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Minimum Wage Increase Takes Effect This Week



By HOWARD FINE

For restaurant operators, retailers and others, the new year will ring in an unpleasant shock as California’s minimum wage jumps for the second time in two years.

This time, the minimum wage is going to $8 an hour from $7.50. A year earlier, it went from $6.50 to $7.50.

Thousands of restaurant owners throughout Orange County, and businesses in scores of other industries, will face a stark choice: raise prices, cut back employee hours or take home less profit as round two of the minimum-wage hike kicks in.

California’s minimum wage will be the highest of any state in the nation, except Washington, where the wage rises to $8.07 on Tuesday.

For California businesses, the increase in the minimum wage is by far the most sweeping law taking effect this week.

Unlike past new years in which employers were hit by an onslaught of burdensome regulations, this year, the flow of new laws with significant impact on business has slowed to a trickle.

For that, employers can thank Gov. Arnold Schwarzenegger, who vetoed every bill that business interests dubbed a “job killer.” In other cases, his veto threats prompted other bills to die in the Legislature.

“It was a good defensive year for businesses,” said John Kabateck, executive director of the California chapter of the National Federation of Independent Business.

But this could be the calm before the storm. A deal between Schwarzenegger and Assembly Speaker Fabian Nu & #324;ez, D-Los Angeles, for a sweeping overhaul of the state’s health insurance system is working its way through the Legislature.

If it passes early next year and wins approval from voters in November, it would require every employer to provide healthcare or pay up to 6.5% of payroll to a state-managed fund that would subsidize coverage for lower-income families.

In the interim, there are scores of new laws that Schwarzenegger did sign this past fall that impact specific industries, such as one prohibiting healthcare facilities from retaliating against employees who file grievances.

There also are dozens of laws taking effect this week that can best be described as paperwork nuisances. Of these, the most prominent is AB 650, which requires all employers to notify workers about eligibility requirements to receive the earned income tax credit, a federal program to aid low-income workers. The notices must go out at the same time or within a week of the Internal Revenue Service’s W-2 form or 1099 form used for independent contractors.

“This may not be overly burdensome, but it’s one more mandate among hundreds that employers must follow,” said Scott Hauge, president of the Small Business California advocacy group.

Hauge said some of his members are concerned about the possibility of requiring tax credit notification for workers receiving 1099s.

“It sets a precedent that essentially begins to treat independent contractors the same as full-time employees,” he said. “They fear that the next step will be performing the withholding for anyone to whom you send 1099 forms.”

Among the other noteworthy laws taking effect Tuesday are: AB 338, which extends the eligibility time for temporary disability payments; and AB 392, which requires employers with at least 25 employees to give workers as many as 10 unpaid days off when a spouse is on leave from military deployment.

And then there is AB 869, which was backed by small business groups. It requires state labor code enforcers to crosscheck with payroll records to make sure all employers are providing workers’ compensation insurance.

“One of the biggest problems for small businesses is the underground economy and the competition from firms that don’t comply with all the labor and employment laws,” Hauge said. “This bill tackles one small piece of that.”

But for most employers, the big news new year’s day will be the minimum-wage hike.

Fine is a staff reporter at the Los Angeles Business Journal.

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