History of Los Angeles Living Wage

Campaign for Passage of the Ordinance

The Los Angeles Living Wage Coalition was convened by the Los Angeles Alliance for a New Economy (LAANE) in early 1996 to spearhead the campaign for a living wage ordinance. LAANE, a non-profit organization founded in 1993 with the goal of improving the quality of life for working families in Los Angeles, coordinated and staffed the intense two year campaign that involved policy development, coalition building, research, education and advocacy.

The broad-based Living Wage Coalition (LWC) evolved from the Los Angeles Service Contract Worker Retention campaign and was comprised of workers, labor organizations, community and faith-based groups and members of academia.

The LWC chose the legislative route rather than the initiative process because to the prohibitive cost of competing with well-funded opposition from the business community. The legislative approach was bolstered by the presence of a council member ready to champion the ordinance - Jackie Goldberg. In July, 1996, Goldberg introduced the motion to create a Living Wage Ordinance for Los Angeles.

The LWC was faced with powerful and well-funded opposition from both the Mayor's office and the local business community. The LWC expected opponents to attempt to weaken the Ordinance by attacking particular provisions, such as those for health benefits, but the opposition instead took the tactic of challenging on the basic idea of government mandating wages and claimed that the policy would destroy small businesses.

The advocates for the ordinance contended that full-time workers performing services for the city should not require public assistance to obtain medical care and presented research and expert testimony on the importance of health insurance coverage and the rates of non-coverage among low-wage workers. They pointed further to the supposed benefits to employers of providing health care:

• Businesses attract better employees and reduce employee turnover.
• Employers enjoy tax benefits as insurance premiums are tax-deductible.
• Productivity increases with reduced absenteeism of a healthy workforce.

The opposition, for its part, benefited from an analysis commissioned by the city of the projected economic impact of a LWO. Although the findings supported passage, the study found that the average dollar amount spent by employers with city contracts who provided health coverage was only $1.25 per hour. The report also recommended that the base wage be lowered, arguing that the city would likely bear the burden of the higher wage and that workers would be eligible for the federal Earned Income Tax Credit which would bring their effective wage to a higher level.

Overwhelmed with battles related to passage of the ordinance as a whole, the LWC agreed to the reduced wage credit and lower base wage with the intention of amending the ordinance at a later date.
Despite these compromises, the campaign still faced concerted opposition which was only overcome through well-prepared research, effective organizing, a clever media strategy, political savvy and the inside leadership of progressive City Council members. After a hard-fought eighteen-month campaign, the City Council passed the ordinance unanimously on March 18, 1997, later overriding a mayoral veto to make the policy law in May 1997.

As finally adopted, the LWO required any business with a new or renewed service contract with the city or a municipal subsidy over $25,000 to pay employees either $8.50 per hour, if no health benefits were offered, or $7.25 per hour plus benefits equal to at least $1.25 per hour.

Early Implementation of the Living Wage Ordinance

The enforcement agency designated in the ordinance was the Bureau of Contract Administration (BCA), chosen because it was the city department in charge of contract review and administration and already administered the Service Contract Worker Retention Ordinance.

The agent of enforcement is crucial to effective implementation and the Los Angeles LWO was implemented and enforced by the BCA at a very slow pace. Research conducted by LAANE, UCLA and others, as well as informal feedback from workers, demonstrated that the BCA was implementing the ordinance with, as council member Goldberg remarked in understatement, “a lack of zeal.” After one year, the LWO had been applied to only one-third of the intended firms and fewer than one-third of these were complying fully.

1. Weak Enforcement
The BCA devoted most of its time to determining whether contracts and leases submitted by city departments were covered by the LWO, doing very little enforcement and no auditing. Although half of the workers targeted by the LWO were thought to be already receiving health benefits prior to passage of the LWO, these packages varied and the BCA did not conduct audits to determine if firms were spending $1.25 per hour on benefits. Few site visits were conducted by the BCA and none found compliance problems, although investigation of compliance by LAANE identified numerous violations. The Bureau did not take action against non-complying firms while city departments varied widely in their own monitoring efforts.

2. Excessive Exemptions
The BCA granted exemptions for 59% of the contracts, even though very few were contemplated in the regulations. For example, the BCA determined that, absent federal consent, contracts that included federal funds were exempt but it did not actively pursue a federal opinion on the issues and ignored precedents to the contrary established by other jurisdictions. And federal consent to the LWO was not actively sought.

3. Inadequate Health Benefits
The BCA did not collect information on whether health benefits were offered and allowed employers who already had health benefits costing less than $1.25 per hour to add Living Wage workers to the plan. Employers were purchasing insurance coverage for their LWO employees for less than $1.25 per hour and, in effect, keeping the extra wage credit for themselves.

4. Data Collection and Dissemination
The BCA was not proactive in obtaining information about new contracts from city departments in order to develop a centralized database of LWO employers and did not make the information it did possess available. LAANE's compliance and research activities were hindered by the consequent inability to obtain information on contractors from the BCA.

5. Complaint Process
Although complaint forms were developed for employees, no system for handling complaints was developed and no one in the Bureau spoke Spanish - the primary language of many of the impacted workers. Moreover, to impede grassroots compliance activities, the BCA imposed a pro-business attitude on the worker trainings conducted by LAANE that informed employees of procedures for filing complaints against their employers.

6. Interference with Worker Trainings
Some six months after passage of the ordinance, the city asked LAANE to design and conduct trainings for impacted workers in conjunction with the BCA. From the beginning, the BCA stipulated how trainers portrayed unions and business, required employees who attended to sign in, contradicted the trainers and insisted that employers be allowed to attend the trainings. All this intimidated employees, discouraged attendance and hampered candid discussion of violations to the Ordinance.

7. Pro-business Bias
The relationships and attitudes the Bureau staff developed in their primary role of administering city contracts were inevitably friendly to business - it was their job to keep firms happy. This made them ill-suited to implement a policy that businesses perceived as not in their interests. BCA management and staff directed enforcement based on their interpretation of the regulations in the context of these biases. Inadequate staff, lack of training, and high turnover exacerbated the problem.

Transfer of Enforcement Authority

The City Council recognized the shortcomings of the BCA's implementation of the Ordinance and, in November, 1998, eighteen months after passage, amended the Ordinance. The amendment transferred enforcement to an "Administrative Agent" designated by the City Council, giving the council flexibility to change the enforcement agency if needed.

Once again, effective research and organizing by LAANE and strong support from Council Member Jackie Goldberg were essential to success. Other amendments to the Ordinance adopted at the same time included a presumption that all service contracts and leases are covered by the LWO, reducing the need to determine the applicability of the LWO to each contract, and clear statements of applicability to city leases and to contracts involving federal funds.

The City Council transferred enforcement to the City Administrative Officer (CAO), which provides staff support to City Council members and the Mayor's office, two months after the amendments were passed. Since the CAO took over the enforcement function, enforcement of the Ordinance has become proactive. The office has compiled a central database of contractors and information flow to grassroots groups has improved. Payroll records are used to verify how much money is deducted from the employee's wage for health insurance and a copy of the health insurance policy must be provided to verify cost of coverage. Field audits are conducted in which two months of payroll documents are required and, if a violation is found, the employer must provide all payroll records. If proof of compliance is not submitted within fourteen days, the CAO recommends that the lease or contract be terminated for non-compliance. To date, firms have complied with the requirements of the CAO's office and no contracts have been terminated for non-compliance.

LAANE's deep involvement with the LWO and close relationships with legislators, city officials and workers have enabled the organization to play a central role in compliance. LAANE staff conduct site visits to obtain information from workers on health benefits received. LAANE also tracks new contracts and Requests For Proposals (RFPs) for firms offering services likely to be performed by low wage workers. LAANE checks the RFPs and contracts for required language and memos are sent to the CAO if non-compliance is discovered.