STATE OF CALIFORNIA

DEPARTMENT OF INDUSTRIAL RELATIONS

INDUSTRIAL WELFARE COMMISSION

 

 

 

Public Meeting and

Public Hearing

 

 

 

 

 

December 7, 2001

 

 

 

 

 

Hiram Johnson State Building

455 Golden Gate Avenue

San Francisco, California

P A R T I C I P A N T S

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Industrial Welfare Commission

BILL DOMBROWSKI, Chair

DOUG BOSCO

LESLEE COLEMAN

TIMOTHY CREMINS

HAROLD ROSE

 

 

Staff

BRIDGET BANE, Executive Officer

TRACI PILGRIM, Analyst

MARGUERITE STRICKLIN, Legal Counsel

 

 

 

 

 

 

 

 

 

I N D E X

Page

Proceedings 4

Approval of Minutes 4

Wage Board regarding Section 11, Wage Order 1-2001 4

Statement as to the Basis for Wage Order 5 Amendments 5

JULIANNE BROYLES, California Chamber of Commerce 6

FRAN KEEGAN, Electroglas 7

STEVEN ZIEFF, California Employment Lawyers 10

Association

SHANE GUSMAN, Teamsters; Amalgamated Transit 16

Union; Hotel and Restaurant Employees;

United Food and Commercial Workers;

Hotel and Restaurant Employees; Machinists

PATRICIA GATES, Van Bourg, Weinberg, Roger & 18

Rosenfeld

TED FRANKLIN, Van Bourg, Weinberg, Roger & 24

Rosenfeld

PETER COOPER, California Labor Federation 34

TOM RANKIN, California Labor Federation 36

New Business 48

PATRICIA BRESLIN, Golden Gate Restaurant 49

Association

TOM RANKIN, California Labor Federation 54

PETER COOPER, California Labor Federation 56

Deductions from Exempt Employeesí Salary 57

Adjournment 69

Certificate of Reporter/Transcriber 70

P R O C E E D I N G S

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(Time noted: 10:05 a.m.)

COMMISSIONER DOMBROWSKI: Iíll call the meeting to order. This is the Industrial Welfare Commission meeting, December 7th.

Let the record show that all five commissioners are present.

Iíd like to take the liberty of going a little bit out of the agenda. Weíll start with the public meeting agenda.

And Number 1, approval of the minutes, the minutes have not been finalized, so weíre going to need to skip that agenda item.

Number 2, Iíll turn to Bridget.

MS. BANE: Thank you, Mr. Chairman. And Iíd like to borrow your copy of the correct agenda.

The second item on the agenda concerns the consideration of individuals for an appointment to the wage board which is under consideration, to be appointed for modifying Section 11 of Wage Order 1. And I believe that there is a necessity to, at this point, put off the appointment of the wage board and to schedule instead a public hearing on the matter for the next meeting that will be open for comment by the public after an investigation is completed by the staff. And we would ask the chair to do that, because I have consulted with counsel, and although it was thought at the time that the petition was brought forward that both sides had weighed in on the issue, indeed and in fact, there has not been a public hearing scheduled, as required by the Labor Code.

So, with that -- with that request, I would turn it over to counsel and/or back to the chair.

COMMISSIONER DOMBROWSKI: Any comments?

(No response)

COMMISSIONER DOMBROWSKI: Okay. Let the record show that we will schedule that for next monthís hearing.

MS. BANE: We will. I believe that that will be on January the 11th.

That will not, by the way -- if the Commission chooses to appoint a wage board, that will not delay any amendments that might result from that wage board appointment. They would still be able to take effect in July of 2002, regarding Wage Order 1.

COMMISSIONER DOMBROWSKI: Okay. Saving on

paper --

Weíre going to go to Item Number 3, consideration of and possible action on the "Statement as to the Basis" for amendments to Wage Order 5 regarding employees with direct responsibility for children under 18 years of age receiving 24-hour care.

Iím going to assume that is really the subject that everybody wants to speak about. And assuming that, Iíll ask Patti Gates to come up.

MS. GATES: Iím sorry. If you donít mind, weíd like to wait till the -- if we could be called last, weíd appreciate that. Tom Rankin is on his way.

COMMISSIONER DOMBROWSKI: All right. Fine.

Julianne Broyles.

MS. BROYLES: Good morning, Chairman, commissioners, Julianne Broyles, from the California Chamber of Commerce.

I was going to speak in gratitude for the action taken at the last -- at the October 29th meeting regarding Wage Order 5 and the amendments to the "Statement to the Basis" to clarify, at the request of the California Labor Commissioner, the issue of salary deductions for exempt workers.

Itís a very important issue, especially as we go into the end of December, which is a time primarily that we find our members of the California Chamber needed the guidance that the Industrial Welfare Commission provided, because this is -- the period between Christmas and New Yearís is traditionally a time where many companies do shut down for that entire week. And having that guidance on the record is something that we found to be very helpful.

And really, that is the only reason I was to speak today. And if you have any questions, Iíd be happy to answer them.

COMMISSIONER DOMBROWSKI: Thank you.

MS. BROYLES: Thank you.

COMMISSIONER DOMBROWSKI: Fran Keegan.

MS. KEEGAN: Good morning. Thank you for the opportunity to speak today. I really appreciate it. I am Fran Keegan. Iím the VP of human resources from Electroglas.

Electroglas is a company rich with 42 years of history, and we will prevail during this downturn, although it looks very bleak right now. Our third-quarter revenues were down 57 percent over the prior quarter, and we lost $14 million in the third quarter.

Our employees in 2001 experienced a wage freeze in May. We had a layoff in September, and weíve requested our employees to take over twenty days off in 2001. But right now, thatís history, and weíre looking forward to 2002.

And our CEO, Kurt Wozniak, had a very tough decision to make. So he got our employees together, and he basically said, "Iím looking at 2002, and I have basically four choices: first choice, I can reduce the staff, I can lay people off; my second choice, I can reduce engineering programs; my third choice is I can cut your pay; and my fourth choice, I can continue to ask you to take time off."

Kurt decided to cut our employeesí pay and to ask them to take anywhere from 16 to 32 days off in 2002. Now, why would he do that? He would do that because we need this team of people to be successful, and we need our products so we can be successful, probably in 2003 when this all ramps up.

And this is a huge sacrifice for our employees, who have already suffered a lot. We actually gave them a small thank-you, which was stock options, at the same time.

What this represents to the company is a savings in 2002 of $5 million. If we do not do this, we would cut approximately sixty people, or 10 percent of our workforce.

And what was our response from our employees when we did this? Let me read two responses that Kurt Wozniak received after he told everyone they will have pay cuts and 16 to 32 days off next year.

"Hi, Kurt. Just a note of support, as I know it must have been a tough decision during this very difficult downturn. Since Iím a salesman, Iím one of the last ones that want a pay cut, but I believe your actions are right on the mark, given the circumstances. We need our A-team and new products ready to win, and weíll all profit in the upturn."

One other employee sent in this quick note:

"During the past several weeks, Iíve tried very hard to maintain a good attitude and keep both myself and my fellow co-workers motivated. Iíve been doing a fairly good job, with an exception here and there. Heck, Iím human. But now, reading your email, I try to find the bright spots: 1) We still have a job; and 2) the special stock options give a share in the long-term growth potential of Electroglas. Thanks for both number 1 and number 2.

"By the way, I have a couple quarters sitting here, so if you need a Coke and a smile, stop by. Janet."

We have an amazing company, and they get it. They are ready to go the distance.

And what I ask of you is please help us keep our employees employed, support your California-based employers, and give us the ability to manage our business the best way we know how. We need to be ready for the upturn.

Thank you.

COMMISSIONER DOMBROWSKI: Questions?

(No response)

COMMISSIONER DOMBROWSKI: Kevin Marks.

MR. MARKS: Mr. Chairman, at this time, I respectfully decline to offer any comments.

COMMISSIONER DOMBROWSKI: Okay. Willie Washington.

MR. WASHINGTON: Respectfully, I would also decline.

COMMISSIONER DOMBROWSKI: Robert Tollen.

MR. TOLLEN: I submitted a letter. Is that part of the record?

COMMISSIONER DOMBROWSKI: Yes, it is.

MR. TOLLEN: Yeah, I donít -- I was going to comment if I heard something, but I havenít heard something I want to respond to yet.

COMMISSIONER DOMBROWSKI: Okay. Steven Zeiff (sic).

MR. ZIEFF: Zieff.

COMMISSIONER DOMBROWSKI: Zieff? Iím sorry.

MR. ZIEFF: Thank you. My name is Steve Zieff. I represent the California Employment Lawyers Association and a number of other groups that represent employees and workers throughout the state.

I just wanted to make a couple of very brief comments concerning the issue of possible changes to the "Statement as to the Basis."

First of all, this may be an unpopular view, but I believe that the statement of the law that was set forth in Mr. Lockerís letter of May 30th of this past year is absolutely correct. I also request that the commissioners respectfully consider the letter from the Attorney Generalís Office, Mr. Siggins, in terms of what is an appropriate way to amend the "Statement as to the Basis." I believe some of the principles he set forth in there would be wise to keep in mind, because I think if the "Statement as to the Basis" is modified the way I understand that it might, I think it, with all due respect, would be subject to potential challenges down the road. And thatís, of course, for the courts to decide.

And I just want to reiterate a basic principle; that is, the Industrial Welfare Commissionís responsibility, as you know better -- you know very well, is to protect the health and welfare of the workers throughout the State of California. And weíre concerned with the proposed changes to the "Statement as to the Basis."

AB 60, Labor Code 1515, provided very specific standards as to what was required to meet the standards of the exemption. And one of those standards is that there be a monthly salary. And I believe the monthly salary is one of the ways in which California law differs and is, in some ways, more protective than federal law. But that is what the Legislature said. And I donít think a "Statement as to the Basis" can undo the basic statutory provision.

And so, I would really request that the Commission think twice before adopting a "Statement as to the Basis" that I believe would violate or possibly be inconsistent with the basic provisions of AB 60 and the actual terms of the orders as they now exist.

And finally, Iím not going to go through all the details of the law, but I think itís important to keep in mind that this -- the position as it currently exists, as it was interpreted, at least, in Mr. Lockerís letter, I donít think the punch line there is in any way unfair to employers. Itís there to protect employees. The basic idea is that if you want to claim the exemption -- and the exemptions are historically very narrowly construed -- if youíre going to claim an exemption, you must meet each and every one of the requisites of the exemption. And here, if youíre going to claim the exemption, you need to meet the monthly salary test.

And I think to undo the monthly salary test would be inconsistent with the statute, it would be inconsistent with the current regulations. And I think employers have options; employees donít have options. Employers have options. If they want to furlough people for part of a month, they can either pay the full salary for the month or they can -- or they can treat people as nonexempt employees. But they -- I guess the punch line here is they canít have their cake and eat it too and still be consistent with California law.

And I would just request that the Commission make sure that the action it takes is something thatís not going to open up a can of worms that is going to result in a lot of litigation down the road, that is going to create more confusion, perhaps, than is necessary.

So, those are my comments. And thank you for your time.

COMMISSIONER DOMBROWSKI: Any questions?

COMMISSIONER COLEMAN: No questions, just a comment, that the actions of the IWC donít affect at all the monthly salary standard in AB 60. Thatís not what weíre addressing. We fully agree that the Legislature has been very clear in the monthly salary standard. So weíre not -- weíre not touching that.

MR. ZIEFF: Yeah. Well, with all due respect -- and I actually just -- someone handed to me a moment ago the proposed "Statement as to the Basis," which I had not seen before -- my concern is this, that the -- to the extent thereís a suggestion in there that you can meet the monthly salary basis on a prorated basis, you know, on a prorated weekly basis, I think that does fly in the face of both the statute and the current regulations. And I think that would open up a can of worms.

COMMISSIONER COLEMAN: I think our position is that California has had this monthly salary standard for a long time, and that we have had a federal -- weíve utilized the federal standards for salary deductions, the rules under the federal statute, for salary deductions. And thatís been the rule of law in California for years and years. So those two have coexisted perfectly fine in the past. And thatís our -- that was our -- at least certainly my intention, was to continue to abide by that monthly standard set in the statute yet use -- harmonize with the federal statutes for purposes of salary deductions.

MR. ZIEFF: At the risk of seeming contentious, and I donít -- I truly donít mean to be contentious, and maybe this is going to end up at some point in the courts, where neither you nor I will decide it, but I think one difference is AB 60 codified -- you know, set forth a certain standard that has to be met. And I think what the interpretations were in 1997 and 1998, predating AB 60, vis-à-vis the salary issue, may not necessarily govern, in light of the legislative enactments. And maybe the proper place for employers and special interest groups to address their concerns is with the Legislature rather than here.

COMMISSIONER COLEMAN: Well, I think itís clear that there is confusion out there, and our goal is to clarify at least our intention.

MR. ZIEFF: My only -- you know -- is I -- I donít have a crystal ball, but I certainly think the change to the "Statement as to the Basis" could result, down the road, in litigation that might come out with a different result than perhaps certain special interest groups would desire.

COMMISSIONER DOMBROWSKI: Well, I have no doubt that thereís a good chance that there will be litigation. The only thing I would reiterate, which I said last month, is we were asked by the Labor Commissioner to provide some guidance. And I think, in my opinion, procedurally, we have found a way to try to do that. The Legislature is obviously free to do whatever it wishes, and the Legislature obviously supersedes us. But I would like to see this Commission at least take the opportunity to provide some guidance today for the Labor Commissioner in response to his request.

So --

MR. ZIEFF: And then, stepping back -- and I appreciate your comments -- itís easy for employer groups to get people down here. Working people have a harder time getting down here. But I suggest that --

COMMISSIONER DOMBROWSKI: No, I would disagree. In our experience, itís been the opposite.

MR. ZIEFF: Well, maybe I have a different view of things.

COMMISSIONER DOMBROWSKI: No. Weíve had this room a number of times, packed with employees.

COMMISSIONER BOSCO: Bigger rooms than this, actually.

COMMISSIONER DOMBROWSKI: Bigger rooms that this, actually, yeah.

MR. ZIEFF: My concern is this --

COMMISSIONER CREMINS: Depending on the issue.

MR. ZIEFF: -- you know, the bottom -- I donít see that thereís any major prejudice to employers. Employers are free to furlough people. Itís just that if theyíre going to do that, then, for that month, they would lose the exemption, in my view, you know, the way I would read the statute and law. And we may respectfully disagree.

COMMISSIONER DOMBROWSKI: Right. Okay.

MR. ZIEFF: But thank you for your time.

COMMISSIONER DOMBROWSKI: Thank you.

Shane Gusman.

MR. GUSMAN: Mr. Chairman, members of the Commission, Iíll be very brief. Shane Gusman, on behalf of the Teamsters, the Amalgamated Transit Union, the United Food and Commercial Workers, the Hotel Employees and Restaurant Employees, and the Machinists.

I think Mr. Zieff pretty much touched on a lot of things that I would comment on. The -- I would just respectfully urge you to reconsider. I know that youíve sort of got yourself going down this road of adopting these amendments to the "Statement of the Basis," but I think, in light of the Attorney Generalís opinion and the Leg Counsel opinion -- I believe that you have both -- that the action is -- or the process is flawed. The "Statement of the Basis" is a contemporaneous rationale for an action taken either to promulgate, amend, or rescind an order. The Wage Order 5 amendments that you are making -- and I think folks will speak to that, on those specifics -- have nothing to do with the particular language that was at issue right here.

And the only other comment that I would make is that a lot of the commissioners and -- well, a few of the commissioners and a lot of the employer groups that were here at the last meeting expressed an interest in having clarity in the law. And I certainly understand that, and I respect that, and I think the folks from my side want clarity as well. But when you try to create clarity through a process thatís flawed, I think you get the opposite, because what you get is litigation. And I donít think that gives anybody any clarity out there, from both the employer or the employee perspective.

So, youíre perfectly free to take whatever action you want to take, and as the Legislature is perfectly free to do whatever -- while weíve identified that both the Commission and the Legislature are free to do what they want, but we think that if you wanted clarity, we would come to the table and try to make something happen in the Legislature quickly.

Thank you.

COMMISSIONER DOMBROWSKI: Patti, youíre up.

MS. GATES: I think Peter Cooper just went to call Tom Rankin. Heís in San Francisco and on his way. But weíll go first.

My name is Patricia Gates, and Iím an attorney with the law offices of Van Bourg, Weinberg, Roger and Rosenfeld. And my colleague, Ted Franklin, is with me today to also speak to this issue. And when Peter Cooper arrives back, heíll probably join us at this table because he has another aspect of the same objections that weíd like to raise today. And Tom Rankin had asked me to put a card in for him, in the event he can get here, but he has another meeting right now.

What Iíd like to say -- and I appreciate Bridget Bane providing me with a proposed "Statement as to the Basis" for the amendment to Wage Order Number 5 regarding employees working in group homes. I served as legal counsel to the Service Employees International Union and followed this process very closely over the last year. In fact, I attended both of the wage board meetings as counsel to SEIU, and I watched a process unfold which was actually a process that was a very heartening one. I saw people from labor and management come together as a wage board and become citizens, much the way you see it happen when you attend a jury trial. People donít want to serve on juries, but they do it, and sometimes when they get there, they find out that they actually accomplish something very fundamental. This is what happened on that wage board.

As a matter of fact, another extraordinary thing happened -- and Peter, who was a member of that wage board, will speak to it -- SEIU opposed going to a wage board on Wage Order 5 for employees of group homes. I know because I wrote the opposition for them. Once this Commission decided to convene a wage board, SEIU not only attended, but they carefully selected people to serve on that wage board, people who could speak directly to the conditions of labor and the hours of work in this narrow industry. In fact, this industry represents only about 2,500 employees statewide. But one of those employees, a group home worker, actually served on the wage board.

Now, these people give their time to help this Commission sort out issues that are difficult issues, about how you balance the needs of an industry to provide a workforce and the needs of workers to be protected. This Commission -- this particular wage board did that in a stellar fashion. They sent to you, to you commissioners, a unanimous proposal. There was no opposition. They even discussed at the wage board meeting -- and itís a matter of public record -- I have a copy of the report -- they discussed what should go in the "Statement as to the Basis." And as a matter of fact, one item that they discussed that would make the regulation too lengthy, but they felt like it needed to be explained, was the item of sleep time. How do you deal with times when workers in group homes are sleeping? Do you deduct it? Do they get paid? What if they get interrupted by teenage girls waking up ten times during the night? These were actually tough issues that that wage board grappled with and solved. And they sent to you, in good faith, a proposal, a unanimous proposal.

And what youíre doing, what youíre proposing to do today, defiles that. Iím shocked, actually.

The labor members --

COMMISSIONER DOMBROWSKI: I take offense to that, actually. What we are doing is clarifying what the personal attendant exemption is by making a reference to previous IWC exemptions. Itís an interpretation.

MS. GATES: Beginning on Page 6 of this proposed "Statement as to the Basis," which I hope this Commission will not vote to ratify today, beginning on Page 6, the first paragraph, and continuing, Page 6, all of Page 7, until you get to the Section 11, "Meal Periods," has nothing to do with what that wage board considered.

COMMISSIONER DOMBROWSKI: I disagree.

MS. GATES: I was there.

COMMISSIONER DOMBROWSKI: I disagree. Itís our "Statement as to the" -- itís the Commissionís "Statement as to the Basis." Itís what we decided on.

MS. GATES: How will this Commission find people to serve on wage boards if this is the way this Commission intends to behave? This Commission needs wage boards to operate. Thatís how you regulate.

COMMISSIONER DOMBROWSKI: We are doing nothing to threaten the process of the wage boards.

MS. GATES: I respectfully --

COMMISSIONER DOMBROWSKI: To have that characterization -- I just will not sit here and listen to that, Patti.

MS. GATES: I respectfully disagree.

COMMISSIONER DOMBROWSKI: I disagree with you.

MS. GATES: I think that when people --

COMMISSIONER DOMBROWSKI: You know, Iíve seldom -- in the years Iíve chaired this, Iíve tried to be fair. But Iím getting a little tired of how our actions are being characterized. I disagree. You disagree.

COMMISSIONER BOSCO: Can I ask a question?

COMMISSIONER DOMBROWSKI: Sure.

COMMISSIONER BOSCO: Iíd like a legal answer if possible, because you are an attorney. Are you aware of any section of the law that limits the IWC in making its determination on issues to the exact recommendations of a wage board? And inversely, are you telling us that we must adopt word-for-word every recommendation as it comes out of our wage boards?

MS. GATES: I think thatís --

COMMISSIONER BOSCO: And if so, will you cite me the statute?

MS. GATES: I think thatís clearly answered by the Attorney Generalís opinion. The Attorney General explains exactly what a "Statement as to the Basis" is.

COMMISSIONER BOSCO: I didnít see anywhere in the Attorney Generalís opinion the answer to that question, or at least the Attorney General opining that the IWC is limited in its decisions and votes to the recommendation of wage boards. If it were, we wouldnít need to be sitting here. We would simply recognize that a wage board came out with a recommendation, and it would be law.

MS. GATES: I think this Commission is limited in some ways.

COMMISSIONER BOSCO: Not in --

MS. GATES: If a wage board brings you a two-thirds recommendation, the statuteís clear on what the limits of your authority are as to the amendment. And --

COMMISSIONER BOSCO: When -- again, are you saying that when a wage board gives us a recommendation by a two-thirds vote, or, in this case, a unanimous vote, we are limited in how we must proceed, and that we must adopt that recommendation word-for-word with no changes?

MS. STRICKLIN: If I could break in, the only way that you would not adopt that recommendation of a wage board thatís based on a two-thirds or more vote is if you find that thereís no substantial evidence for that recommendation.

MS. GATES: So, if they made a recommendation that their record, the record of their meetings, did not support, you could step in. But we need to look at the record of their meeting, and itís a matter of public record. John Wormuth was appointed as the tie-breaker because itís assumed that wage boards will be contentious, and someone is appointed. You appointed him to make that decision. He prepared a report that he submitted to you.

Now, this talk about salaried employees and exemptions did not appear anywhere, in any of these records that exist and were created by the people on the wage board. And that is my objection. I donít think you can make this change to the "Statement as to the Basis."

And I donít want to aggravate you further, but --

COMMISSIONER BOSCO: No, itís not aggravating me. I really did want to have your opinion on that.

MS. GATES: And Mr. Franklin has further, I think, to say, legally, on that subject.

MR. FRANKLIN: Yes. Iíd like to address that question of what is being amended here. And the amendment thatís being made right now is to the "Statement as to the Basis." As to a regulation thatís forwarded with a two-thirds recommendation, that must be adopted unless there is no substantial evidence on the record.

And in amending the "Statement as to the Basis," this Commission would be doing something different. It would be trying to explain that action that itís taking at this time. Thatís the purpose of a "Statement as to the Basis." And the Supreme Court of the state has spoken on that very issue. And it said itís an explanation of how and why the Industrial Welfare Commission did what it did; in other words, how and why the Industrial Welfare Commission adopted the specific changes that are being made to the wage order.

COMMISSIONER DOMBROWSKI: Exactly.

MR. FRANKLIN: And this doesnít contribute to that in any way at all.

COMMISSIONER DOMBROWSKI: I disagree.

MR. FRANKLIN: It is -- well, this is about -- this is nothing to do with the things that are being changed. It does not explain them.

COMMISSIONER DOMBROWSKI: We describe whatís being changed, and we clarify the intention of those changes by comparison to previous IWC actions.

MR. FRANKLIN: Well, I --

COMMISSIONER DOMBROWSKI: Thereís nothing wrong with that.

MR. FRANKLIN: With all respect, the court has clarified some of the reasons why a "Statement as to" --

COMMISSIONER DOMBROWSKI: This is exactly an explanation of how and why.

MR. FRANKLIN: How so?

COMMISSIONER DOMBROWSKI: By the -- by the comparison. Itís clear. I mean, I -- in my opinion, this is exactly what weíre doing.

MR. FRANKLIN: Itís on a subject that was not even taken up by the wage board. It is a subject that was not discussed by the wage board, about which there is no testimony in the record. And it addresses -- and clearly, given the history, the surrounding history of how this particular subject has come up -- and a court will look at that -- it is clear that the -- and I believe, Mr. Chairman, that you explained before, that this was in response to a request from the Labor Commissioner for clarification. Well, that has nothing to do with this wage board and --

COMMISSIONER DOMBROWSKI: But, procedurally --

MR. FRANKLIN: -- and the wage board process.

COMMISSIONER DOMBROWSKI: But, procedurally, with this wage order being open and the subject being exemptions, it provides us with the opportunity to provide the clarification. What the Labor Commissioner chooses to do after that is going to be the Labor Commissionerís choice. All I want to do is provide a way that follows procedure and gives him some clarification.

MR. FRANKLIN: Well, that is exactly a statement of what a "Statement as to the Basis" is not about. A "Statement as to the Basis" is to facilitate meaningful judicial review that -- this will not facilitate meaningful judicial review of the changes that have been made to the -- to the wage order. Thatís what weíre talking about.

It is supposed to also subject the agency and its processes and its decisions to more informed scrutiny by the Legislature, the regulated public, lobbying and public interest groups, the media, and the citizenry. Itís not going to accomplish that.

COMMISSIONER BOSCO: Could I ask a question?

COMMISSIONER DOMBROWSKI: Sure.

COMMISSIONER BOSCO: Again, from a legal standpoint, if the IWC ab initio, on its own, were to receive a wage board report as we have, and we were to, in addition to the issues discussed in the wage board report, we were to anticipate that a contentious issue would arise in relation to that very report, by virtue of legal opinion, letters, or other items floating around, are you saying that we would be prohibited from commenting on that in our -- in our "Statement as to the Basis," if we were to anticipate something on our own that related to that issue?

MS. GATES: I believe you do have the power, and that -- in fact, I brought with me the wage packet that your Commission prepared for this particular wage board, the wage board on group home employees under Wage Order 5. And how this Commission would accomplish that is by placing that language in the charge to the wage board.

And, in fact, you prepared -- this Commission prepared a five-page charge to the Wage Order 5 wage board, and, in fact, anticipated some areas that were going to be difficult. From the hearings that you had held, you knew that this issue of 24-hour coverage was a stickler and overtime after 40 hours in a workweek was a problem. So you instructed, in your charge -- as a matter of fact, what you said specifically is that -- and the answer is that thatís the way to do it, is to put it in the charge -- you said, "After studying the material sent to you, we request that you report your recommendation on the following matters." And then you laid out:

"Whether the partial current exemption from daily overtime found at 3(E) should be amended for the limited group of workers who provide 24-hour care to children under 18 years of age, such that an employee who works more than 40 hours or six days in any workweek will be paid weekly overtime, but that any work after --

-- "any only" -- I think thereís a typo here --

" -- such an employee has worked more than 54 hours in any workweek will the employee be paid daily overtime."

And then the charge says that they were only to make this inquiry for the narrow group of employees who were represented at full Commission meetings. And thatís how you would -- if you wanted to expand the charge, if you anticipated something that was going to be a problem, you could say, "We want you to investigate."

COMMISSIONER BOSCO: Okay. I understand that youíre outlining a way of us achieving that information. And I have no doubt that if we had specifically addressed this issue then, and the wage board answered it, we would have a different set of circumstances.

But my question was, are we prohibited at this point from, on our own, anticipating questions that might arise over this wage order and answering those questions in the "Statement as to the Basis"? What prohibits us from doing that?

MS. GATES: One thing that prohibits you is that there are no salaried people that do this kind of work. These are all hourly paid workers who get paid -- and you made a finding that they get paid very low hourly amounts. And you even said in your -- in the charge, you said that the Commission understood that peopleís wages for hourly work were between $7 and $10 an hour, and that the Commission would hope that the Legislature would do everything it could to expand these wages and make these wages more livable wages for this group of people. There are no salaried exempt people who do this work. So itís totally inappropriate to have a discussion of salaried exempt employees.

COMMISSIONER BOSCO: We have no way of knowing, first of all, whether there are no such people or whether in the future there will be such people. And it seems to me that this is a convenient way of expressing the IWCís intent on this and other wage board reports.

MR. FRANKLIN: Well, it may be convenient, but itís not proper. And the problem with its propriety is that itís not on the subject that the wage board was convened about. Itís tangential.

And simply to anticipate any kind of future legal challenge to any aspect of the entire wage order is not proper in terms of a "Statement as to the Basis." The "Statement as to the Basis" is supposed to be a contemporaneous record of why the decisions are being made now, the amendments are being made now through the wage order, why these amendments are being made, not with reference to just any old statement that happens to appear in the wage order.

COMMISSIONER COLEMAN: Let me just comment a little bit here. We actually have been asked on three different instances, and twice by labor, to clarify an issue that was unclear in the Legislature, to clarify an issue through the "Statement to the Basis." And actually, when we did this, we were never challenged by labor to -- that we couldnít -- that the "Statement to the Basis" couldnít be used in this way.

Once was in the -- you may recall, for those that have played this game with us over the years -- once was the question on the seventh day overtime. The Legislature requested premium overtime for the seventh day of work, and, in fact, it was concluded by folks on both sides of the aisle that there was an omission for the word "consecutive." And so, in our -- in our "Statement to the Basis," we clarified what that meant. Now, that didnít come up in a wage board or a wage order. It came up during the course of hearings, and we clarified to the "Statement to the Basis"

-- let me finish.

There are two other examples. One was a question about what "overtime hours" meant, whether -- in the collective bargaining exemption. And again, during hearings, not related in a wage board, not during a wage board testimony, we were asked to clarify what "hours" meant, and we did in our "Statement to the Basis" for the 2000 wage orders.

And then a third time, when the question about individual liability for penalties, the question was whether an employee who willfully or not willfully violated the calculation of overtime, and it was felt by testimony that certainly we wouldnít punish an employee that didnít willfully do that. And so, we talked about that being our intent during the "Statement to the Basis."

So, we have three examples where the IWC clarified its intent. There was some confusion in the Legislature, and we clarified, using the "Statement as to the Basis." And thatís, in my opinion, what weíre doing here. So I donít see any -- I actually see precedent for us to be able to do that here.

MS. GATES: I understand what youíre saying, and your pointís well taken. Those clarifications that this Commission made to the "Statement as to the Basis" were clarifications that were made on the massive amendments that were made implementing AB 60. And at that time, you had a different kind of power. You had a power that expired on July 1st, 2000. And that was a power to proceed to regulate without the use of wage boards, for the purpose of implementing AB 60 only. And that power -- at Labor Code Section 515(A), it says, the last sentence, "Any hearing conducted pursuant to this subdivision shall be concluded no later than July 1st, 2000." So, that "Statement as to the Basis" and those clarifications contained therein were all done under that authority.

COMMISSIONER COLEMAN: But I -- and I think Doug asked this question too -- I canít find anywhere, either in legal opinions or in the charter of the IWC where it describes what a "Statement to the Basis" is, where it specifically precludes us from clarifying. And if you can cite somewhere, then, you know, weíd be happy to hear that.

I understand from the Attorney Generalís letter what a "Statement to the Basis" must contain. But nowhere does it tell us what it cannot contain.

MS. STRICKLIN: If I could jump in, just a second. I think that thereís a little confusion here. Itís not just -- when weíre dealing with the regular procedures in the Labor Code for promulgating a regulation or amending a regulation, the record that that regulation and the "Statement as to the Basis" is going to be based on is not just the wage board proceedings, but itís also the beginning of the primary investigation, all the wage board proceedings, and the public hearings afterwards. And what the "Statement as to the Basis" is supposed to be based on is what is contained in those three types of proceedings, nothing else.

So, if thereís nothing in that record relating to the amendments or to the wage order that youíre promulgating, then it shouldnít be in the "Statement as to the Basis."

MS. GATES: So itís your opinion that the items starting on Page 6, 7, and 8 shouldnít be in the "Statement as to the Basis"?

MS. STRICKLIN: As Iíve previously advised the Commission before, I believe that they have not followed proper procedures in adding that additional language. I donít think that thereís anything in the record with regard to these amendments that deals with salaried exempt employees. And therefore, it should not be included in the "Statement as to the Basis."

MS. GATES: Thank you.

COMMISSIONER CREMINS: This may be a naïve question. Is there a mechanism that exists now to offer a clarifying statement on general statute generally, something that supersedes more than one wage order?

MS. STRICKLIN: Thereís nothing that precludes the Commission from voting to send a letter to the Labor Commissioner with regard to what its intent was with regard to those salaried exempt employees. But it should not be included in the "Statement as to the Basis" that deals with an entirely different subject area.

COMMISSIONER DOMBROWSKI: Mr. Cooper or Mr. Rankin?

MR. COOPER: Peter Cooper, California Labor Federation. Good morning, Chairman and commissioners.

Before I begin, I would like -- what Iíd like to do is to read into the record a letter prepared by Allen Davenport, who is the director of governmental affairs for SEIU.

But before I begin, I would like to mention also that as an alternate for our Wage Board Number 5, I am -- I feel that due process was not adhered to. And I do not recall there ever -- there being mention of the impact of the "Statement as to the Basis" in our discussions in Wage Board Number 5 in the two days that we spent in Sacramento discussing this. And I feel that it -- and I believe that itís really a lack of respect that is shown by the Commission for the people that have been selected for the wage board, by not listening to what theyíve said during those two days and by going beyond what was discussed in those two days. So, thatís my personal comment.

And Iíll go ahead and read what Mr. Davenport has presented to you. I will also give you a copy of his letter, in case you donít have it.

COMMISSIONER DOMBROWSKI: We have those?

COMMISSIONER BOSCO: We do have it.

COMMISSIONER ROSE: We have it.

MR. COOPER: You have those letters.

COMMISSIONER BOSCO: I donít think you need to read it.

MR. COOPER: I would like to read portions of it into the record.

"Dear Ms. Bane: Please accept this letter [by Allen Davenport]. This is a formal protest on behalf of the labor members of the wage board appointed by the IWC to look into the hours and working conditions for 24-hour care group homes for children, as regulated by Wage Order Number 5.

"We strongly object to the Commissionís majority 4-1 vote to amend the ĎStatement as to the Basisí explaining the narrow amendments to Wage Order 5 proposed by the wage board to include unrelated wage and hour policy statements.

"I am hopeful that after reviewing the opinions I have seen from the Attorney General and the Legislative Counsel that the IWC will reverse this action at its December 7th, 2001, meeting. On behalf of the labor members of the wage board, I urge the Commission to do so."

And now let me just skip to the very end and read the last paragraph, and you can read the rest of it on your own.

Last paragraph:

"The Commission majority proposes to violate a trust I had in participating in the work of the Commission. Under these circumstances, I would like to review the current proposed ĎStatement as to the Basisí before it is published to ensure that it explains only the amendments in Wage Order 5 that we submitted and includes nothing else unrelated to the amendments."

And just a note: "Please forward the proposed ĎStatement as to the Basisí to Patti Gates, my attorney."

I would like to turn it over to Tom Rankin now for further comment.

MR. RANKIN: Thanks. Sorry I was late, so I missed a lot of discussion, but I think you understand our position, and youíve received a letter from us yesterday on this issue.

This is an issue thatís properly dealt with by the Legislature. In the Legislature there is a bill pending, AB 1677, to deal with this issue. And I would probably suggest to you that you leave this up to the Legislature and donít act in excess of your authority. I think the consequences of your doing that have been made clear, both in our letter and in Senator Burtonís letter.

COMMISSIONER DOMBROWSKI: Any questions?

COMMISSIONER CREMINS: A question, maybe a comment. But I think our -- correct me if Iím wrong, Mr. Chair -- I think our intent at the last meeting was to offer some clarification on a contentious issue. And I think we took somewhat of a contentious issue and took somewhat of an action that was somewhat out of the ordinary and made it -- maybe created more controversy than needed. And I would hope we would -- it sounds like weíre going to get a lawsuit here if we take action today.

I wonder if we could consider some way -- maybe from Marguerite or someone -- to take another route that would be short of a lawsuit and offer some clarification. And I donít know if a vehicle exists or whether anyoneís even had time to think about that. But the fear is, if we take action today, I think weíre going to invite some civil lawsuit, and not -- in an attempt to clarify an issue, weíre probably going to cloud it more, up in the courts and years and years of litigation with no resolution to a really contentious issue.

COMMISSIONER DOMBROWSKI: I think we have litigation no matter what we do. If we donít take any action --

COMMISSIONER CREMINS: Okay.

COMMISSIONER DOMBROWSKI: If we donít take any action today, the litigationís going to be against the employer community. I -- Tom, you werenít here earlier -- I said -- clearly recognized the authority of the Legislature and the Legislatureís ability always supersedes us. And I would assume that legislative action will be taking place next year.

But I really -- at least from my constituencyís viewpoint, want to see us take some action today. Iím willing to take the risk on the litigation and then try to move forward to get this off the table.

MS. STRICKLIN: I would offer the Commission this: you have a "Statement as to the Basis" with regard to amendments that have already been adopted. You also have language included in that "Statement as to the Basis" that deals with exempt employees. I think the "Statement as to the Basis" with regards to those amendments needs to be adopted so that we can move forward. The question is whether that additional language should be included in that "Statement as to the Basis."

If you have some message that youíd like to send to the commissioner, perhaps you could take that language and vote to send it -- I believe the next agenda item relates to the letter that was issued on May 30th -- and take that language, formulate that in the form of a letter to send to the commissioner, and deal with it that way, rather than hold up the "Statement as to the Basis" with regard to Wage Order 5.

COMMISSIONER ROSE: Mr. Chair?

COMMISSIONER DOMBROWSKI: Harold.

COMMISSIONER ROSE: Is there a way, on the "Statement as to the Basis," to amend?

MS. STRICKLIN: Iím sorry.

COMMISSIONER ROSE: Is there -- is it possible to amend, to take out --

MS. STRICKLIN: What you have there is just a draft, and it hasnít been concurred in by the Commission yet. So you can deal -- you can take that language, you can instruct that other language be included or language be excluded. Itís up to the Commission.

COMMISSIONER ROSE: I would recommend, so we donít put off any further the "Statement as to the Basis" for the home health care, that we eliminate the -- is it all of Page 6 or just the -- starting with the first full paragraph?

MS. STRICKLIN: If youíre -- I believe it starts at Page 6, and I can tell you which paragraph.

COMMISSIONER ROSE: Itís the first full paragraph?

MS. STRICKLIN: Yes, and ending --

COMMISSIONER ROSE: Beginning with the partial exemption?

MS. STRICKLIN: Yes.

MS. GATES: If I might -- if I might interject --

COMMISSIONER DOMBROWSKI: No. Please, please. No.

Marguerite?

MS. STRICKLIN: Oh.

MS. GATES: The sentence in the last paragraph on Page 6 --

COMMISSIONER ROSE: "In keeping with the" -- yeah.

MS. STRICKLIN: "In keeping," yeah.

COMMISSIONER ROSE: Starting with, "In keeping with this objective," through Page 6, all of Page 7, up to Section 11, "Meal Periods." I would move that that be removed from the "Statement as to the Basis."
COMMISSIONER BOSCO: Could you state again what youíre -- what section youíre talking about?

COMMISSIONER CREMINS: Page 6, Line 2.

COMMISSIONER BOSCO: "In keeping"?

COMMISSIONER ROSE: Right, "In keeping."

COMMISSIONER BOSCO: So from there to where?

COMMISSIONER ROSE: From there to, on Page 8, stopping with Section 3, and then leaving in Section 11, "Meal Periods," and Section 12, "Rest Periods."

COMMISSIONER DOMBROWSKI: Is that a motion?

COMMISSIONER ROSE: Thatís a motion. Iím presenting that as a motion.

COMMISSIONER DOMBROWSKI: Okay. Do I have a second?

COMMISSIONER CREMINS: Second.

COMMISSIONER DOMBROWSKI: Okay. Want to call the roll?

COMMISSIONER BOSCO: May we discuss it first?

COMMISSIONER DOMBROWSKI: Oh, Iím sorry. Iím sorry.

COMMISSIONER CREMINS: I think we have comments also on the amendment.

COMMISSIONER BOSCO: Well, I donít know which should come first, our comments or others, but my way of looking at this is maybe in a broader context. And Iíve read the Attorney Generalís opinion and the Legislative Counselís opinion, various letters. Weíve gotten dozens of letters on this subject. And it seems like every meeting that weíve had for the last few months, this issue has come up, whether itís -- mostly in general public discussion.

And I think it can be incorporated under that part of the Attorney Generalís opinion that includes our investigation, because our investigation can include our own investigation. I mean, thatís what weíre sitting on this Commission to do, is to make up our minds on things and to listen to testimony and use our own investigatory powers.

And so, Iím going to err in favor of keeping this language in the "Statement of the Basis," with the very real possibility that at some point it may be challenged. I think if it is challenged, it isnít likely to undermine everything else in the order that weíre going to put out. If a judge, for instance, looks at this and says it doesnít belong in the "Statement of the Basis," then, you know, a judge can just decide it didnít belong there. And I have no doubt that the balance of everything else that we decide, including the balance of the "Statement of the Basis," would stand. Itís extremely unlikely, in my opinion, that because some wording in the "Statement of the Basis" may, in effect, get thrown out by a court, that it would invalidate the entire action that we take.

So, Iím going to err in that way, although I think, after this, we should consider taking our counselís opinion that we send a separate letter with this language in it, so that in those two ways, we would make clear what our intention is.

COMMISSIONER DOMBROWSKI: Okay. Any other comments?

COMMISSIONER CREMINS: I guess I would ask for a comment. Is there a problem with clarifying it only one way? If we have two vehicles available to us, why -- why utilize both and jeopardize one of the wage orders or invite litigation? If we can -- if a clarification letter would suffice, and if itís truly our intent here, by what we did at the last meeting, to just offer clarification as opposed to a circuitous route around changing statute.

COMMISSIONER DOMBROWSKI: I would answer that I disagree. I mean -- well, I take the position what weíre doing is proper.

COMMISSIONER CREMINS: Right. No, Iím not arguing whether itís proper.

COMMISSIONER DOMBROWSKI: I just want to -- and thatís why weíre doing it.

COMMISSIONER CREMINS: Iím looking for an easier way to do it. Thatís --

COMMISSIONER DOMBROWSKI: I mean, whatís clear is that we are getting multiple opinions about what our authority is. And frankly, Iím having trouble sorting it out. And Iím just -- and I just think we -- I think we can go this way. Thatís why -- I want to -- I have no problem with us sending a separate letter, but Iím not sure what that really gets us. So --

COMMISSIONER CREMINS: Is one more advantageous than another?

COMMISSIONER DOMBROWSKI: I donít know.

COMMISSIONER ROSE: One in closing.

COMMISSIONER DOMBROWSKI: Harold.

COMMISSIONER ROSE: Yes. I just think that it -- the people that were on the wage board and an employee that actually did the job went out, did what we asked them to do, they came back. And why jeopardize it in any way? Just make it clean-cut and present the "Statement of the Basis" and vote on it.

COMMISSIONER COLEMAN: I would agree with Harold that, certainly, the wage boards have done a great job. And the first five pages does a very good job of taking into account what theyíve done. And I feel that weíre honoring them by including everything that theyíve asked us to include.

And I would agree with Bill that we are statutorily empowered to explain in more clarity what our thoughts are on the exemption issue. And in keeping with that, I think itís proper to include that in the "Statement to the Basis."

COMMISSIONER DOMBROWSKI: Any other comments, questions?

COMMISSIONER CREMINS: I question to you. Can we get some comments from the public still?

COMMISSIONER DOMBROWSKI: I thought we were done taking comments from the public.

MR. RANKIN: Well, I have a question I just want to ask. I would assume that, given the Attorney Generalís opinion, you would not available to you the services of the Attorney General in the event a lawsuit was filed.

MS. STRICKLIN: Thatís something that would be determined at the time a lawsuit was filed. A decision has not been made on that.

COMMISSIONER DOMBROWSKI: Let -- I mean, let me again make it -- I want to make it clear that -- that I agree with what the Attorney Generalís opinion says. What I disagree with is the substance, and I -- itís basically -- I believe that what weíre doing is related. People can disagree, and thatís where weíre at.

COMMISSIONER BOSCO: Are you suggesting weíll have to go into court in forma pauperis?

(Laughter)

MR. RANKIN: Well, Senator Burton has also raised that question. Iíd suggest you might listen to him.

COMMISSIONER BOSCO: Oh, the number of threats weíve gotten on defunding, I -- I donít know whether my per diem mileage will be paid getting here, or parking, maybe even the bridge fare will be taken away.

COMMISSIONER DOMBROWSKI: Any other commissioners? Comments, questions?

We have a motion of deleting the previously stated sections.

Bridget, call the roll.

MS. BANE: Mr. Dombrowski.

COMMISSIONER DOMBROWSKI: No.

MS. BANE: Ms. Coleman.

COMMISSIONER COLEMAN: No.

MS. BANE: Mr. Bosco.

COMMISSIONER BOSCO: No.

MS. BANE: Mr. Cremins.

COMMISSIONER CREMINS: Aye.

MS. BANE: Mr. Rose.

COMMISSIONER ROSE: Aye.

MS. BANE: The motion is defeated, three to two.

COMMISSIONER DOMBROWSKI: Any other comments or questions from the commissioners before we vote to concur on the "Statement as to the Basis"?

COMMISSIONER BOSCO: I have one comment, and that is to commend the wage board. I think everyone here is unanimous in thinking that theyíve done a superb job. And the fact that they issued their report unanimously, even though, ex post facto, it might not be -- I think we all owe them a debt of gratitude.

COMMISSIONER DOMBROWSKI: Okay. Could I have a motion for adoption of the "Statement"?

COMMISSIONER BOSCO: I move we adopt the --

COMMISSIONER DOMBROWSKI: Iím sorry. Am I phrasing that right? Itís "adopting"?

MS. BANE: Yes. Itís to concur in the adoption of the "Statement as to the Basis."

COMMISSIONER DOMBROWSKI: Right.

COMMISSIONER BOSCO: I move that we concur in the adoption of the "Statement as to the Basis" on Wage Order Number 5.

COMMISSIONER COLEMAN: Second.

COMMISSIONER DOMBROWSKI: Call the roll.

MS. BANE: Mr. Dombrowski.

COMMISSIONER DOMBROWSKI: Aye.

MS. BANE: Ms. Coleman.

COMMISSIONER COLEMAN: Aye.

MS. BANE: Mr. Bosco.

COMMISSIONER BOSCO: Aye.

MS. BANE: Mr. Cremins.

COMMISSIONER CREMINS: No.

MS. BANE: Mr. Rose.

COMMISSIONER ROSE: No.

MS. BANE: The motion to concur in the adoption of the "Statement as to the Basis" as it was presented to you today as a Commission passed, three to two.

COMMISSIONER DOMBROWSKI: The fourth item on the agenda -- Bridget, could you --

MS. BANE: This fourth item was related to the public hearing, which you passed at the beginning of todayís meeting. There was a public hearing, and is a public hearing, on the agenda schedule and styled as the investigation into the -- regarding the effect of the May 30th, 2001, opinion letter written by Miles Locker. And Item Number 4 in the public meeting would then relate to that. But the public hearing has not been held at this time.

COMMISSIONER DOMBROWSKI: Can we skip over that agenda item?

MS. BANE: Yes, I think that, as the chair, you can -- you can defer that and move on to other business.

COMMISSIONER DOMBROWSKI: Do we have any new business?

Iím sorry.

COMMISSIONER ROSE: I believe thereís a letter. Does something have to be done about that, from the Golden Gate Restaurant Association, at least acknowledge that we have it?

MS. BANE: Thatís correct. A letter was distributed.

COMMISSIONER ROSE: Thatís asking to postpone the minimum wage increase January 1st, 2001 (sic)?

MS. BANE: I believe thatís the substance of it. And I believe there is someone here who wishes to speak to that.

Mr. Chairman, do you wish to proceed with that at this time? This is -- Ms. Breslin is here from -- sheís the executive director of the Golden Gate Restaurant Association.

COMMISSIONER DOMBROWSKI: Go ahead.

MS. BRESLIN: Thank you.

Good morning, commissioners. I apologize for getting the letter to you just this morning, but thank you for the opportunity for me to come here and request an emergency solution and a long-term solution to help the restaurant industry at this time.

Times have changed since the Commissionís and Governorís decision to raise the minimum wage over two years. Every industry has felt the effects. Our industry is no different, and the effects have been devastating for us here in San Francisco. In a recent survey that we distributed to our members, we found that their sales fell anywhere between 15 and 50 percent, just over the last month, right -- the month following the September 11th tragedy. The result has been, initially, layoffs, reduced shifts, and now some businesses have actually declared bankruptcy and closed.

Iím requesting at this time, if itís at all possible, for you to find some avenue to postpone the minimum wage increase for our industry, if possible.

Secondly, in a long-term solution, Iíd like you to consider again -- and I know I have been here before -- but to recognized declared tips towards any future minimum wage increase. The restaurant industry has been struggling to overcome a number of economic hardships, and the least of which is the inequitable wage structure which -- which is mandated and compounded by every minimum wage increase. Employees who receive tips are well compensated. And according to a survey that we did, again among our member restaurants, tipped employees earn an average of over $23 an hour. And yet, every minimum wage increase has gone to this well compensated class of employees and limits the pool of financial resources for employers to compensate non-tipped employees. This pool is very, very slim right now, as Iíve just said previously.

And worst of all is that the employees themselves are so well aware of the disparity in income between the non-tipped employees and the tipped employees. Historically, the state-mandated wage increases have negatively affected employee morale in the restaurants when tipped employees continue to receive an automatic minimum wage increase from funds that could be allocated to their non-tipped colleagues, such as dishwashers and line cooks. The blanket minimum wage increases in our industry do a real disservice to our non-tipped employees. And the unfavorable employee morale consequences are immense.

Recognizing declared tips as part of an employeeís compensation is consistent with the goal of the minimum wage, to ensure that employees receive living wages. By recognizing declared tips, employers will have more financial resources to increase the wages for those who do not get tips.

Again, I -- please, I urge you, I ask you -- find any way to protect the health of this industry. Here in San Francisco, the industry is hurting very, very badly. And Iím sure itís the same throughout the state. Please find a way to postpone the minimum wage increase and consider recognition of declared tips in any way.

COMMISSIONER DOMBROWSKI: Iím sorry. Are you --

MS. BRESLIN: Yes. No, no. Thank you. Iíd like to hear what you have to say.

COMMISSIONER DOMBROWSKI: Marguerite, the procedural --

MS. STRICKLIN: Procedurally, the Commission is required to do a minimum wage review every two years. But this particular minimum wage was promulgated a year ago, and thereís nothing to stop it going into effect, without going through the entire minimum wage process, review process. It will become effective January 1st.

MS. BRESLIN: And is there any way to do some emergency review of the minimum wage issue at all?

MS. STRICKLIN: Not that Iím aware of, no.

MS. BRESLIN: Is there some way that a recommendation can come forth from this Commission towards the Governor? Could he --

MS. STRICKLIN: No. This is a regulation of the IWC, and the IWC has its procedures in the Labor Code. And the Governor, unless by some executive order he could do that, I donít imagine heíd do that.

COMMISSIONER CREMINS: Is there an anticipation of when weíre going to begin our two-year review?

MS. STRICKLIN: Yes.

COMMISSIONER CREMINS: Is there an anticipated date?

MS. STRICKLIN: I think we have a petition for that as well.

MS. BANE: We do. We have a petition that was submitted by a letter from Mr. Rankin on November the 20th. And the petition -- the time during which you can consider what to do with that petition is a 120-day period. But at any time during that 120 days, the Commission can decide to proceed.

COMMISSIONER BOSCO: Can I make a comment?

First of all, to answer your other question about the Governor, the Legislature would clearly have the ability to make changes in our orders. So, that would be one avenue that you might pursue.

But with all due respect, the -- and I appreciate your testimony -- and all of us dislike the economic times that weíre in -- but with all due respect, I recall hearings that we had during the very best of times, when the restaurant association was against any increase in the minimum wage. So, I think you might be in a stronger position in the future to take a more reasonable position on the minimum wage as we consider it, because one thing for sure is that your position has been consistent all the way through, that you donít want any increases in the minimum wage, but I think that gives you a little less credibility when you come in, such as you are today, in emergency circumstances.

MS. BRESLIN: I appreciate those comments very much because I myself was here testifying, and I probably did not make myself clear. We do not oppose a minimum wage increase. We oppose a minimum wage increase for a certain class of employees who are receiving tips. Our non-tipped employees are, for the most part -- and I donít know about somebody -- I donít know about somebody -- but are above the minimum wage, our non-tipped employees are. But they are not earning as much as the tipped employees. They may be in the $8, $9, $10, $11, $12 range. And that -- itís that class of employees which I meant to bring forth last time I testified. And I apologize if I didnít make that clear then. But itís that class of employees that is causing the inequitable wage structure in our industry.

COMMISSIONER BOSCO: I wasnít speaking of your testimony in particular.

MS. BRESLIN: No, no.

COMMISSIONER BOSCO: I was speaking to many people that testified that really opposed the minimum wage, period, in that industry.

MS. BRESLIN: And when I come forward, I will make it clear. Iím not opposed to a minimum wage increase, just this particular class of employees.

Thank you.

MR. RANKIN: Mr. Chair?

COMMISSIONER DOMBROWSKI: Mr. Rankin.

MR. RANKIN: Tom Rankin, California Labor Federation.

I donít think any of the people here were on the IWC at the time, but this issue has come up time and time again. Itís been litigated. The Supreme Court has issued a decision saying you cannot offset tips against the minimum wage. So I donít understand why the restaurant folks are here. There again, theyíre in the wrong venue.

MS. BRESLIN: Is it possible to create an exemption for a class of employees from a minimum wage, not to offset tips, but perhaps to keep the minimum wage as it is for any future minimum wage increases for that class of employees?

MS. STRICKLIN: I donít believe so. Itís a general minimum wage order. And as Mr. Rankin said, that tip credit has already been decided by the Cal Supreme Court. Iím not sure how you would go about doing that, going forward into the future.

MS. BRESLIN: I am not -- the Supreme Court ruling that the gentleman just referred to, I would need to take a look at it, because this has come up in the Legislature too, and we have received no indication that it was impossible, from individuals there.

MS. STRICKLIN: Well, that might be something for the Legislature to look at. But this Commission, I donít think, has any way of doing that.

MS. BRESLIN: Well, I had to come forward to let you know our state. I need you to take a look at that and recognize that in all your future rulings.

Thank you.

COMMISSIONER DOMBROWSKI: Thank you.

I want to go back to Item Number 4 on the meeting agenda.

MR. COOPER: Excuse me, Mr. Chair. Will there be time for further public comments on this issue?

COMMISSIONER DOMBROWSKI: Oh, Iím sorry. If you want.

MR. COOPER: Yeah. Thank you.

COMMISSIONER DOMBROWSKI: Weíre not doing anything.

MR. COOPER: Right, right. I just wanted to address it briefly.

Peter Cooper, Labor Federation.

I donít think that thereís any reason why the restaurant association should get any special treatment on this issue. In fact, we recently, as you had stated before, submitted a petition to reconsider the adequacy of the minimum wage, and we believe it is certainly not adequate and it is high time that a wage board be formed, because, as you know, thereís a lengthy process to discuss this issue.

And I just wanted to briefly say that if you look at our letter, there are a number of ways that we look at the minimum wage. And the two-step increase that did occur, the $1.00 increase, provided a significant improvement for the standard of living of a number of Californians. However, it does remain a poverty wage by many measures. And you can see that in our letter.

And eventually, we believe an increase in the minimum wage will create a significant economic stimulus to the economy, which would be particularly good at this point in time, and therefore encourage you to form a wage board as soon as you can.

Thank you.

COMMISSIONER DOMBROWSKI: Thank you.

Any other comments?

All right. I want to go back to Item Number 4 on the meeting agenda. We had a discussion about the other alternative, sending the letter from the Commission to the Labor Commissioner outlining our interpretation. Counsel advises me that it would be best if we take a vote on that.

And basically, I need a motion directing the staff to prepare such a letter for our signature.

COMMISSIONER COLEMAN: So moved.

COMMISSIONER DOMBROWSKI: Do I have a second?

COMMISSIONER BOSCO: Iíll second it.

Could --

COMMISSIONER DOMBROWSKI: Discussion?

COMMISSIONER BOSCO: Let me just ask, is that -- would the letter reflect the verbiage in Page 6 through 8 of our --

COMMISSIONER DOMBROWSKI: Exactly.

COMMISSIONER BOSCO: -- now-adopted "Statement as to the Basis" on Wage Order 5?

COMMISSIONER DOMBROWSKI: Correct.

COMMISSIONER CREMINS: Is there -- am I out of order? Is there a way for the Commission to have some input in that letter?

COMMISSIONER DOMBROWSKI: Sure.

COMMISSIONER CREMINS: Some discussion afterwards, maybe?

COMMISSIONER DOMBROWSKI: Weíre directing them to draft it.

COMMISSIONER CREMINS: Are we off-base here mandating that a letter be written without knowing the content of it?

MS. BANE: What happened with the language that was adopted at the last meeting is that the language was then given to counsel, and she was directed to include the language in the "Statement as to the Basis." I would imagine that you could do the same thing with staff if you chose to ask that the same language be included in a letter drafted to the Labor Commissioner, and subject to review before any -- before itís sent out, certainly, and your input.

COMMISSIONER CREMINS: What about veto power if we donít agree with the content?

MS. BANE: I think you can style the motion just about any way you want it.

COMMISSIONER COLEMAN: And to clarify my motion, I was referring to the sections -- Page 6 and on.

COMMISSIONER CREMINS: Okay.

COMMISSIONER BOSCO: So, as I understand it, weíre going to ask that a letter be drawn with this material in it. And then what? Come back to the Commission for us to vote on whether to send it or not? Is that how we would do this? Or should we just go ahead and authorize this language to be incorporated in a letter and send it?

Iím going to make a substitute motion, that the staff prepare a letter that contains as its substance all of the items on Page 6, 7, and 8, starting with, on Page 6, "In keeping with this objective," in Sentence Two, and ending on Page 8 with the words "Section 3," referring to the "Statement as to the Basis" for amendments to Wage Order Number 5, which weíve adopted, and that the staff prepare a letter including that language and send it to the Labor Commissioner --

MS. BANE: Correct.

COMMISSIONER BOSCO: -- with the signature of our chairman, reflecting the views on this subject of the IWC.

MS. BANE: Thatís a substitute motion?

COMMISSIONER BOSCO: Yes.

MS. BANE: Is there a --

COMMISSIONER DOMBROWSKI: Iíll second that.

Any comments?

COMMISSIONER CREMINS: So, again, to clarify, we are now mandating the content of the letter as outlined in the wage order, Page 6 and 7. So thatís -- that is our interpretation to the Labor Commissioner.

COMMISSIONER DOMBROWSKI: Correct.

COMMISSIONER ROSE: And -- excuse me.

COMMISSIONER DOMBROWSKI: Sure.

COMMISSIONER ROSE: And that means that that refers to all wage orders?

COMMISSIONER DOMBROWSKI: Marguerite?

MS. STRICKLIN: My understanding, this is related to the promulgation of the AB 60 amendments, so I assume it would apply to all wage orders, if thatís what --

COMMISSIONER CREMINS: Before -- did we not take a motion at the last meeting to open up all wage orders to this interpretation?

COMMISSIONER DOMBROWSKI: I think thereís going to be some discussion on that right after this.

MS. STRICKLIN: I think what the motion was at the last meeting was to have an investigative hearing to determine which industries or occupations this affected, and then to make a decision as to whether or not a wage board would be called, and whatever orders the Commission decided.

COMMISSIONER BOSCO: I think weíve been asked by various parties to express ourselves on this issue, and this letter would do that. Itís -- the sections that I referred to are very well written by our counsel and staff, and I see no reason not to just express ourselves by using that language.

COMMISSIONER DOMBROWSKI: Any other comments?

(No response)

COMMISSIONER DOMBROWSKI: Bridget, do you want to call the roll?

MS. BANE: Mr. Dombrowski.

COMMISSIONER DOMBROWSKI: Aye.

MS. BANE: Ms. Coleman.

COMMISSIONER COLEMAN: Aye.

MS. BANE: Mr. Bosco.

COMMISSIONER BOSCO: Aye.

MS. BANE: Mr. Cremins.

COMMISSIONER CREMINS: No.

MS. BANE: Mr. Rose.

COMMISSIONER ROSE: No.

MS. BANE: The motion for the letter has passed, three to two.

And let me assure you that I would want every member of the Commission to look at the letter. It wonít go out, certainly, from me; itís going to go out by the chairman. But you can take it from me that this letter wonít go anywhere without you seeing it.

COMMISSIONER CREMINS: Thank you.

COMMISSIONER DOMBROWSKI: Commissioner Bosco?

COMMISSIONER BOSCO: Mr. Chairman, I wanted to address an action that we took at the last meeting, because I really donít think itís necessary, and nor do I think our Commission should go any further, really, with this issue. I think by doing another investigation, by having to hold one or two yearsí worth of wage boards on every single wage order that weíve passed or prior IWCís have passed, it opens up a scope of work that I really donít think that we need to take on, having expressed ourselves in a different way on this.

And Iím going to suggest -- actually, Marguerite, can you tell me, did we have any official action here that we would need a motion to rescind, or can I just make an informal suggestion that we not proceed with these investigations?

MS. STRICKLIN: The only thing that was on the agenda was the public hearing. And I think, if I recall your comments at the last meeting, it was to determine whether or not the Commission would move forward after the investigation. So, I think you can make a suggestion that the Commission not move forward.

COMMISSIONER BOSCO: All right. Iím going to make a motion that the Commission not move forward with a further investigation at this time on the effect of the May 30th, 2001, opinion letter written by Miles Locker of the Department of Labor Standards Enforcement.

COMMISSIONER DOMBROWSKI: Any discussion, comments?

(No response)

COMMISSIONER DOMBROWSKI: Is there a second?

COMMISSIONER COLEMAN: Second.

COMMISSIONER DOMBROWSKI: I guess that should go first. Any discussion or comments now?

(No response)

COMMISSIONER DOMBROWSKI: Roll.

MS. BANE: Mr. Dombrowski.

COMMISSIONER DOMBROWSKI: Aye.

MS. BANE: Ms. Coleman.

COMMISSIONER COLEMAN: Aye.

MS. BANE: Mr. Bosco.

COMMISSIONER BOSCO: Aye.

MS. BANE: Mr. Cremins.

COMMISSIONER CREMINS: Aye.

MS. BANE: Mr. Rose.

COMMISSIONER ROSE: Aye.

MS. BANE: The motion has passed unanimously.

COMMISSIONER DOMBROWSKI: Okay. No other items on the meeting agenda.

Iíd ask for a motion to adjourn.

COMMISSIONER ROSE: Iíd like to have one question.

COMMISSIONER DOMBROWSKI: Sure.

COMMISSIONER ROSE: My question is, will this petition to raise the minimum wage be on the January agenda? Can we put it on the January agenda? Will you put it on the January agenda?

MS. BANE: If the Commission wishes, it will be on the January agenda. There was no motion to that effect, although I wanted to make it clear that you can do that at any time.

COMMISSIONER ROSE: So moved.

COMMISSIONER CREMINS: A question. The content of the letter is asking that we convene -- or begin in earnest our two-year investigation as to the minimum wage? Is that right?

MS. BANE: Um-hmm. Thatís correct.

COMMISSIONER CREMINS: And we need -- we need approval at the next meeting to do that?

MS. BANE: You need to --

COMMISSIONER DOMBROWSKI: Whatís the deadline for when we have to approve it?

MS. BANE: March the 20th.

COMMISSIONER DOMBROWSKI: March 20th.

MS. BANE: Thatís 120 days.

COMMISSIONER DOMBROWSKI: Weíd have to hold -- weíd have to vote on holding it by March 20th?

MS. BANE: You would have to have completed your investigation and determined what to do regarding the petition, whether to move forward with the petition or whether to reject the petition. But in this case, I donít think thereís an option to reject the petition. I think the Commission is mandated to conduct this review.

COMMISSIONER DOMBROWSKI: Itís only a question of time.

MS. BANE: Yes.

COMMISSIONER DOMBROWSKI: And what weíre -- when do we have to -- we can put it on the agenda at the next meeting -- whenís the last meeting? Whatís the latest date we can put it on the agenda?

MS. BANE: I believe that would be March the 20th.

COMMISSIONER DOMBROWSKI: And at that date, we would then --

MS. BANE: You would then make your determination to move forward and to appoint a wage board.

COMMISSIONER DOMBROWSKI: Weíd hold a wage board or hold public hearings?

MS. BANE: Youíd have a -- I think you would move forward with the public hearing at that point.

Marguerite?

MS. STRICKLIN: I think right now, by March -- was it the 2nd, you said?

MS. BANE: 20th.

MS. STRICKLIN: -- 20th -- sorry -- you would have to make a decision as to whether or not to have an investigative hearing and then call a wage board. I think with regard to the timing on when the review is supposed to start has been a debate since the statute passed. But itís about that time, so you -- it might make sense to go ahead and set -- have an investigative hearing at some time between now and March 20th, so that you could have some information before you on -- in March to make a decision.

COMMISSIONER DOMBROWSKI: And from my perspective, I want to wait till we see what happens. We have an increase coming January 1st. I think to do at least some semblance of an investigation, I think Iíd like to at least see whatís going on a little later in the first quarter versus immediately in January.

MS. STRICKLIN: Well, the February meeting? You could set that meeting in February or something, around there.

COMMISSIONER DOMBROWSKI: I mean, Iíd rely on staff to tell us when we have to put it on the agenda. But Iíd like to get some experience from the January 1st increase out in the community first.

MS. BANE: You could take it up again at your January 11th meeting, which has been scheduled. And you could take this subject up again. If you donít want to set it for a public hearing on January the 11th, you could bring in -- bring up the subject again. You would have a choice to set it in February or in March.

COMMISSIONER DOMBROWSKI: Okay.

Did we get a second on Haroldís motion, by the way?

COMMISSIONER BOSCO: What was Haroldís motion?

COMMISSIONER CREMINS: Weíre trying to clarify what the motion was.

COMMISSIONER DOMBROWSKI: You wanted to restate that, Harold?

COMMISSIONER ROSE: It sounds like -- I would just like to have it so we could review it, at least discuss it, in January. In January, then, we could say we want to do something about it in February or March, and then we could do it.

COMMISSIONER DOMBROWSKI: Oh, I see. Okay. I thought you were making a motion to start the hearings --

COMMISSIONER ROSE: No, no.

COMMISSIONER DOMBROWSKI: Okay. Well, I donít think -- do we need to vote on that? Maybe we can --

MS. BANE: No, we can set it as an agenda item.

COMMISSIONER DOMBROWSKI: Weíll set it as an agenda item.

COMMISSIONER ROSE: All right.

COMMISSIONER DOMBROWSKI: Thatís fine.

COMMISSIONER CREMINS: For inclusion in the agenda packet next meeting?

MS. BANE: Correct.

COMMISSIONER DOMBROWSKI: Thatís fine.

COMMISSIONER ROSE: Just donít lose it.

COMMISSIONER DOMBROWSKI: Okay.

Anything else?

(No response)

COMMISSIONER DOMBROWSKI: All right. Can I get a motion to adjourn the meeting?

COMMISSIONER ROSE: Move we adjourn.

COMMISSIONER DOMBROWSKI: Second?

COMMISSIONER COLEMAN: Second.

COMMISSIONER DOMBROWSKI: All in favor, say "aye."

(Chorus of "ayes")

(Thereupon, at 11:32 a.m., the public

meeting was adjourned.)

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CERTIFICATE OF REPORTER/TRANSCRIBER

--o0o--

I, Cynthia M. Judy, a duly designated transcriber, do hereby declare and certify under penalty of perjury under the laws of the State of California that I transcribed the tapes recorded at the Public Meeting of the Industrial Welfare Commission, held on December 7, 2001, in San Francisco, California, and that the foregoing pages constitute a true, accurate, and complete transcription of the aforementioned tapes, to the best of my ability.

Dated: December 14, 2001 ______________________________

CYNTHIA M. JUDY

Reporter/Transcriber