Running a small business in Orange County isn’t cheap.
With the costs for gas, materials and rent all going up, staying in business here is a challenge.
And owners have to figure a growing minimum wage into those costs.
In January, California’s minimum wage increased to $8 an hour, now one of the highest in the country.
Retailers, restaurants, light manufacturers, janitorial and landscaping companies are just a few that have been hit hard by the increase.
Small-business owners worry that higher minimum wage rates could eat into profits, according to Chris Lorenzana, business development director for the Small Business Administration in Santa Ana.
Others welcome higher wages because they attract qualified workers, he said.
“A minimum wage hike could help small businesses. They’re able to find more reliable people,” Lorenzana said. “A modest increase in wages convinces more qualified people to enter the labor market such as retirees or spouses who want more money.”
Higher minimum wage rates are just some of the extra financial burdens affecting the restaurant industry. Lazy Dog Cafe, a Huntington Beach-based operator of restaurants in Orange, Westminster and Torrance, counts 450 workers. A good chunk of them make minimum wage.
“The restaurant business has its challenges with minimum wage going up and the cost of food rising,” said Chris Simms, founder and president of Lazy Dog Cafe. “But it’s important to hire enough workers so that your business can run smoothly.”
Irvine-based Futek Advanced Sensor Technology Inc., which generates $10 million in yearly sales making sensors and related instruments used to measure everything from torque and water pressure to heat and force, counts 85 employees, with many of them earning minimum wage.
President Javad Mokhbery acknowledges the burden of a higher minimum wage, but welcomes the type of workers it brings in.
“It attracts people with more skills,” Mokhbery said. “You get a lot of college students who have good communication and computer skills.”
Although the minimum wage increase means more of an expense for business owners, Mokhbery believes that companies need to capitalize on their workers.
“When we hire people at minimum wage we make it a mission to give them more training so they can move up in the company and improve their lives,” Mokhbery said.
A handful of Futek’s workers were immigrants and have moved up within the company, according to Mokhbery.
“For many of them this is their first job in America,” Mokhbery said. “They come in at minimum wage but they work hard and they don’t stay at that level for very long.”
Mokhbery believes higher minimum wages are necessary in order to live in OC.
“In Orange County, I can’t see how people can survive on minimum wage,” he said. “It’s so expensive to live here.”
But small business owners need to look beyond the cost of higher minimum wage rates and pay attention to premiums paid on overtime, missed meal periods and split shifts, according to Bruce May, a labor and employment litigator at Newport Beach’s Stradling Yocca Carlson & Rauth.
“Increased minimum wage has a ripple effect on other costs,” he said.
Small business owners need to pay close attention to minimum wage workers, their shifts and breaks in order to avoid class action lawsuits, May said.
“Class action lawsuits are no longer just the curse of big businesses,” May said. “Small- business owners need to have good tracking skills in place.”
Small-business owners can’t look at a missed meal period as just that, May said. One worker could tap a lawyer and seek a settlement for missed meal periods going back for years. When a class action lawyer brings a bunch of other employees into a lawsuit, it’s a huge burden for employers, May said.
“We’ve seen class action lawsuits against a single restaurant where they seek to recover missed meal periods for four years,” May said. “When you multiply each missed meal period by number of workers, you’re left with a huge financial burden.”
A slow economy could push more employers to lay off minimum-wage employees, according to Tiffanny Brosnan, a labor and employment partner at Snell & Wilmer LLP in Costa Mesa.
Small business owners need to be aware that layoffs aren’t always the best way to save money, she said.
“The goal should be to reduce labor costs, not just reduce headcount,” she said. “Employers need to figure out not just who to lay off but who to keep in order to keep their businesses operating efficiently.”
Small businesses can reduce employment costs by hiring less temporary workers, implementing hiring freezes, reducing the amount of overtime, getting rid of unproductive workers and implementing early retirement plans, according to Brosnan.
“When the economy is declining it’s always good for a company to communicate business goals with employees and make them a part of the solution,” she said.
