To: Sonoma County Board of Supervisors
Department or Agency Name(s): County Administrator’s Office
Staff Name and Phone Number: Yvonne Shu 565-1739, Christel Querijero 565-7071
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
Discussion of Proposed Changes to the Living Wage Ordinance
End
Recommended Action:
Recommended action
A) Receive recommendations from the Living Wage Ad Hoc on proposed changes to the Living Wage Ordinance
B) Direct staff to develop draft language for Living Wage Ordinance amendments that reflect Board majority preferences
end
Executive Summary:
The County of Sonoma’s Living Wage Ordinance (LWO) is an important way that the County promotes doing business with contractors who support their employees who do work on County contracts. The County’s LWO went into effect on July 1, 2016. On December 14, 2021, the Board approved an increase of the living wage hourly rate to $16.75 per hour and directed staff to explore suggested changes to the LWO, as proposed by local labor advocates. The intervening years since the ordinance’s passage have revealed system and process challenges with LWO implementation. These internal observations and the ordinance proposals will be discussed today.
Discussion:
Background
A living wage is different from a minimum wage, but they are often conflated, especially in a County such as Sonoma, where there are unincorporated areas and incorporated cities.
Minimum wage
A minimum wage is the lowest allowable rate of pay per hour that can be paid to an employee. The minimum wage is a general law regulating all employment in the covered jurisdiction and must be paid by all employers. There may be federal, state, county or city minimum wage rates, and an employer must follow the rate that is most beneficial to the employee (with some exceptions). California’s current minimum wage rate <https://www.dir.ca.gov/dlse/faq_minimumwage.htm> is $15.00 per hour for employers with more than 26 employees and will increase to $15.50 per hour on January 1, 2023. This rate is applicable to the unincorporated parts of the County. Incorporated cities may have different minimum wage rates from the state. For example, the City of Santa Rosa currently has a minimum hourly wage of $15.85, which will increase to $17.06 per hour on January 1, 2023.
Living wage
In contrast, living wage requirements typically are more limited and most commonly only apply as a condition of a government contract. A living wage is generally defined as the lowest hourly wage that can support subsistence needs. These needs vary based on a variety of factors, including family size and circumstances, lifestyle, and the cost of living in a certain area. Whether to enact living wage requirements (typically, via local legislation) is a policy decision at the discretion of local jurisdictions for their communities. The jurisdictions determine who is covered under their living wage ordinance; typically, it is the employees of employers who contract with the governing entity. In California, there are 42 cities and counties with living wage ordinances (LWO), according to U.C. Berkeley’s Labor Center’s list of California City and County Living Wage Ordinances <https://laborcenter.berkeley.edu/california-city-and-county-living-wage-ordinances/>. Bay Area counties with LWO’s include San Francisco, Santa Cruz, Marin, Santa Clara, and Sonoma. Local jurisdictions with living wage policies include the town of Sonoma and the city of Petaluma.
Unless exempt under the terms of the applicable wage standard, in general the highest wage rate-whether as a function of minimum wage, or if a living wage law applies and provides for a higher amount--must be paid to covered workers in instances where multiple wage rate requirements apply.
Sonoma County’s Living Wage Ordinance (LWO)
In December 2015, the Board of Supervisors adopted the County’s Living Wage Ordinance (LWO), which established a $15.00 per hour living wage rate for County employees and covered employees of certain County services contractors and economic assistance recipients (i.e., employers receiving direct financial assistance from the County in the form of grants, loans, or loan guarantees, in-kind services, waivers of county fees, interests in real property, or other valuable consideration, totaling one hundred thousand dollars or more in any twelve-month period). The LWO went into effect July 1, 2016, for for-profit contractors, economic development assistance recipients and County employees (Attachment 1). A gradual implementation path for non-profits was also established, with full compliance required as of July 1, 2019.
In contrast to a more universally applicable minimum wage, the County’s LWO generally only applies to contractors and entities who conduct business with or who obtain financial assistance (or other statutorily listed benefits) from the County. Specifically, employees of covered companies and organizations (e.g., those having over five employees for for-profit entities) that do certain volumes of business (i.e., over $25,000) with the County or that received certain financial assistance or benefits (i.e., over $100,000), are required to be paid at least the County’s established hourly living wage rate. In sum, Sonoma County’s LWO is limited and only covers employees of organizations that have contracts or other agreements with the County over a certain amount.
On December 14, 2021, the Board approved an increase of the living wage hourly rate to $16.75 per hour. The new rate was applied immediately to all new contracts as of January 1, 2022, and to all existing contracts by April 1, 2022, to allow for implementation and contract adjustments.
LWO Sec. 2-377 requires that the county administrator or designee review the living wage rate to determine whether to recommend adjustments for the Board’s consideration. Formal review of the living wage rate had not been brought to your Board prior to that December 2021 action, primarily due to the priority of addressing major countywide emergency disasters and lack of staff capacity.
Equity Analysis
Staff used the Government Alliance on Race and Equity’s (GARE) Equity Toolkit to provide a general equity analysis (Attachment 2) of the existing LWO. The County does not have an accurate way to collect the data needed for the detailed level of analysis required to understand local impact of the LWO on an individual or neighborhood basis, or as to how LWO impacts persons conducting business with the County. However, anecdotal feedback gathered from community-based organizations (CBO) and departments indicates that the County can simplify and clarify LWO and other procurement processes, which would help to lower transactional costs and burdens associated with contracting with or obtaining assistance from the County. This could potentially expand the pool and diversity of local organizations that would consider working with the County.
On August 16, 2022, the North Bay Labor Council (NBLC) requested that the County obtain an equity analysis of each of their proposed changes to the County’s LWO. This analysis could not be done, given the multitude of proposals and the breadth of issues the effort would entail, as well as the Office of Equity’s limited capacity.
Feedback
Staff spoke with several contractors and community-based organizations (CBO) about the LWO. They shared that they all pay above the current living wage rate, and their main request was that they needed more advanced notice to implement any future rate change.
The CBO’s stated that costs in general are increasing for all non-profits. An increase to the living wage rate presents challenges in that CBO contracts are often structured on a reimbursement basis, so that with each new contract or program, they must calculate (with the new rate) whether they can afford to front the costs to provide the community services that the County would later reimburse. For multi-year grants, CBO’s often must project their budget at the beginning of the grant, so any increase to the hourly wage rate during the term of the grant can be problematic. Finally, CBO’s frequently are required to present balanced budgets on contracts but there is often a funding gap that must be filled through other means, such as fundraising. Any increase in the hourly wage rate would increase this gap. CBO’s in particular often have numerous contracts with the County, and under the current living wage process they are required to complete the living wage questionnaire with each contract.
With the help of the Economic Development Board, a survey was sent to the local business community at large, to gauge their general awareness of the current LWO and the impact it might have on their inclination to do business with the County. With 85 responses, the businesses were about evenly split between being aware, somewhat aware, or not at all aware of the LWO. Of the total responses, 64% indicated that the current living wage rate would not impact their employees’ wages, because they already pay above the living wage rate, while 51% were neutral in terms of the LWO’s influence on their organization’s inclination to do business with the County.
North Bay Labor Council (NBLC) and North Bay Jobs with Justice (NBJJ)
North Bay Jobs with Justice and the North Bay Labor Council have sent proposed changes to the County’s LWO and have also provided background information and advocacy materials (Attachment 3).
Comparison counties
Staff spoke with living wage representatives for Marin, San Francisco, Santa Cruz and San Mateo counties, and also included Santa Clara in their research. Notable differences or observations include the following:
§ Santa Cruz County <https://www.co.santa-cruz.ca.us/Departments/GeneralServices/Purchasing/CurrentLivingWageOrdinance.aspx> applies their LWO to a slice of their overall contracts - for services in the middle ground between “very skilled” and “minimum wage” jobs - that is, those occupations that involve some complexity. Purchasing has discretion to make determinations if services are not clear, but only the listed services are subject to LWO and only if their aggregate contract amount reaches the LWO threshold of $15,000 cumulatively within a fiscal year. Santa Cruz’s Purchasing system alerts Purchasing staff when a contractor is approaching the LWO threshold.
§ San Francisco’s Office of Labor Standards Enforcement prioritizes communication, education and training, so that they are proactively encouraging compliance of their living wage rate (which they call the “minimum compensation ordinance <https://sfgov.org/olse/minimum-compensation-ordinance-mco>”, not to be confused with their minimum wage rate). They make presentations, answer questions from bidders, maintain a strong working relationship with the contracting department, and investigate complaints.
§ In Marin County <https://www.marincounty.org/depts/ad/divisions/management-and-budget/living-wage-ordinance>, the LWO primarily affects the County’s contracted in-home supportive services (IHSS) workers, who are paid at the LWO rate.
§ San Mateo County <https://www.smcgov.org/hr/san-mateo-countys-living-wage-ordinance-lwo> made its pilot living wage ordinance permanent in April 2022. Their LWO has only one wage rate, regardless of whether the provider offers health or retirement benefits.
Ad Hoc Committee
As part of the LWO proposal work plan, the separately established ad hoc committee for Project Labor Agreements was broadened, to include consideration of potential amendments and other proposals as to the LWO. The Living Wage Ad Hoc discussed different aspects of the LWO, reviewed living wage policies from other counties, and discussed internal County living wage and procurement issues. Supervisors Rabbitt and Hopkins (CR) form the Ad Hoc, and staff from the County Administrator’s Office, Human Resources, General Services, and County Counsel support the Ad Hoc.
County Procurement Review
The County has recently launched an effort to assess the County’s Procurement system. The effort supports the Strategic Plan Organization Excellence <https://socostrategicplan.org/organizational-excellence/> pillar, objective 1.5, intended to align procurement and grant guidelines with strategic priorities and racial equity principles. The County recognizes that there are opportunities for improvement, efficiency, and modernization in its procurement process and systems. The recommendations from this broader procurement assessment may impact the way that the LWO is currently implemented, including compliance, systems, and data collection. Potential LWO-related changes may be more readily incorporated with the broader effort when other changes may be made to the general purchasing processes and systems.
Living Wage Proposals and Analysis
Attachment 4 provides background and analysis of each of the proposals.
The following table summarizes the suggested recommendations.
|
|
Item |
Ad Hoc Recommendation |
|
1 |
Include or exclude County employees in LWO |
§ Continue to include County employees in the LWO for the hourly wage rate only § Add a new LWO provision to exclude County employees from any LWO benefits provisions |
|
2 |
Location of living wage-covered employees |
§ Clarify and add language to the LWO to specify its applicability to only those covered employees who live in the US |
|
3 |
Exemption for emergency contracts |
§ Add narrowly worded, express emergency contract exemption language to the LWO |
|
4 |
Living Wage COLA |
§ Adopt an automatic annual adjustment with methodology as follows: annual COLA to increase the hourly rate at the same rate as the CPI-U, with a specified cap on the increase. County has discretion to decide against an increase in any given year. Increase would be as a consent item or part of the annual budget workshop. § Change effective date for any rate change from January 1 to July 1 |
|
5 |
Leave / PTO |
§ Recommends that staff return to the Board with more detail around the policy options outlined in the “LWO Proposals and Analysis” attachment (i.e., add provision for paid leave without specifying number of days, add provision for specified number of paid days leave, consider making paid leave offerings a preferential factor in awarding contract opportunities). § The Ad Hoc agrees that any expectations or LWO amendments regarding paid leave should exclude County employees because their terms and benefits are best negotiated through the collective bargaining process |
|
6 |
Hours for part-time employees |
§ Include “best effort” language, similar to the retention language in Sec. 2-386 |
|
7 |
Employee retention |
§ Keep “best effort” language § Consider: - Instituting a procurement policy to provide a bid factor increase for all proposers who would voluntarily commit to a retention of previous contractor employees; AND/OR - Instituting a procurement policy to add language in County solicitation materials, to describe and encourage the County’s value preference for worker retention |
|
8 |
Responsible bidder |
§ Add clarifying language to Sec 2-380(d) |
|
9a |
Lessees: Fair |
§ Continue to exclude short-term lessees, concessionaires, and franchisees from the LWO |
|
9b |
Lessees: Airport |
§ The Ad Hoc was split on how to proceed with the airport and recommends that staff return to the Board with additional policy options |
|
10 |
Model language |
§ Revise LWO to require that covered employers use the LWO employee notices issued by the County § Include more information of key LWO provisions in the employee notices |
|
11 |
Enforcement |
Near-term § Create and publish an enforcement/complaint hotline § Expand 2-382(b), for full cost recovery for any audit that reveals LWO violation or discrepancy and remove the $2,500 cap § Establish a process for spot check audits Long-term § Wait for findings from the overall procurement assessment to identify gaps and potential solutions to process and data issues |
|
12 |
Living Wage questionnaire and data |
§ Staff to redesign the questionnaire after ordinance changes complete |
At the Board’s December 6, 2022 meeting, staff will propose an adjustment to the living wage rate.
Staff will provide draft language options on Board-directed changes to the LWO in January or February 2023, with adoption of the ordinance expected in March or April 2023.
Strategic Plan:
N/A
Prior Board Actions:
12/14/21 Adopted resolution to increase the living wage hourly rate to $16.75 and approved Living Wage Ordinance work plan
9/21/21 Directed staff on areas of further analysis and evaluation for the Living Wage Ordinance
Fiscal Summary
Narrative Explanation of Fiscal Impacts:
None
Narrative Explanation of Staffing Impacts (If Required):
None
Attachments:
1 - County’s current living wage ordinance
2 - LWO racial equity analysis
3 - North Bay Labor Council / North Bay Jobs for Justice materials
4 - LWO proposals and analysis
5 - Living Wage contractor questionnaire
6- Santa Cruz County’s Living Wage Compliance Statement for for-profit entities
Related Items “On File” with the Clerk of the Board:
None