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Businesses probably won’t be able to pick up and move their headquarters outside of city limits in order to avoid San Diego’s proposed minimum wage hike.
The latest version of an ordinance pushed by City Council President Todd Gloria requires companies to pay the city’s increased minimum wage – which could hit $11.50 by 2017 – to any employee that works more than two hours within the same week in the city.
This means a landscaper who works a few hours in Escondido and then heads to San Diego for another gig could get a temporary pay boost once he crosses into San Diego.
How the city would police the change is largely yet to be determined.
The draft ordinance suggests companies that fail to pay San Diego’s steeper minimum wage could face fines up to $1,000 per violation and that the city designate an enforcement office to hear complaints and conduct investigations.
There’s little agreement on how that should work. City leaders are awaiting a study by the independent budget analyst they hope will clarify the ideal approach – and the costs associated with it.
Gloria has said investing in enforcement could lessen the need for low-wage earners to rely on public assistance or services. Meanwhile, City Councilwoman Lorie Zapf has argued enforcing the measure would require the city to create a “mini-IRS.”
She and other City Council Republicans frequently point to plans to spend roughly $1.1 million next year to enforce both the city’s living wage and expanded prevailing wage ordinance, which set pay requirements for city contractors.
Two other California cities that have recently boosted their minimum wages offer differing models for San Diego.
San Francisco voters approved a minimum wage increase in 2003 and the city’s $10.74 an hour is currently one of the steepest in the nation.
The city has sunk significant resources into enforcement. For a time, it assigned seven and a half workers – one worked part time – to investigate complaints at a cost of nearly $1 million a year. It’s since settled at about five-and-a-half staffers, said Donna Levitt, who leads the San Francisco Office of Labor Standards Enforcement.
The city also agreed to pay a handful of community organizations about $462,000 this year to educate local workers and help those who are being underpaid to file complaints.
That piece is crucial, Levitt said, to ensure that workers are aware of the rules and know how to react when there’s a violation.
“A lot of immigrant workers are fearful of coming directly to a government agency,” she said.
Last fiscal year, city workers collected about $1.5 million in back pay on behalf of 349 employees who were paid less than the minimum wage and recovered nearly $154,000 in city fines, according to an annual report.
San Jose hasn’t shifted as many resources toward enforcing its minimum wage.
Voters there approved a minimum-wage increase in November 2012 and employers have been required to pay at least a $10 minimum wage since last March.
Last year’s city budget allocated cash for two compliance workers and a part-time assistant but Nina Grayson, who leads the city’s Office of Equality Assurance, said the city’s managed with one full-time staffer who takes and investigates complaints.
She said the single staffer’s salary and benefits add up to $95,000 and the city spent about $5,000 on printing and language translation costs in its first year – roughly 14 times less than San Francisco is set to spend this year.
But they’ve also had fewer tangible results.
Since the ordinance went into effect last March, Grayson said San Jose has completed 17 minimum-wage investigations and collected nearly $13,000 in back pay for 50 workers. The city hasn’t collected any fines, though, because there isn’t a financial penalty for first-time offenders.
Grayson expects complaints – and thus payouts – to rise in coming years as more workers learn about the law and the reporting process.
For now, though, one enforcement employee is sufficient, Grayson said. “It’ s just been relatively steady.”
The state puts significantly more muscle behind policing the minimum wage but it’s unlikely to give San Diego a hand with enforcement if a minimum wage measure passes.
In 2012 alone, Department of Industrial Relations investigations generated more than $3 million in minimum-wage payouts to workers who had been initially shorted and more than $775,000 in state fees.
Some of those cases came as a result of proactive enforcement efforts but a Department of Industrial Relations spokeswoman said the state isn’t mandated to take the same approach in cities with their own minimum wage laws, or to work with cities to investigate complaints.
They would only be required to handle complaints that come into their office.
“The state can assist if specifically asked to, but they are not required to do so,” spokeswoman Kathleen Hennessy said.