The National Employment & Labor Law Firm™ 1.888.littler www.littler.com firstname.lastname@example.org AS AP ™ The National Employment & Labor Law Firm™ 1.888.littler www.littler.com info @ littler.com and hiring practices. the minimum wage over the last decade. Conversely, such efforts will not go Indeed, this represents the longest period unopposed. Prior to its passage, Mayor Federal law requires that all workers without an increase since the federal Daley threatened to veto Chicago’s Big covered under the Fair Labor Standards minimum wage was introduced in 1938. Box ordinance, yet in order for such a Act (FLSA) be paid at least $5.15 an It is predicted that as many as 19 states veto to be effective, he will be forced to hour. In the event that an employee could consider legislative proposals to use his political heft to change the votes is subject to both the state and federal increase the minimum wage this year, and of two council members. The Illinois minimum wage laws, the employee is another 11 states have similar proposals Retail Merchants Association has already entitled to the higher of the two minimum that carried over from 2005. threatened to mount a constitutional wages. Two states, Kansas and Ohio, challenge to the Chicago ordinance have a minimum wage rate below the Given Congress’s recent failure to pass a suggesting that the ordinance, by targeting federal rate for some workers who are not minimum wage increase, we can expect large retailers, violates constitutional covered under the federal law, such as increased lobbying and legislative efforts equal protection guarantees. Similarly, waitresses. Six states (Alabama, Arizona, at the local level. The U.S. House of other business groups are lobbying and Louisiana, Mississippi, South Carolina and Representatives recently agreed to a organizing to enact state-level legislation Tennessee) have no minimum wage law change in the federal wage law in hopes prohibiting local wage laws. Such at all, while 22 states (Alaska, Arkansas, of increasing the minimum wage for preemption laws have already passed California, Connecticut, Delaware, the first time since 1997. The bill called in Arizona, Colorado, South Carolina, Florida, Hawaii, Illinois, Maine, Maryland, for an increase in the federal minimum Louisiana, Missouri, Utah, Oregon and Massachusetts, Michigan, Minnesota, wage rate from $5.15 per hour to $7.25 Texas. Other preemption campaigns are New Jersey, New York, North Carolina, per hour over 3 years, in the following being mounted in Michigan, Kansas, Oregon, Pennsylvania, Rhode Island, increments: $5.85 per hour effective on Tennessee and New Mexico. Vermont, Washington, and Wisconsin) January 1, 2007, $6.55 per hour effective have approved a higher minimum wage on June 1, 2008 and $7.25 per hour Recommendations for than the federal law.1 Most of these states’ effective on June 1, 2009. The provision, Employers wage rates fall somewhere between $6 to attached to the Estate Tax and Extension $7 per hour, with the highest being $7.63 of Tax Relief Act of 2006, also provides As indicated by the significant recent per hour in Washington. In contrast, that tips may be counted toward meeting activity in this area, minimum and living living wage rates typically range between any future minimum wage increases by wage laws are on the rise. As a result, $9 and $10 an hour. employers in those states where state law employers must become familiar with prohibits tips from being calculated as local and state wage laws and proposed States are not the only governments raising part of the minimum wage. (The states legislation before entering new markets. wage rates. Chicago’s Big Box ordinance is currently prohibiting this practice are Those employers already established in just the latest example of an increasing Alaska, California, Minnesota, Montana, existing markets should keep abreast of trend in local municipalities’ efforts to Nevada, Oregon and Washington). On any newly effective legislation, as well require employers to raise wages. Cities August 3, the Senate voted to halt debate as any proposed legislation that could like Washington D.C., New Orleans, Santa on the bill thereby ending the hopes of a aversely impact its business. Fe, San Francisco and Albuquerque have federal minimum wage hike in the near recently seen virtually across the board term. The estate tax provision and the increases of the local minimum wage via effects on tipped employees led many D. Chad Anderton is a Shareholder and Stephanie living wage ordinances. Chicago’s new Senate Democrats to vote against the bill, Seay Kelly is an Associate in Littler Mendelson’s Big Box ordinance is distinct from typical thereby resulting in the bill’s demise. Chicago office. If you would like further living wage ordinances, however, because information, please contact your Littler attorney it specifically singles out large retailers. To be certain, due to the successful passage at 1.888.Littler, email@example.com, Mr. Anderton of Chicago’s Big Box ordinance, similar at firstname.lastname@example.org, or Ms. Kelly at skelly@ Future of the Minimum and efforts to raise the “living wage” in other littler.com. Living Wage localities, especially in relation to “Big Box” retailers should be expected. Anti- Experts suggest that the increasing poverty organizations like ACORN will number of minimum and living wage continue to rally and organize workers in laws across the nation is largely due to efforts to raise the living wage in localities the federal government’s failure to raise around the country. 1 The remaining twenty states have adopted the federal minimum wage rate. 2 asaP™ is published by Littler Mendelson in order to review the latest developments in employment law. asaP™ is designed to provide accurate and informative information and should not be considered legal advice.