Living Wage Laws: Employer Loses Battle Over Failure to Pay Living Wage; Are You in Compliance?

In 1999, Hayward enacted a “living
wage” ordinance, requiring its service contractors to pay specified living wage
rates to employees who work on a city contract worth at least $25,000. The wage
rates are adjusted annually based on the San Francisco Bay Area’s cost of
living. Current rates are $9.41 per hour if the employer provides health
benefits or $10.86 per hour without benefits. (The California state minimum wage is $6.75 per
hour.) The ordinance also requires service contractors to provide a minimum of
12 paid days off per year and another 5 unpaid days for sick leave, vacation,
or other personal reasons.

Hayward’s law recently came
into focus when an Alameda
County judge ordered
Cintas Corp., the largest uniform rental company in the nation, to pay $1.44
million for violating the living wage standards.

The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.

Class Action Over
Failure to Pay Living Wage

The case grew out of a
$105,000 contract Cintas held with Hayward
to wash towels and uniforms for city employees. Two women who worked in
Cintas’s San Leandro and Union
City laundry plants, where the work on the Hayward contract was done, filed a class action
suit against Cintas. They claimed the company paid them between $7.10 and $8.20
per hour, without health benefits—well below the required Hayward living wage.

Cintas unsuccessfully
argued that it didn’t have to pay these workers the living wage because their
work was performed outside of Hayward.
Cintas also failed to convince the court that Hayward’s living wage ordinance was
unconstitutional. Entering judgment for the workers in this case, the judge
wrote: “Just as cities have permissibly enacted requirements that city contractors
have an affirmative action plan or provide equal benefits to employees’
domestic partners, the city of Hayward can require that its service contractors
pay their employees who perform work on a contract with the city to be paid at
the rates set forth in the living wage ordinance.”

The $1.44 million
judgment includes $805,000 in back wage and vacations, $258,900 in penalties,
and $375,000 in interest. The award will be shared by 219 employees who worked
for Cintas on the Hayward
contract between 1999 and 2003, when the suit was filed.

Living Wage Laws Across
the Country

Currently, more than 120
cities and counties across the nation have living wage ordinances—including the
California communities of Sacramento, Oakland, San Francisco, San Diego, Los
Angeles, Santa Cruz, San Jose, Santa Clara, Oxnard, Ventura, West Hollywood, and
Marin, to name a few. And the list is growing, with living wage campaigns under
way in at least 100 other U.S.
cities. Unions back many of these efforts.

Are You Complying?

The wages required under
these laws vary widely— Santa Cruz, for example, currently requires a living wage
of between $12.04 and $13.14 while the Hayward living wage is between $9.41 and
$10.86— and amounts are usually tied to whether the employer provides health
benefits. Many of the laws, such as the Hayward
ordinance at issue in the Cintas case, also require covered employers to
provide workers with a specified number of paid and unpaid days off per year. Many
of the laws also require notices to affected employees.

Sanctions for living
wage violations can include, depending on the ordinance, penalties of up to
$500 per week for each affected worker for as long as the violation takes
place, back pay for each affected worker, and the loss of the employer’s contract
with the city.

Which employers are
covered by a living wage ordinance also varies. It’s usually based on the
amount of the contract with the city and the type of work performed. But some
ordinances, such as San Francisco’s,
apply to all employers in the city. And, as the Cintas case highlights, you
could even be required to pay a living wage to your workers outside the city
that you have the contract with if those employees are working on that service
contract.

If there’s a living wage
law in a city where you do business or have a city contract, be sure to check
with the city on the requirements. As the Cintas case shows, violations can add
up to a steep bill.