Wages
California – The state attorney general confirmed that a recently enacted law banning “junk fees” does not apply to restaurant service charges. The new law, which goes into effect on July 1, 2024, specifically prohibits “drip pricing,” or “advertising a price that is less than the actual price that a consumer will have to pay for a good or service.” Last week, the attorney general’s spokesperson had told some media outlets that under the law, it is unclear how service charges would be considered. This week’s clarification that service fees are allowable comes with the stipulation that “those fees must be disclosed (so they are no longer hidden) in restaurants’ advertised prices.” Restaurants typically list service fees on their websites, menus, and receipts. More details.
Michigan – One Fair Wage President Saru Jayaraman announced that her group will appeal to the Michigan Court of Appeals the decision last week by the Board of State Canvassers to not certify the minimum wage initiative for the 2024 ballot. The Board deadlocked over a change in the petition’s definition of “employer.” The initial version of the petition (and the summary shown to petition signers) defined an employer as someone who employs one person or more but the language of the full petition that circulated was different. It defined an employer as someone who employs 21 people or more which would exempt around 90 percent of Michigan businesses from following the new law, if it were adopted. More details.
Anaheim, CA – The California Supreme Court refused to hear an appeal from Disney as to whether an Anaheim wage law applies to many of their workers. The dispute between Disneyland workers and the park began in 2018 when voters passed a law prescribing a $15 minimum wage for companies in Anaheim’s resort area who enjoyed “tax rebate” agreements with the city. The measure approved by voters, known as Measure L, had been placed on the ballot thanks to a petition drive led by a coalition of Disney unions. In the lead up to the election, Disney asked the Anaheim City Council to shred a 45-year gate tax shield and a $267-million bed-tax break for a luxury hotel project that has since been abandoned. With those agreements canceled, Anaheim’s city attorney opined that the law wouldn’t apply to Disney. The workers, led by their unions, sued and the company prevailed in the lower courts, then lost an appeal and now have lost their last appeal at the Supreme Court level. The company will now have to make the necessary pay adjustments as well as provide significant back pay. More details.
Evanston, IL – The city council heard a proposed ordinance to raise the local minimum wage to $15.50/hr for employers with between 4-50 employees and $16.25/hr for employers with 51 or more employees beginning in July 2024. The proposed wages are higher than the current minimum wages set by Cook County and the state of Illinois. The bill was amended to exclude a two-tier wage but will keep an automatic annual cost of living escalator. Formal action is likely at the next council meeting, Nov. 13. More details.
Paid Leave
Massachusetts – A state house committee heard legislation to mandate that employers give workers notice of their paid leave rights under the law and an application when they need to take leave. Currently, the law only requires an employer to provide information about paid leave when a new employee starts work. The bill would make the state’s notification requirements the same as the federal Family and Medical Leave Act requirements. Under the state program, workers can get up to 20 weeks of paid medical leave to recover from a serious illness or injury. Workers can also get up to 12 weeks of paid family leave to care for a sick family member, bond with a new child or manage family needs due to a family member’s military service. Less than 10 percent of eligible workers have utilized the benefit and proponents believe lack of awareness of the program is a major factor. More details.
Labor Policy
Labor Department – The U.S. Senate confirmed Principal Deputy Administrator Jessica Looman as the head of the department’s Wage and Hour Division (WHD) by a 51-46 vote. The WHD enforces the federal minimum wage, overtime pay, recordkeeping, and child labor requirements of the Fair Labor Standards Act, as well as other employment standards and worker protections under other statutes. Since Jan. 20, 2021, Looman had been serving as the Principal Agency Administrator, a role designated to permit her to lead the WHD while her nomination was pending without triggering litigation. An effort late last year to have Looman confirmed through unanimous consent was unsuccessful. More details.
NLRB – The agency released its long-anticipated final joint employer rule this week. The rule would officially undo a Trump-era rule, in effect since April 2020, that required businesses to “possess and exercise … substantial, direct and immediate” control of a workers’ job conditions to qualify as a joint employer. Instead, the new standard would consider an employer’s direct or indirect authority to control essential terms and conditions of a worker’s job, even if that control isn’t actually exercised. That definition is expected to be applicable to a broader swath of business arrangements. Those terms and conditions include compensation, scheduling, assignment of duties, supervision of performance, workplace rules, hiring and firing, as well as workplace health and safety conditions, according to the agency. The new rule is set to take effect in late Dec. Many business groups including the International Franchise Association and the National Restaurant Association are likely to litigate the issue, as well as pressure Congress to curb the impact of the rule. More details.
Misc.
Interchange Fees – The Federal Reserve issued its proposed changes to the current debit card interchange cap, which would reduce the interchange fee cap and increase the fraud-prevention adjustment. Their proposed rule would reduce the base component of the interchange fee cap to 14.4 cents (down from the current 21 cents), reduce the ad valorem component to 4.0 basis points (down from the current 5.0 basis points) and increase the fraud-prevention adjustment to 1.3 cents (up from the current one cent). Additionally, it would mandate an update to all three components of the interchange fee cap (base, ad valorem and fraud prevention) every other year going forward by directly linking the components to data from the Board’s biennial survey of large debit card issuers starting in 2025, without public comment. A 90-day public comment period now begins. More details.
Key Takeaway
- The announcement this week that Chipotle will likely raise their prices in California in direct response to the new mandated wage hikes for fast food workers is important. On the one hand, announcements like these demonstrate for consumers, employees, elected officials and opinion leaders that these policies have a clear and direct impact on the marketplace – that they drive up prices. Those reactions can be helpful as industry leaders educate lawmakers in other jurisdictions considering wage hikes that there are real “unintended consequences” from these policies. However, in the current environment with regard to service fees and other charges, the industry needs to be careful that we don’t get into a cycle of publicly blaming lawmakers for increasing pressures on our business models. That approach will ultimately further embolden industry detractors and their allies in elective office and likely elevate the reputational attacks on our industry.