STATE OF CALIFORNIA

DEPARTMENT OF INDUSTRIAL RELATIONS

INDUSTRIAL WELFARE COMMISSION

Public Meeting

February 21, 2003

State Capitol, Senate Room 4203

Sacramento, California

--o0o--

BILL DOMBROWSKI, Chair

DOUG BOSCO

LESLEE COLEMAN

TIM CREMINS

HAROLD ROSE

BRIDGET BANE, Executive Officer

DOUG McCONKIE, Analyst

DAVID ZAHEDI, Analyst

Page

Proceedings 5

Appointment of Wage Board Members - Wage Order 5 - 5

24-Hour Group Homes for Elderly and Disabled

Charge to Wage Board 6

Consideration of Request for Reconsideration of 7

Petition to Raise Minimum Wage

PETER COOPER, California Labor Federation 8

PATRICIA GATES, Van Bourg, Weinberg, Roger & 9

Rosenfeld

ALLEN DAVENPORT, Service Employees International 10

Union

CHRISTINA ORR, ACORN 11

DAVID LINDNER, Christian Reform World Relief 12

Committee

BETTY PERRY, Older Women's League of California 12

WILLIAM POWERS, California Congress of Seniors 13

IGNACIO HERNANDEZ, Consumer Federation of 13

California

JULIANNE BROYLES, California Chamber of Commerce, 20

California Employers Coalition

PATRICIA BRESLIN, Golden Gate Restaurant 26

Association

ROBERT GIOVATI, Automotive Aftermarket Services, 28

Inc.

JON ROSS, California Restaurant Association 30

JIM ABRAMS, California Hotel and Lodging 31

Association, California Association of Bed

and Breakfast Inns

New Business 40

Adjournment 40

Certificate of Reporter/Transcriber 41

--o0o--

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

COMMISSIONER DOMBROWSKI: I call the meeting to order.

Let the record show that all five commissioners are present.

The number one item on the agenda is appointment of members to a wage board established to consider modifications to Wage Order 5, regulating the wages, hours, and working conditions of employees in the public housekeeping industry, regarding employees who have direct responsibility for the elderly and adults with disabilities receiving 24-hour care.

I trust everyone's had a chance to look at those nominees. Are there any questions?

(No response)

COMMISSIONER DOMBROWSKI: If not, I would move that the names be put into the record and that we adopt these members.

All in favor, say "aye."

(Chorus of ayes)

COMMISSIONER DOMBROWSKI: Any opposed?

(No response)

COMMISSIONER DOMBROWSKI: They're adopted.

The second item is consideration of the charge to the wage board established to consider modifications.

Bridget, I'd ask if you could point out maybe the major features.

MS. BANE: Yes. I'd be glad to.

On Page 3, we have the pertinent language for the charge itself. And there are three sections to this.

And the first section, the charge indicates that the wage board will consider whether the amendments which were passed last year should be further amended to include employees of 24-hour care facilities for the elderly, the developmentally disabled adults, and the mentally dependent adults; secondly, to consider whether any and/or all amendments agreed upon by the wage board may or should be limited in their duration, that is, time-limited; and third, whether the size of the residential group homes for all of the mentioned classes should affect or restrict the scope of any exemptions proposed by the wage board, that is, to restrict the application to residential care facilities of a certain size.

The rest just includes the history, including the prior amendments that really are directly concerned with this. Not all of the amendments were -- are concerned with the petition or the request of the petitioners. But on Page 2, the hours and sleep time part of the amendment that is directly involved is listed for you in bold.

COMMISSIONER DOMBROWSKI: Any questions from the audience?

(No response)

COMMISSIONER DOMBROWSKI: Seeing none, any questions from the commissioners?

(No response)

COMMISSIONER DOMBROWSKI: Okay. I'll again make the -- ask for a motion to adopt this wage charge.

COMMISSIONER BOSCO: So moved.

COMMISSIONER DOMBROWSKI: Second?

COMMISSIONER COLEMAN: Second.

COMMISSIONER CREMINS: Second.

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

(Chorus of ayes)

COMMISSIONER DOMBROWSKI: No opposition.

That is adopted.

Item Number 3, consideration of a request for reconsideration of petition to raise the minimum wage, filed by the California Labor Federation.

Peter, maybe you want to just have -- we have enough seats up here, I think. And I didn't really count the cards, but if everybody comes up, we can sort through.

I count six -- five people, actually -- well, I've got some more here.

I'm asking for those in favor to come up at this point.

MR. COOPER: Thank you, Commissioner Dombrowski.

COMMISSIONER DOMBROWSKI: So -- just for the record, if you could, be sure to identify yourself for the transcript. That would be very helpful.

MR. COOPER: Okay. Peter Cooper, California Labor Federation.

As you know, the poverty level is at $7.32 an hour. That's the wage that's needed to reach the poverty level for a family of three in California. The National Research Council has indicated that, given the high cost of living in California, that number would be 18 percent higher than that $7.32. I think it's very clear from those numbers, from the numerous studies that we've submitted, that the current wage rate of $6.75 is not sufficient to provide the cost of proper living.

I'm supplying you with an additional study from the Budget Project about the growing inequality, and I'll give this to your staff.

And, quite frankly, we're very frustrated that -- and concerned that the Industrial Welfare Commission, that's been given this important duty of protecting the workers in this state, has -- has been more concerned with protecting the employers in the state and derelict in its duty to provide for the welfare of workers. I understand that it's called the "Industrial Welfare Commission." I think the real duty of the IWC should be more like a "Workers' Welfare Commission."

And so, I ask that you support our reconsideration for our proposal to increase the minimum wage and to proceed with some public hearings to have more input on this matter.

I have with me a number of people that would like to speak on our behalf.

Patty Gates.

MS. GATES: Hi. My name's Patricia Gates, and I'm an attorney with the Law Offices of Van Bourg, Weinberg, Roger and Rosenfeld. And I've been before you many times on this issue, on the increase in minimum wage.

And I'm here today to ask you to reconsider your previous decision to not increase the minimum wage. The IWC should grant the California Labor Federation's request for reconsideration. There is uncontroverted evidence and ample evidence in the record that the current minimum wage of $6.75 per hour is inadequate to supply the cost of decent living in California.

The opponents to the increase in minimum wage have failed to introduce any evidence that shows that the minimum wage is adequate. That was their task. That was their duty. The Legislature has given you limited power, and that power is to determine whether or not the minimum wage is adequate. The Legislature has not delegated any authority to this Commission to engage in a balancing test to balance the interests of business against the interests of working people. Your job here is exclusively to look at whether $6.75 is adequate.

If you do not increase the minimum wage, you are essentially making a finding on which there is no evidentiary base. What you've had is some testimony from business about possible negative effect on business, but you've had no testimony showing that $6.75 an hour will give a worker or a family an adequate life in California.

So we're asking you to reconsider today the decision that you made in January, and to increase the minimum wage based on the evidence that has been placed before you.

Thank you.

MR. COOPER: Allen, go ahead.

MR. DAVENPORT: Allen Davenport. I'm director of government relations for the Service Employees International Union in California. We are here on behalf of the workers who work in the service economy, the service economy which is the growing part of the California economy, which is the predominant part of the low-wage worker economy in California. It's the economy that's not going anywhere. It's the economy that's here to stay. It's the economy that serves the high-wage industries, that serves the high-wage people, that serves people who can afford to pay more for the services. It simply -- it's the kind of marketplace where the wages can grow to meet the needs of the workers, and that grows the California economy. Companies that employ these workers put more money into California if the wages are higher. They stay here, they have to be here. This work isn't going anywhere. It's a great benefit to the people of California to have the money that is earned by companies, that is paid by the government, to remain in California with these workers and be recirculated in the economy.

There are many, many benefits for everyone in the economy to raising the minimum wage, including having more people be able to buy more products and services from the very industries who are here to complain about having to pay higher wages. It makes no economic sense not to have a higher-wage economy.

We ask for your reconsideration of this matter.

MS. ORR: Hello. My name is Christina Orr, and I represent ACORN, which is a community organization representing approximately 15,000 low and moderate individuals within the State of California.

We also feel that we should get a reconsideration on the minimum wage. People in our communities work very hard and, of course, feel that they need an increase in that.

We feel that if the IWC does not take action immediately, we're failing to uphold its mandate to protect the health and welfare of our workers in California.

MR. LINDNER: My name is David Lindner. I'm a local pastor and I'm representing the Christian Reform World Relief Committee. I just want to speak on behalf of the Christian community.

And we feel that this decision that was made December -- January 10th is unconscionable. In effect, you are lowering the minimum wage by failing to raise it to keep pace with cost-of-living increases.

We have a mandate as followers of Christ to be in a community that takes care of every one of its members and has a responsibility for each other. And the least of these are the people who are earning minimum wage. And it is unconscionable to support paying minimum wage at below the poverty level.

We urge you, as members of the Christian community, to reconsider.

Thank you.

MS. PERRY: I'm Betty Perry. I'm the public policy director of the Older Women's League of California.

And, you know, older women often have to go back to work after a divorce, the death of a spouse. And when they enter the workforce at a later age, their skills may be not suitable to jobs that they once could have held, so they take minimum-wage jobs. This gives a very low standard of living. And if they are stuck in these jobs for any time, then their Social Security does not accumulate very well, and they're stuck with a very meager life the rest of their lives. We think this is one aspect of the minimum wage that you should really consider.

We would like you to reconsider the whole issue.

MR. POWERS: Bill Powers, Congress of California Seniors. I'm legislative director.

For all the reasons previously cited, we urge you to reconsider your past action and help to increase the minimum wage in this state.

Thank you.

MR. HERNANDEZ: Ignacio Hernandez, on behalf of the Consumer Federation of California. And I would like to echo all of the comments that were made before in support of the reconsideration.

I also want to add that when you look at the rate of the minimum wage in California, we are essentially sentencing all of these workers to a substandard living condition in California, despite all of the prosperity and despite the extent to which we promote this state as being a golden state and a state of opportunity. We are really limiting the opportunities for these workers.

And we talk about the cost of living and we talk about the type of living that we are sentencing these workers to if we cap the minimum wage at such a low level. But in real terms, let's just look at housing. The median cost of a house in California has now surpassed $300,000 a year. I can't imagine a single lending institution in this state who's going to offer the financing for a $300,000 home to somebody who makes the minimum wage. And I suspect that most of you couldn't expect that either.

And even though we're looking at statewide, if we look at regions throughout California, the increase in the cost of a house is just -- is incredible and growing at an incredible rate. And yet, the minimum wage is not keeping pace.

If you look at --

COMMISSIONER DOMBROWSKI: What level would we have to raise the minimum wage to in order to qualify for a home loan?

MR. HERNANDEZ: That's a good question. I think as high -- as high as it takes. I mean, I think that's something that -- if that were -- if that were to be the single threshold, Mr. Commissioner, if that were to be the single threshold, I think that it would take more than simply just raising the minimum -- minimum wage.

I certainly would love to see a condition of the minimum wage being enough to afford a house, but I think that -- based on your comments, I think that there's kind of an understanding that the point of minimum wage isn't to allow someone to purchase a house in California, which is actually a sad commentary. I wish it were. We could talk about those numbers, and it should get to that rate.

But we kind of accept the fact that they're not going to buy a home. But nonetheless, for these people who work hard every day for a wage that nobody in this room makes, I think we have to keep in mind the type of living conditions.

So, let's put aside actually purchasing a home.

But I just want to add real quickly that, if you look at regions throughout the state, you're talking about an increase of about 26 percent, in the Sacramento area, in the San Fernando Valley area, just over the last year, in the cost of a home.

So, even putting aside purchasing a home, look at the cost of renting a home. If you take the traditional standard of about 30 percent of a person's income, monthly income, to go towards rent, we're talking about $380 a month for somebody on the minimum wage. You know, good luck finding somewhere that has decent living conditions, just sanitary living conditions, and paying $380 a month for rent.

I know, in some of the reports that I've seen that talk about that, well, if you look at minimum-wage earners, they're not necessarily just, you know, the only person in a household that's working. Well, if I could only spend $385 a month in rent, it makes a lot of sense why I'm probably living with other family members, or having to have other family members work.

So, when we're talking about the -- you know, the type of living condition that minimum-wage workers are having to face, you know, I just want to kind of put the numbers -- you know, make them a little bit more real.

But I do -- I do understand that, you know, and I'll say what we don't say. We don't expect minimum-wage earners to purchase a home in California. And at this point, we probably don't even expect them to rent a home, at this -- at this rate.

So, I urge you to reconsider it and certainly want to commend the California Labor Federation for steadfastly, you know, working on this issue. And I look forward to this Commission, you know, moving forward on the minimum wage.

Thank you.

COMMISSIONER DOMBROWSKI: Thank you.

Any questions for this panel?

COMMISSIONER CREMINS: I had a question -- I had a question for, I guess, Ms. Gates, or if there's another counsel on the -- the floor's testimony. I was concerned about -- she basically said we're not meeting our statutory mandate as a commission. What's the remedy, I guess, from your folks' point of view, if we don't meet the mandate? I mean, do we go to court? Do you take us to court? Does a judge ultimately go back and order us to do our duty, or does he mandate a minimum wage on us, or --

MS. GATES: When a -- when a commission operates beyond its statutory authority, the remedy is a petition of a writ of mandate in a court of law. And if a commission has been delegated a particular kind of power by the Legislature and the commission acts in excess of that power or outside the parameters of that power, the checks and balances that exist in our American system is the judicial check. And so, if the -- if the Commission makes a determination upon which there is no evidence in the record that supports that determination, one of the possible remedies would be the judicial remedy, yes.

COMMISSIONER CREMINS: Okay.

COMMISSIONER DOMBROWSKI: Any other questions?

COMMISSIONER BOSCO: I don't have a question, but I wanted to say something.

COMMISSIONER DOMBROWSKI: Go ahead.

COMMISSIONER BOSCO: I, first of all, appreciate everyone's testimony. We had nothing but extraordinarily competent materials that have been provided by the advocates of an increase in the minimum wage. And I would reiterate what I said the last time, that I regret that we're not in the same California that we were when we did increase the minimum wage a couple years ago.

This morning when I read our local newspaper in Santa Rosa, where Harold and I live, the workers of Agilent are going to be told today how many of them are going to be laid off. Agilent has announced that they're going to lay off 4,000 people here in California. These are not minimum-wage people, I'm sure, but they're still going to be people that don't have any job at all.

And it's part of, I guess, our role to have to balance how much we can side with the poorest people in California, who we're talking about right now, in terms of their wages, and yet not kill the goose that lays the golden egg.

There are certainly paradoxes in our society now. We've seen this disgraceful growing percentage of corporate leadership that -- you know, they don't make $100,000 or $200,000 or $300,000, like the president does. They'll make $1 million, or $100 million, and get loans of half a billion dollars from their corporate boards. And it's hard to imagine that they have any greater needs as human beings than the motel maids and others that we're talking about here.

But having said that, I am hopeful that, very soon, we will see a turnaround in California's economy. And as soon as that happens, you know, assuming that I'm still on the Commission, I'm going to be one of the first to encourage that we again revisit the minimum wage. But I don't really think that that's in the cards right now.

I do thank everyone that's been working very hard on this. And you all, you know, are doing the public a huge service.

But I think that, given our state's economy, we probably wouldn't be really helping anybody overall by perhaps increasing the dilemmas that businesses face today.

Thank you.

COMMISSIONER DOMBROWSKI: Thank you.

Any other comments?

(No response)

COMMISSIONER DOMBROWSKI: Okay.

Thank you, panel.

Those in opposition to the petition who wish to speak, please come forward.

(Pause)

COMMISSIONER DOMBROWSKI: Go ahead, Juli.

MS. BROYLES: Good morning, Mr. Chairman, members. Juli Broyles, from the California Chamber of Commerce. I'm the director of employer relations and small business issues for the California Chamber of Commerce.

I'm here today on behalf of the Chamber and the California Employers Coalition. We did submit written comments as well and do want to note that, inadvertently, we did leave off one Coalition member, the California Restaurant Association. And we'll be sending an updated signature list to the Commission so that you have it for your records.

COMMISSIONER DOMBROWSKI: Oh. They care about the minimum wage?

(Laughter)

MS. BROYLES: The Coalition, as we look at the issue of the minimum wage, it has very serious concerns about looking at that issue as we speak right now. We feel that there's a lot of other ways to make California better for all citizens, whether it's lower housing costs, more affordable housing, more affordable healthcare, lower taxes, better roads, transportation infrastructure, and access to lifelong learning would be issues that certainly we would rather be concentrating on because of the long-term benefits to the workers of California.

We are committed, the California Chamber and the Coalition, to helping workers find better skills, achieve better skills, and find and keep better jobs here in our state. However, we do want to point out some very difficult issues that must be taken into consideration as the -- if the reconsideration of the petition to increase the minimum wage goes forward.

The California economy has been especially hard hit by the economic downturn and the hits to our tourism industry and our high-tech industry. We are already contending with incredible increases in our workers' comp rates, in our healthcare rates, and in our energy costs.

We do believe that there -- as well, in the petition that was originally filed, there was a proposal to index the minimum wage after an increase. We do not believe there is the statutory authority for the Industrial Welfare Commission to index a wage in perpetuity.

We do think that there will be a wide range of economic consequences if the minimum wage is increased at this time.

In the materials that I did provide to the Commission, I wanted to point out a couple of real-world consequences of raising the minimum wage, the first of which is the impact on workers' compensation costs. California employers have raised an outcry this year because of premium increases ranging from 25 to 300 to 1,000 percent in terms of their workers' compensation rates -- premium costs. In the chart that I did provide you -- at the last meeting of the Industrial Welfare Commission, Petitioner Tom Rankin mentioned that he would prefer a minimum wage rate of $8.00, and there's been different dollar amounts that have been described during the process. What I did do in the chart was to break it out in 25-cent increments and what the impact would be on workers' compensation premium costs.

If you would note, in the letter that was -- that was left on the dais today for -- regarding the petition, they talk about $7.32. So, if I can use the $7.50 figure, that's a $90 million increased premium cost. If we use the $8.00 figure that Mr. Rankin referenced last -- at the last meeting, that's $150 million in additional premium costs California employers would be taking on. That means that the individual per-worker cost, if it's just calculated on California's minimum-wage worker population, would go from the current of $772 per worker, at $6.75, to -- at $7.50, it leaps to $858 per worker.

COMMISSIONER DOMBROWSKI: Harold?

COMMISSIONER ROSE: Could you change mikes, please?

MS. BROYLES: I'm sorry.

At $7.50 --

COMMISSIONER DOMBROWSKI: That doesn't work either.

MS. BROYLES: -- it goes to $858 per worker. And at $8.00 per hour, it would move to $915 per worker.

COMMISSIONER DOMBROWSKI: Hang on, Juli.

Could somebody else speak into their mike? Let's see -- I want to hear --

MS. BRESLIN: Hello.

COMMISSIONER DOMBROWSKI: No, speak -- I want to hear if all the mikes are bad or just those.

MS. BROYLES: Yours is buzzing too.

COMMISSIONER DOMBROWSKI: They're all bad.

Can we do it without mikes? Can you -- hang on.

COMMISSIONER BOSCO: Do it without talking.

(Laughter)

COMMISSIONER BOSCO: You have to have --

COMMISSIONER CREMINS: I'll second that motion.

(Laughter)

COMMISSIONER DOMBROWSKI: It's the sound system.

We can't do the transcript, I don't think, without it.

MS. BROYLES: We have definitely seen different --

COMMISSIONER DOMBROWSKI: Hang on. Hang on.

MS. BROYLES: Oh, I'm sorry. I thought you were ready.

(Off-the-record pause)

THE REPORTER: He's going to get help.

COMMISSIONER DOMBROWSKI: Can you function with it this way or not?

THE REPORTER: Somewhat.

COMMISSIONER DOMBROWSKI: Do you want to try?

THE REPORTER: It's getting the same recording that's coming off the PA system. We can try.

COMMISSIONER DOMBROWSKI: Okay. Go ahead, Juli.

MS. BROYLES: There are a lot of other economic realities that we can talk about.

The Milken Institute has just issued a report earlier this year regarding the costs of running a business in California. California is one of the top three states that have -- of the cost of running a business. It's not, again, a place where we would want to be. We want to encourage businesses to be here, to expand here, and to locate here in the future.

According to the Employment Development Department in their most recent release of unemployment numbers, California has a 6.6 unemployment rate, the rate it has been in six years. We also have 1.1 million California workers current unemployed. That's almost 500,000 more than they had told us last year that they would -- that they had estimated would be unemployed at this time. We don't think that this is something that we are -- anything that we should be proud of, but we should be working to get these people back on the job rather than to create new barriers to finding and creating and enlarging jobs for the current California unemployed. 697,000 of that 1.1 million have been laid off just in the last year.

Businesses of all sizes, as we know, that are shouldering very high costs concerning energy, workers' comp costs, and twenty-plus percent increases in our healthcare premium costs -- we don't think it's something that should be ignored by the Commission.

Along with those economic costs, there are some actual interior issues to running a business, and that's how business workers -- the workers for a business are classified. When AB 60 was enacted in 1999, it changed how exempt workers are classified by a business by placing a two times the state minimum wage requirement on a base remuneration amount that a worker must receive in order to be considered an exempt worker. When you look at that amount, when it was first put into place, it was about $23,000, a little over $23,000. It now requires, at the current minimum wage rate of $6.75, a $28,080 base wage rate. Again, to use the number that Mr. Rankin referenced at the last meeting, an $8.00 minimum wage rate would increase that base salary for an administrative exempt worker at $33,280. That would be a $5,000 increase, approximately.

For small employers and even large employers, it becomes a classic Catch-22: either they're going to have to cut the number of managers they have or change that managerial exempt worker to a non-exempt worker. And that would also impact how the benefits are calculated, the amount of benefits that they receive, and pension plans.

We do think that instead of approving the seventh wage hike in six years, it would be better for California to focus on reducing our costs, especially with provided benefits such as health and workers' compensation costs, increase the opportunities for small businesses formation and associated job opportunities that go along with that, increase the skills of our future workforce, to enact significant regulatory reform, and do no more harm by resisting any new effort to increasing their employment cost or business liability here in California.

For these reasons, we are asking the Commission to reject the petition to reconsider the minimum wage increase. And I'm ready to answer any questions you might have.

MS. BRESLIN: Thank you.

Good morning, commissioners. Patricia Breslin, executive director of Golden Gate Restaurant Association in San Francisco.

Commissioners, in January this Commission very wisely determined it was the wrong time to consider a minimum wage increase. In my opinion, it is still the wrong time.

I presented an economic report that was commissioned by the Golden Gate Restaurant Association that outlined what the situation was in San Francisco last year. We're in the process of updating those numbers now. And preliminary reports show that there are still 160 -- or plus -- fewer restaurants in San Francisco now than there were in June of 2001, still 160 less.

Right now in San Francisco, throughout the city, restaurateurs are preparing their budget plans, and they're doing it now in a three-tiered process. With the imminent threat of terrorism around, visitors are not coming to the city. And the tiered process is this scenario: If there's a reduction of 10 percent in the revenue sales, what do we do now? Well, we close probably all the breakfasts. If there's a 20 percent reduction in revenue sales, what do we do now? Maybe close Monday through Thursday lunches, as many have already done. Maybe we'll lay off some management on the weekends, turn it down a little bit, and there will be a loss of jobs for many employees. That's the situation right now.

I spoke to a restaurateur. Anecdotally, this restaurant seats 165 guests. Last night, they sat 35 all night long, with a full staff. That full staff won't be there much longer.

If there's a minimum wage increase, finally, that minimum wage increase in our industry is going to go to those who earn tips. Yes, granted, the tips are low right now because there are no customers. But it won't go to the individuals that I believe this Commission will try to reach when the economic times rebound.

Thank you.

MR. GIOVATI: Good morning, commissioners. My name is Bob Giovati. I'm with a corporation called Automotive Aftermarket Services. And when we say "aftermarket," we're talking about businesses that service your vehicle after you buy it: auto parts stores, warehouse facilities, cylinder head exchanges, engine rebuilders, businesses of this nature.

Before I became a legislative advocate, I personally called on these businesses for about ten years, drove close to 300,000 miles up and down the state, having personal conversations with these business owners. So, when I speak about this issue, I speak from experience that I have, not from some ivory tower.

Our industry, particularly the auto parts segment, auto parts stores, employs a lot of delivery drivers at minimum wage. I don't know of any business owner I've spoken to that is philosophically opposed to, somewhere down the line, when the economy in the state is better, looking at the minimum wage yet again. But right now, the vast majority of the businesses in our industry are suffering dramatically. Double-digit increases in workers' comp, energy costs, business liability insurance, health insurance are not uncommon.

Virtually every day, I speak to a business owner who says, "Bob, I'm running thirty employees. I need forty, can't do it. My insurance costs have gone too high. I've really got to find some way to find some profit here," or "I had to raise my health insurance deductible from $250 to $1,000 to offset the increases I saw there," or "I had to get rid of a couple delivery vehicles because I can't afford to insure them any more." Another story might be, "I've got a couple of part-timers, want to give them full time, can't do it because I can't afford it." Cost of operating has just gone up too much.

So, the bottom line is, it does seem at times to me that the attitude that's been taken on in the State of California is, if a new law or bill doesn't, a) bankrupt the business, or b) cause it to move out of state, then it must be okay, it can't be all that bad. But I'm telling you from personal experience, my humble opinion is -- and I believe it's backed up from the hundreds, if not thousands, of conversations I've had -- that these increases, if you do reconsider and the minimum wage is raised any time in the near future, I believe it's going to cost jobs and payroll to our industry. And therefore, I would respectfully ask that you deny this attempt to reconsider.

Thank you.

MR. ROSS: Good morning. Jon Ross, with Kahl Pownall Advocates, on behalf of the California Restaurant Association. I'll keep the remarks brief.

First, to the comments made earlier about the absence of a record to support your conclusion that the current minimum wage is adequate, certainly we've had months of testimony on this issue. I'll draw your attention to just two points. On the issue of adequacy, the current minimum wage of $6.75 exceeds the historic average minimum wage over the last forty years, adjusted for inflation. If you look at that fact alone, this Commission is -- and apply a standard of adequacy over that period of time, certainly the decision reached by this Commission is consistent with prior commissions applying the same historical standard. So, I think you've met, certainly on that alone, your burden of adequacy.

Second, to the question of whether a higher minimum wage is desirable, if not necessary to achieve adequacy, Commissioner Bosco's remarks, I think, were right on the money. The testimony you've heard from the Industrial Relations Department and from their economists point you to the fact that the timing of a minimum wage increase is critical when weighing it against the potential for job losses. Your job is to try and weigh the benefits of an increase, or the desirability of an increase, against the potential loss you'll suffer, countervailing job losses.

When you do it in a down economy, when you do it in the light of workers' comp increases, UI increases, energy cost increases, and the other things have been cited here today, you increase, necessarily, the number of jobs that will be lost. And we think your judgment to hold the current wage steady is appropriate, given those facts.

Thank you.

MR. ABRAMS: Thank you. I'm Jim Abrams, with the California Hotel and Lodging Association, and also the California Association of Bed and Breakfast Inns.

The testimony that we gave in the January hearing, I think, covered most of the points that I would like to cover. And I'd ask that you -- that that be part of the record for this particular hearing.

Two points.

There has been reference made today to the question of exactly what your statutory mandate is. Commissioner Cremins asked the question. One of the things that has not been mentioned is that courts in California have acknowledged that in fulfilling your statutory mandate to look out for the welfare of employees, you have to look at the welfare of all employees. So, if a particular action, for example, is to deal with the mean wage, to deal with hours or working conditions, that it's not just the employees who are most immediately impacted that are the sole subject of the investigation. The impact that that will have, an action of this Commission will have, on other employees is a relevant factor -- not necessarily the defining factor, but a relevant factor.

Secondly, I would like to point out that, in the petition for reconsideration and all the testimony you heard from proponents, that up to $8.00 an hour, there will be no impact on jobs. And a couple of the people said that these people are going to continue working, they're not going to go anywhere else, they're not going to go out of state, not going to move. The simple fact of the matter is that the best way to help people, whether they earn the minimum wage or they earn something other than minimum wage, whether they're tipped or not tipped, is to make sure that, first of all, that they're working. And I think Commissioner Bosco put his finger on it. People in this state today are not working.

To give you an example, in the early '90's, the California Division of Tourism was basically spending very little money, if anything, to promote travel and tourism. And during -- every year, 34,000 people were out of work who would have had jobs. Every single year, 34,000 people who would have been working, and particularly in hospitality, which is where many, if not most, of the minimum-wage jobs are first found, had no work. The governor's budget this year proposes for the next fiscal year closing the Division of Tourism. I hope, for heaven sakes, that that doesn't happen. If it does happen, we will certainly lose at least the 34,000 jobs statewide again, if not more. And I've done some calculations, and I'm happy to share them with you in writing, that, just for lodging facilities, the hotels and the motels and the inns in California, best-case scenario, 10,000 people each year will not work, period. And that has nothing to do with the minimum wage, it has nothing to do with the fact that California has no tip credit, it has nothing to do with workers' comp. What it has to do with is the fact that just the demand is going to go down.

When you start layering all these things together, you come to the point of saying there are going to be too few jobs to serve anybody's best needs. So, for that reason, I submit to you that the judgment and the decision that you took in January, for now certainly, is the right judgment. And if, as, and when it is appropriate to look at the minimum wage issue again, we're happy to revisit with you what exactly the appropriate minimum wage should be.

Thank you.

COMMISSIONER DOMBROWSKI: Any questions?

COMMISSIONER CREMINS: I'm a bit surprised. I've not seen or heard of any court cases where it addresses the Commission's authority or interpretation of what the definition is -- I think the statute says adequacy and welfare of the worker.

MR. ABRAMS: It does --

COMMISSIONER CREMINS: I'm a bit surprised. I have not seen any court cases or any testimony here.

MR. ABRAMS: The -- well, I'd be happy to find the reference for you.

COMMISSIONER CREMINS: Please.

MR. ABRAMS: It doesn't deal with the minimum wage. It says that in making decisions, looking out for the welfare of employees, whether it's by setting the minimum wage, whether it's by setting hours or working conditions or exemptions or anything else, that a consideration has to be what is the overall welfare for employees generally in California.

My reference was not specifically with respect to the minimum wage. But I will be happy to find that reference for you.

COMMISSIONER CREMINS: In my mind -- I'm not certainly not -- I'm not a lawyer, but in my mind, the statute is pretty clear, to assess the welfare and adequacy of the minimum wage -- or the welfare of the worker. I don't see any reference to business in the statute, and I think it's fairly clear.

MR. ABRAMS: Well --

COMMISSIONER CREMINS: I know it's a matter of debate, but --

COMMISSIONER DOMBROWSKI: Any other questions?

(No response)

COMMISSIONER DOMBROWSKI: Thank you.

Any other action?

COMMISSIONER CREMINS: If a motion is proper, Mr. Chairman --

COMMISSIONER DOMBROWSKI: I believe it is.

COMMISSIONER CREMINS: -- I would actually make two motions. We're having this debate here on what is in legislative interpretation and what is not. I'm actually generally concerned about the Commission itself, both the political ramifications and the legal ramifications. I'm wondering if a motion would be proper to strike the record of any what is and what is not legislative interpretation and leave that up to outside parties. I would make that as my first motion.

COMMISSIONER ROSE: Second.

COMMISSIONER DOMBROWSKI: Bridget?

MS. BANE: I don't -- I don't think that you can strike part of public testimony, but I believe that the motion could be to disregard it as the -- any comment that holds any authority.

COMMISSIONER DOMBROWSKI: We have a public record.

COMMISSIONER CREMINS: You're right.

COMMISSIONER DOMBROWSKI: It's there. I don't see any purpose in us trying to edit or -- if people -- if commissioners want to make comments about things that were said for the record, they're free to do so.

COMMISSIONER CREMINS: Understood.

COMMISSIONER DOMBROWSKI: Harold, do you still -- what's the answer on the motion?

MS. BANE: On the motion, I don't believe it's a proper motion, Commissioner Cremins, to strike something from the public record in a public meeting.

COMMISSIONER CREMINS: All right. Fine.

Is it proper to take testimony with prejudice?

MS. BANE: The testimony --

COMMISSIONER DOMBROWSKI: What does that mean?

MS. BANE: -- speaks for itself in a public meeting, and it can be commented upon or, in a sense, editorialized on by you. Certainly, as a commissioner, you have a right to discuss or comment on any of the testimony that has been given and make it a part of the record also.

COMMISSIONER CREMINS: All right. I don't see the votes here to do what I want to do. I'm sincerely looking to protect the Commission, and I think we really need to think about what our legislative mandate is and what our duties are, and not accept almost as gospel as -- other folks' interpretation.

So, I assume I will withdraw the motion.

COMMISSIONER DOMBROWSKI: All right.

MS. BANE: Commissioner, it would be proper if you would like to ask the staff to do some research on that. And I'll be glad to do that for you, without even a request.

COMMISSIONER CREMINS: That would be helpful.

COMMISSIONER DOMBROWSKI: All right.

Anything else?

COMMISSIONER CREMINS: I do -- I will make a formal motion to rerequest a reconsideration of the petition to raise the minimum wage.

COMMISSIONER ROSE: Second.

COMMISSIONER DOMBROWSKI: Okay. We have a motion and a second. Any comment or discussion?

COMMISSIONER ROSE: Yes.

COMMISSIONER DOMBROWSKI: Harold.

COMMISSIONER ROSE: I would like the Commission to just consider we're not saying we're going to raise the minimum wage; we're going to consider it. And I think that's what we need to do, to just consider what's happening, take testimony, wage board, whatever is required to consider what's happening, not just take the word of twelve people sitting in front of us, and just shine them on and say, "No, we'll come back later and take care of it." We never come back and take care of it, so we need to charge forward now.

COMMISSIONER DOMBROWSKI: I would echo Commissioner Bosco's comments earlier. I would also state my views that it's -- we've gone through a review. All the parties have had their chance to put their evidence on the table. I think -- well -- and, obviously, there were not -- there were three commissioners in January who, by the vote, I think, said today's -- given all the evidence, today's minimum wage is adequate. I haven't seen anything in the last thirty days or thirty-five days, whatever it's been, that should change that. And I would anticipate -- I haven't reviewed with Bridget yet -- but I would anticipate that the statutory requirement for us to again start a review of the minimum wage comes up at some point.

Do you know offhand?

MR. McCONKIE: November.

MS. BANE: In November.

COMMISSIONER DOMBROWSKI: In November? And obviously, I think we'll bring it up then. So that's where I'm coming from on this.

COMMISSIONER COLEMAN: I would agree with your comments, Chairman Dombrowski. And I think the new evidence that we've seen in the last thirty days is that the economy has gotten worse and that jobs continue to be at risk. And so, I think we have performed our duty to keep the welfare of employees at heart in making this decision. So I would agree that a review in the future, hopefully when the economy turns around, would be more beneficial to workers.

COMMISSIONER DOMBROWSKI: Okay. We have a motion and a second. Let's call the roll.

MS. BANE: Commissioner Cremins.

COMMISSIONER CREMINS: Aye.

MS. BANE: Commissioner Rose.

COMMISSIONER ROSE: Aye.

MS. BANE: Commissioner Bosco.

COMMISSIONER BOSCO: No.

MS. BANE: Commissioner Dombrowski.

COMMISSIONER DOMBROWSKI: No.

MS. BANE: Commissioner Coleman.

COMMISSIONER COLEMAN: No.

MS. BANE: The motion has failed, three to two.

COMMISSIONER DOMBROWSKI: Okay.

Any new business before the Commission?

(No response)

COMMISSIONER BOSCO: I move we adjourn.

COMMISSIONER DOMBROWSKI: We have a motion to adjourn. Second?

COMMISSIONER ROSE: Second.

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

(Chorus of ayes)

COMMISSIONER DOMBROWSKI: We are adjourned.

(Thereupon, at 10:53 a.m., the public

meeting was adjourned.)

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CERTIFICATE OF REPORTER/TRANSCRIBER

--o0o--

I, Cynthia M. Judy, a duly designated reporter and transcriber, do hereby declare and certify under penalty of perjury under the laws of the State of California that I transcribed the tape recorded at the Public Meeting of the Industrial Welfare Commission, held on February 21, 2003, in Sacramento, California, and that the foregoing pages constitute a true, accurate, and complete transcription of the aforementioned tape, to the best of my ability.

Dated: February 22, 2003 ______________________________

CYNTHIA M. JUDY

Reporter/Transcriber