What transpired at Los Angeles City Hall last month in regards to the city minimum wage was nothing short of baffling. The Valley Industry & Commerce Association, or VICA, its strategic partners and area businesses were engaged in the issue from the time Mayor Eric Garcetti announced his intent to raise the wage in September 2014. Yet, VICA is certain that a majority of the Los Angeles business community feels a lot like we do: that our needs were given just a flicker of consideration before this monumental decision – for which businesses will foot the bill – was given the stamp of approval. There were, of course, some concessions made in the final minimum wage increase proposal. The timeline is longer – five years for most, six years for some. A significant paid time off mandate that was silently included at the last minute was removed for further study after VICA and others – even the mayor himself – expressed concern. VICA appreciates these efforts made to ease the burden on employers. However, the fact is, many of our elected officials have never run a business, and don’t know how certain legislation affects people in their everyday lives. A minimum wage increase to $15 an hour with a few small tweaks is still a 67 percent spike in salary and a 100 percent increase when taxes and workers compensation are factored in. A requirement for employers to provide employees with 12 days per year of paid time off may have been pulled from the final wage proposal, but it will be back. And California legislators passed a three-day-per-year paid time off mandate that employers will have to adjust to come July 1. These sorts of extreme new laws don’t just hurt employers. Even the City Council admitted that last month’s minimum wage increase is an “experiment.” Yes, a 15-member legislative body voted to conduct a social experiment on nearly 4 million people. In short, lawmakers in general don’t seem to have much of a concept of the cumulative effects of legislation on their constituents. As if a massive increase in labor costs for businesses in L.A. weren’t enough, those businesses still have the gross receipts tax to deal with. The tax is essentially a punishment for running a business that makes money – companies have to pay taxes on any and all income, regardless of profits. City officials have vowed to gradually phase out the gross receipts tax – also known as the business tax – but with the significant labor cost just imposed on city businesses, nothing but a swift and total elimination of the tax has much of an impact now. On the same day the City Council held its minimum wage hearing, it also heard comments on a proposed wage theft ordinance. While VICA is certainly against wage theft, the ordinance wastes city resources by creating an ordinance when a law already exists at the state level. A report on the ordinance also recommended the inclusion of a private right of action, allowing employees to hire attorneys to sue for punitive and real damages, rather than contacting the labor relations board. Such a provision would mostly benefit trial lawyers, who could use the opportunity to prey on employees and encourage them to bring legal action against an employer in order to collect attorney’s fees. Allowing a private right of action would be costly and time consuming for businesses, who would have to respond to increased lawsuits, and would clog the already-overburdened court system. Another force businesses continue to contend with is the broader issue of overregulation. Studies have shown that California has one of the most costly, uncertain regulatory environments in the country. Just within the realm of labor law, the state enacted an average of 15 statutory changes per year between 1992 and 2002, which is four times the nationwide average, according to the California Business Roundtable. A regulatory problem of great severity in California is the California Environmental Quality Act, or CEQA. Created with good intentions, but fleshed out with unrealistic goals, CEQA has required businesses to make severe cuts in their greenhouse gas emissions – oftentimes to a degree that current technology cannot achieve – or otherwise be hit with hefty fines. Furthermore, CEQA’s confusing and repetitious structure has a tendency to invite lawsuits against businesses. It has given many a special interest group leverage to secure contracts while causing long and expensive project delays. With all this in mind, it’s a wonder companies still make the choice to do business here at all. Make no mistake that California’s mystical appeal will soon run out if our legislators don’t make serious and sustained efforts to better the business environment. Stuart Waldman is president of the Valley Industry and Commerce Association, a Sherman Oaks advocacy group that represents employers throughout Los Angeles County at the local, state and federal levels of government.
