Agenda Item
i
October 24, 2013
Public Hearing
MEMORANDUM
October 22, 2013
TO:
FROM:
County Council
Robert H. Drummer, Senior
Josh Hamlin, Legislative Attorne):l
LegiS~atiY
Attorney
/vv.'j
J
i
Public Hearing:
Bill 27-13, Human Rights and Civil Liberties - County
SUBJECT:
Minimum Wage - Dollar Amount
Bill 27-13, Human Rights and Civil Liberties - County Minimum Wage - Dollar
Amount, sponsored by Councilmembers EIrich, Ervin and Council President Navarro, was
introduced on October 1. A Health and Human Services Committee worksession is tentatively
scheduled for November 21 at 9:30 a.m.
Bill 27-13 would:
• require certain private sector employers in the County to pay a minimum
wage to employees working in the County;
• provide a credit for an employer who provides health insurance to
employees working in the County;
• provide enforcement by the Office of Human Rights and the Human
Rights Commission;
• authorize the Human Rights Commission to award relief for violations;
and
• generally regulate the minimum wage paid to a private sector employee
working in the County.
Background
Maryland's minimum wage is only $7.25 per hour, or $15,000 a year for a full-time, year
round worker, and leaves a full-time earner and their families below the federal poverty line.
Nineteen states have raised their minimum wages above Maryland's rate, including Alaska,
Arizona, California, Colorado, Connecticut, Florida, Illinois, Maine, Massachusetts, Michigan,
Missouri, Montana, New Mexico, Nevada, Ohio, Oregon, Rhode Island, Vermont, and
Washington, as well as the District of Columbia.
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In addition, the minimum standard of living in Montgomery County is higher than the
minimum standard of living in many other counties in Maryland. Poverty level wages increases
the need for the County to spend public money for the relief of these low wage earners and their
families.
Bill 27-13 would establish a County mmlmum wage for private sector employees
working in the County unless the State or federal minimum wage is higher. The County
minimum wage would be phased in over several years. The rate would be $8.25 per hour on July
1,2014, $9.75 per hour on July 1,2015, and $12.00 per hour on July 1,2016. During the phase­
in period between July 1, 2014 and July 1,2016, an employer would be able to pay the prior year
rate for an employee's first 90 days on the job. Beginning on July 1,2017, the $12.00 rate would
be raised by any increase in the Consumer Price Index on an annual basis. The County minimum
wage would not apply to a worker who is not covered by the State minimum wage, a tipped
employee, or a worker subject to an opportunity wage under the State or federal law.
Bill 27-13 would also encourage employers to provide health insurance by giving an
employer a credit for the cost of the employer's share of the health insurance premium per
employee. The County Office of Human Rights would be responsible for enforcement of the
law. A worker would be able to file a complaint with the Office of Human Rights and obtain an
adjudicatory hearing before the Human Rights Commission.
Legal Authority
Montgomery County can pass its own minimum wage law even though the State of
Maryland has a minimum wage law. In
City of Baltimore
v.
Sitnick,
254 Md. 303 (1969), the
Maryland Court of Appeals upheld a city ordinance establishing a minimum wage standard that
was higher than the State standard. In that case, the plaintiffs argued that State law had
preempted the field of minimum wage. In rejecting that argument, the Court held that the City of
Baltimore could pass its own minimum wage law based on the city's exercise of concurrent
power because the city law did not conflict with the State law. The County Attorney's Office
recently issued an opinion similarly concluding that the County has the authority to enact a
County minimum wage. See ©9-12.
A Regional Approach
Similar bills have been introduced in Prince George's County and the District of
Columbia that would increase the minimum wage in those jurisdictions to $11.50 per hour over
the next 3 years. Councilmember Eirich indicated that he will request an amendment to Bill 27­
13 to reduce the minimum wage from $12.00 per hour to $11.50 per hour to be consistent with
the bills in Prince George's County and the District of Columbia.
Fiscal and Economic Impact
The OMB and Finance Fiscal and Economic Impact Statement is at ©13-19. OMB
estimated that the Office of Human Rights would need to hire an additional 3 investigators to
handle minimum wage complaints at an annual cost of $346,980. , OMB also estimated that the
civil citation revenue could reach $87,500 to $125,000 per year.
2
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Finance noted that economists disagree on the potential economic impact of an increase
in the minimum wage. In addition, available Bureau of Labor Statistics employment data does
not single out Montgomery County. Finance was unable to predict the economic impact of the
Bill.
This packet contains:
Bill 27-13
Legislative Request Report
County Attorney Opinion October 11,2013
Fiscal and Economic Impact Statement
1
8
9
13
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3
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Bill No.
27-13
Concerning: Human Rights and Civil
Liberties - County Minimum Wage ­
Dollar Amount
Revised: September 17. 2013 Draft No.
Q
Introduced:
October 1. 2013
Expires:
April 1. 2015
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective:
July 1. 2014
Sunset Date:
-:...:.No~n.!!:e:.....-
_ _ _ _ __
Ch.
Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council members EIrich, Ervin and Council President Navarro
AN
ACT to:
(1)
(2)
(3)
(4)
(5)
require certain employers in the County to pay a minimum wage to certain
employees working in the County;
provide a credit for certain employers who provide health insurance to employees
working in the County;
provide enforcement by the Office of Human Rights and the Human Rights
Commission;
authorize the Human Rights Commission to award certain relief; and
generally regulate the minimum wage paid to an employee working in the County
for certain employers.
By amending
Montgomery County Code
Chapter 27, Human Rights and Civil Liberties
Sections 27-7 and 27-8
By adding
Montgomery County Code
Chapter 27, Human Rights and Civil Liberties
Article XI, Minimum Wage
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No. 27-13
1
2
Sec.
1.
Sections 27-7 and 27-8 are amended and Chapter 27, Article
XI is added as follows:
27-7. Administration and enforcement.
(a)
Filing complaints.
Any person subjected to a discriminatory act or
3
4
5
6
7
practice in violation of this Article.1 or any group or person seeking to
enforce this Article or [Article] Articles X or XI, may file with the
Director a written complaint, sworn to or affirmed under the penalties of
perjury, that must state:
(1)
(2)
the particulars ofthe alleged violation;
the name and address of the person alleged to have committed the
violation; and
(3) any other information required by law or regulation.
8
9
10
11
12
13
14
15
16
17
18
*
(1)
*
*
(0
Initial determination, dismissal before hearing.
The Director must determine, based on the investigation, whether
reasonable grounds exist to believe that a violation of this Article
or [Article] Articles X or XI occurred and promptly send the
determination to the complainant and the respondent.
(2)
If the Director determines that there are no reasonable grounds to
believe a violation occurred, and the complainant appeals the
determination to the Commission within 30 days after the
Director sends the determination to the complainant, the Director
promptly must certify the complaint to the Commission. The
Commission must appoint a case review board to consider the
appeal. The board may hear oral argument and must:
(A)
(B)
19
20
21
22
23
24
25
26
27
dismiss the complaint without a hearing;
order the Director to investigate further; or
6)­
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BILL
No.
27-13
28
(C)
set the matter for a hearing by a hearing examiner or the
board itself, and consider and decide the complaint in the
same manner as if the Director had found reasonable
grounds to believe that a violation of this Article or
[Article] Articles X or XI occurred.
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
(3)
If the Director determines that there are reasonable grounds to
believe a violation occurred, the Director must attempt to
conciliate the matter under subsection (g).
*
27-8. Penalties and relief.
(a)
*
*
Damages and other relieffor complainant.
After finding a violation
of this Article or [Article] Articles X or XI, the case review board may
order the payment of damages (other than punitive damages) and any
other relief that the law and the facts warrant, such as:
*
(2)
*
*
equitable relief to prevent the discrimination or the violation of
[Article] Articles X or XI and otherwise effectuate the purposes
of this Chapter;
*
(4)
*
*
any other relief that furthers the purposes of this Article or
[Article] Articles X or XI or is necessary to eliminate the effects
of any discrimination prohibited under this Article.
48
49
50
51
52
53
*
ARTICLE XI.
*
*
County Minimum Wage.
27-67.
Findings and Definitions.
!ill
Findings.
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BILL
No. 27-13
54
55
56
57
58
ill
ill
ill
Many persons employed in the County are paid wages which are
insufficient to sustain minimum standards of living in the County.
Minimum standards of living in the County are higher than the
minimum standards ofliving in many other areas of the State.
Minimum wage standards in the County are necessary to:
(A)
promote the health and welfare of County residents;
safeguard employers and employees against unfair
competition;
59
60
61
au
(g
(ill
62
63
increase the stability of industry in the County;
increase the buying power of employees in the County;
and
64
65
66
67
®
@
decrease the need for the County to spend public money
for the relief of employees who also live in the County.
Definitions.
As used
in
this Article:
Consumer Price Index
means the Consumer Price Index for All Urban
Consumers: All items in Washington-Baltimore, DC-NID-VA-WV
(CMSA),
published by the United States Department of Labor,
68
69
70
71
Bureau of Labor Statistics, or
f!
successor index.
72
Director
means the Executive Director of the Office of Human Rights
and includes the Executive Director's designee.
73
74
75
76
77
Employ
means to engage
f!
person to work for compensation.
Employee
means any person permitted or instructed to work or be
present by an employer in the County and who is an employee subject
to the minimum wage requirements ofthe Federal Act or the State Act.
78
79
Employer
means any person, individual, proprietorship, partnership,
joint venture, corporation, limited liability company, trust, association,
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BILL
No. 27-13
80
81
or other entity that employs
2.
or more persons in the County. Employer
does not include the United States, any State, or any local government.
Federal Act
means the federal Fair Labor Standards Act of 1938, as
82
83
amended.
Health insurance
means insurance coverage that is part of an employer
84
85
86
87
benefit package that
lli!:Y§
for medical expenses incurred
Qy
an employee
and an employee's family either
Qy
reimbursing the employee or
Qy
paying the care provider directly.
State Act
means the Maryland Wage and Hour Law, as amended.
Wage
means all compensation that is due to an employee for
88
89
90
91
92
employment.
27-68.
Minimum Wage Required.
ill
County minimum wage.
Except as provided in Subsection
(Q1
an
93
94
employer must
~
wages to each employee working in the County at
least the greater of:
95
ill
ill
ill
the minimum wage required for that employee under the Federal
Act;
the minimum wage required for that employee under the State
Act; or
the County minimum wage of $12 per hour, as adjusted under
Subsection (Q1less any health insurance credit under Subsection
96
97
98
99
100
101
102
103
104
105
106
!£1
{hl
Annual adjustment.
The Chief Administrative Officer must adjust the
minimum wage rate required under Subsection (a)(3), effective July
L
2017, and July
1
of each subsequent year,
Qy
the annual average
increase, if any, in the Consumer Price Index for the previous calendar
year. The Chief Administrative Officer must calculate the adjustment to
m
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Bill
No. 27-13
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
the nearest multiple of
~
cents, and must publish the amount of this
adjustment not later than March
1
of each year.
ill
Health insurance credit.
An employer who provides health insurance to
any employee who works in the County may reduce the County
minimum wage payable under paragraph (aX3) to any employee who is
eligible to receive health insurance
Qy
all or part of the per-employee
hourly cost of the employer's share of the premium for that insurance.
@
Exclusions.
The County minimum wage does not apply to an employee
who:
ill
ill
ill
27-69.
is exempt from the minimum wage requirements of the State or
Federal Act;
is
~
tipped employee under the State Act; or
is subject to an opportunity wage under the State or Federal Act.
Enforcement.
A covered employee who was paid
~
wage rate less than the County minimum
wage in violation of this Article may file
~
complaint with the Director under Section
Sec. 2.
Transition.
In
Notwithstanding Section 27-68(a)(3), as added
Section 1, the County
126
127
128
129
130
131
132
minimum wage must be:
(a)
effective July
1, 2014, $7.25
per hour for an employee during the
employee's first
90
days of employment and
$8.25
per hour beginning
on the employee's
91
5t
day of employment;
(b)
effective July
1, 2015, $8.25
per hour for an employee during the
employee's first
90
days of employment and
$9.75
per hour beginning
on the employee's
91
5t
day of employment; and
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BILL
No.
27-13
133
l34
l35
l36
l37
(c)
effective July 1, 2016, $9.75 per hour for an employee during the
employee's first 90 days of employment and $12.00 per hour beginning
on the employee's 91
st
day of employment.
Sec. 3.
Effective Date.
This Act takes effect on July 1,2014.
Approved:
138
139
Nancy Navarro, President, County Council
Date
140
Approved:
141
Isiah Leggett, County Executive
Date
142
This is a correct copy ofCouncil action.
143
Linda M. Lauer, Clerk of the Council
Date
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LEGISLATIVE REQUEST REPORT
Bill 27-13
Human Rights and Civil Liberties
-
County Minimum Wage
DESCRIPTION:
Dollar Amount
The Bill would establish a County minimum wage that must be paid
to certain employees working in the County for a private sector
employer. The Bill would also encourage an employer to provide
health insurance to its employees by providing a credit against the
County minimum wage based upon the cost per employee for the
insurance. If the State or federal minimum wage is greater than the
County minimum wage, an employer would still need to satisfY the
State or federal law.
The State and federal minimum wage of $7.25Ihour is insufficient to
support a full-time worker in the County.
To maintain a reasonable living wage for workers in the County
when the State and federal minimum wage is insufficient.
Human Rights Commission
To be requested.
To be requested.
To be requested.
To be researched.
Robert H. Drummer, Senior Legislative Attorney, 240-777-7895
To be researched.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Class A civil citation and equitable relief.
F:\LAw\BILLS\1327 Human RightS-Minimum Wage - Dollar Amount\LEGISLATIVE REQUEST REPORT.Doc
f:\law\bills\1327 human rights-minimum wage - dollar amount\legislative rec
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lsiah Leggett
County Executive
Marc P. Hansen
County Attorney
OFFICE OF THE COUNlY
ATIORNEY
MEMORANDUM
TO:
FROM:
VIA:
James
Stowe, Director
Office of Human Rights
Erin
J.
Ashbarry ""-[::-:
Associate County
At~'
~~
~
, ,__
~
--
..
",
. '.
.
'"
.
....
:~
."~-!f7j
.
i-;i
~G
..:
Marc
P.
Hansen, County Attorney
October
It.
2013
-;1;1
:G
');J
DATE:
........
RE:
8iH 27-13, Human Rights and Civil Liberties - County Minimum Wage - Dollar
Amount
Bill
27-13
amends
the
County's Human
Rights
law to
set
a minimum wage paid to by
employers to employees for work in the County, and provides for enforcement by the Office of
Human Rights and the Human
Rights
Commission.
In our view, this law would withstand legal challenge. This law would survive a
chaJlenge on the issue of preemption by Federal or State minimum wage laws: the Federal
minimum wage law expressly preserves local laws that may set
higher
rates, and the Court of
Appeals found Slate law did not preempt a local minimum wage law in
Mayor ofBallimore v.
Silnick,
254 Md. 303,255 A.2d 376
(J
969). The County needs to ensure, however, that its Jaw is
clearJy crafted to be a local law, applying only to work perfonned in the County for employers in
the County.
Both the Federal and State government have minimum wage laws. The Federal
minimum wage rate of$7.25 is set forth in the Fair Labor Standards Act ("FLSA").
f
This is also
2
the minimum wage rate in effect under the State of Maryland's Wage and Hour Law. Notably,
bills failed in the Maryland General AssembJy's 2013 session that would have raised the State's
I
See
29 U.S.c.
§
206(a)(l) (2012). The $7.25 minimum wage rate
has
been in effect since July 2009.
See id.
generally.
Md. Code Ann., labor
&
Empl.
§§
340)
-431
(2008 Rcpl.
Vol.);
see
id.
§
413(b)(I)
(setting a
minimum
wage
at the greater of$6.15 or
the
minimum wage under
the
FLSA).
2
See
101 Monroe Street, Third Floor. Rockville, \1aryland 20850·2580
(NO) 777-6744.
iTO (240)
777·2545 • FAX (240) 777·6705.
erin.ashoorry@montgomcrycoumymd.go
v
(j)
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James Stowe
October 1 ],2013
Page 2
minimum wage.
3
The County's proposed law, which sets a minimum wage rate of $12.00 per hour with
increases phased in thereafter, would not be subject to federal preemption because the FLSA
expressly contemplates that State and local jurisdictions may enact higher wage rates.
4
The question of whether the State's minimum wage law preempts a local minimum wage
law was resolved by the Court of Appeals in
Mayor
0/
Baltimore
v.
Sitnick,
254 Md. 303, 255
A.2d
376
(1969). The Court found that Maryland's minimum wage rate did not preempt
Baltimore's minimum wage law, as Baltimore's law supplemented the State law by setting a
higher rate.
See Sitnick,
254 Md. at
317.
Baltimore's minimum wage law is still in effect and
en forced.
s
Since the
Sitnick
decision, the Court of Appeals reviewed the issue of implied
preemption
6
by State law on many occasions and developed a detailed analysis. In reviewing
this issue today, the Court would look to "the primary indicia ofa legislative purpose to pre-empt
an entire field of law," by reviewing "the comprehensiveness with which the General Assembly
has legislated the field:,7
Sc..~ndariJy,
the Court would examine:
1) Whether local laws existed prior to enactment of the state laws governing the
same subject matter;
2) Whether the state laws provide for pervasive administrative regulation;
3) Whether the local ordinance regulates an area in which some local control has
traditionally been allowed;
1
See
S.B, 683, H.B, 1204. "Labor and Employment· Maryland Wage and Hour Law - Payment of Wages" Gen.
Assem.• Reg. Sess. (Md. 2013), The Senate Bill received an unfavorable vote before the Senate Finance CommiUee
on March 20,
2013.
See
29
U.S ,C. § 218(8)
(2012) ("No provision oftbis
A~t
or ofany order thereunder shall
Cltcuse
noncompliance
with
any
Federal
or
State law
or
municipal ordinance establishing a minimum wage higher than the minimum
wage
established under
this
Act... ").
4
genera/ly
Baltimore, Md.,
Code
§§
1·1 - 6-3 (2010);
id.
§
3-1 (setting minimum wage
for
"every
employer
operating and doing business in Baltimore
City" at
a rate "not less than tbe minimum wage required
by
the Fair
Labor Standards
Act");
id.
§§2-1 - 2·6
(establishing Wage Commission to
receive
and investigate wage law
violations);
id.
§§
4.1 .- 4.11
(establishing enforcement protocols for
the
minimum wage law).
S
See
State law may preempt local law in one of three ways: preemption
by
conflict, express preemption, or implied
preemption.
See Alladis US.A, Inc. v. Prince George's County.
431 Md. 307,31
J,
65 A.3d 118, 120 (2013). As
the Court in
Sitnick
found a local minimum wage law that set a higher rate did not create a conflict with State law,
and there is no express statement in the State's Wage and Hour
Law
that
indicates it supersedes all localla'W'S, a
reviewing court would likely proceed using the Court of Appeals' implied preemption analysis.
II
7
See
AlIied
Vendi"g. Inc. v. Bowie.
332
Md, 279, 299,631 A2d 77 (1993) (citations omitted).
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James Stowe
October 11, 2013
Page
3
4)
Whether the state law expressly provides concurrent legislative authority
to
local jurisdictions or requires compliance with local ordinances;
5)
Whether a state agency responsible for administering and enforcing state law
has recognized local authority to act in the field;
6)
Whether the particular aspect of the field sought to be regulated by the local
government has been addressed by the state legislation;
and
7)
Whether a two-tiered regulatory process existing if local laws are not pre­
empted would engender chaos and confusion.
8
Under these factors, the County's minimum wage law is valid and not preempted by the
State's Wage and Hour Law. Baltimore's minimum wage law has been in effect since 1966 and
enforced concurrently with the State's minimum wage law. Additionally, the State agency that
oversees enforcement of the Wage and Hour Law expressly recognizes local authority to act in
the field in its publications, which identify Baltimore as jurisdiction in which an individual may
pursue a violation of minimum wage laws.
9
Under the analysis developed by the Court of
Appeals after
Silnick,
the ongoing existence for four decades of minimum wage laws and
enforcement schemes at both the State and local leve1 weighs in favor of finding tbat the State
did not preempt the field of minimum wage regulation.
10
To avoid any claim that the minimum wage law
is
not a local law designed to regulate
only within the County, the County should be
dear
in the law,
its
1egislative history, and
its
enforcement that the law only applies to employers in
the
County and for work perfonned in the
County,ll
II
9
See Allied
Vending,
Inc. v. Bowie,
332 Md. 279,299-300,631 A.2d
77
(1993) {citations omitted}.
See the Maryland Guide
to Wage Payment and
Employment
Standards,
published
by
the
Employment Standards
Service of the Maryland Division of Labor
and
Industry, Department of Labor, Licensing and Regulation.
available
at lutp:II¥I'VI'w.dllr.sIGt{',md.us//abm'lw(lgepa'llwprcwrdies.shlml#juriscfifti<m
(identifying Baltimore as
II
potential
juri.sdi~tion
in
which a
claimant may
file
II
claim).
The Coun
of
Appeals
in
Silnick
also noted
that
"[l]here is a presumption of statutory construction that the
Legislature
acts
with
the
knowledge of existing
laws
on the subject malter under construction."
See
SUnick.
254 Md.
at 322. 255 A.2d at 385. The Court found that General
Assembly's
silence on
Baltimore's
1966
minimum
wage law
in its 1967 and
1968
sessions
undennined
any
argument
tJwt
the
Stale
intended
10
preempt the
field
of minimum
10
wage regulation.
See id.
lit
308, 322, 255 A.3d
at
378,385. Four decades' worth of General Assembly sessions
without a repeal of Baltimore's minimum wage Jaw only adds more
weight
to the view that the State did
001
intend
to
preempllocal
minimum
wage laws.
See,
e.g.,
Holiday
Universal,
Inc. v.
Montgomery'
County,
377 Md. 305,833 A2d 518 (2003) (holding County Jaw
was invalid under Maryland Constitution because of its substantial territorial affect outside
the
County and was not
II
local law). Baltimore's minimum wage law is clearly restricted to employees
and
employers
in
Bahimore
City.
See
Ballimore. Md.
Code
§§
I~l
(2010) (defining
employer
as certain entities or
individuals employing
2 or more
persons "in the
City
of Baltimore");
id.
§
3.1 (requiring payment of minimum wage
by
"every employer operating
and doing business
in Baltimore
City"
to
"each employee
in the City"
(emphasis
added».
II
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James Stowe
October
11,20[3
Page 4
If you have any concerns or questions concerning
this
memorandum please call me.
Enclosure (bill)
cc:
Kathleen
Boucher,
Assistant CAO
Robert
H. Drummer,
Senior
Legislative
Attorney
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ROCKVILLE, MARYLAND
MEMORANDUM
October 21,2013
TO:
FROM:
Jennifer
A.
~s,
Director, Office
of~~dget
Joseph F.
~~h:'Director,
Department of Finan
.
0
Nancy Navarro, President, County Council
SUBJECT:
Bi1127- 13, Human Rights and Civil Liberties - County Minimum Wage - Dollar
Amount
n
Please find attached the fiscal and economic impact statements for the above­
referenced legislation.
JAH:ha
c: Fariba Kassiri, Assistant Chief Administrative Officer
Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistant to the COlmty Executive
Patrick Lacefield, Director, Public Information Office
Joseph F. Beach, Director, Department ofFinance
Michael Coveyou, Department of Finance
Robert Hagedoorn, Department of Finance
David Platt, Department of Finance
James Stowe, Human Rights Commission
Pam Jones, Department of General Services
Philip Weed a, Office of Management and Budget
Henri Apollon, Office of Management and Budget
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Fiscal Impact Statement
Bill 27-13, Human Rights and Civil Liberties - County Minimum Wage - Dollar Amount
1. Legislative Summary.
Bill 27-13 would establish a minimum wage
in
the County for private sector employees
working
in
the County unless the State or federal minimum wage is greater than the
County's minimum wage. The County's minimtun wage would be phased in over several
years. The minimum wage would start at $8.25 per hour beginning on July 1,2014,
increase to $9.75 per hour beginning on July 1,2015, and increase to $12.00 per hour
beginning on July 1,2016. Beginning on July 1,2017, the $12.00 rate would be raised by
any increase in the Consumer Price Index on an annual basis. The bill provides a credit to
employers who provide health insurance to employees in the County. The bill authorizes
the Director of the Office of Human Rights to enforce its provisions and the Human
Rights Commission to award relief for any violations.
2.
An
estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed
in
the recommended or approved budget. Includes
source of information, assumptions, and methodologies used.
A person may file a complaint with the Director of the Office of Human Rights for a
violation of the wage requirements in this bill. According to the Office of Human Rights,
a similar program in the city of Baltimore's Office of Civil Rights and Wage
Enforcement has three investigators enforcing its living wage law and investigates
between 175 and 250 complaints each year.
It
is unknown how many complaints would
be filed in Montgomery County each year so the effect on the Office of Human Rights'
caseload cannot be determined at this time. The Office would need to monitor its
workload for a period of time to assess the legislation's actual impact. Assuming the
city
of Baltimore's experience, however, the County's cost could be $346,980 annually for
three investigators and an office services coordinator.!
The Office of Human Rights would be authorized to assess civil penalties of $500 each
for violations of the minimum wage requirement.
It
is unknown how many complaints
would result in civil penalties, but assuming 175 to 250 complaints annually, fine revenue
could be up to $87,500 to $125,000 per year. This is
8n
upper limit estimate since it is
possible that not all complaints would result in the assessment of a penalty.
The bill would not affect the County's contracts subject to the living wage or prevailing
wage requirements since they are both above the minimum wage requirement in this bill.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
Assuming the complaint rate noted above, expenditures over six years could be
$2,081,880 and revenues could be between $525,000 and $750,000.
Two grade 23 Investigator II positions, one grade 25 Investigator III, and one grade 16 Office Services
Coordinator, all at
mid~point.
The cost estimate includes group insurance, retirement, and payroll taxes. According
to the Office of Human Rights, the skill set needed to investigate and enforce the minimum wage requirement is
different than the Office's existing complement of investigators, therefore, the implementation of this legislation
will require some level of additional staffing.
I
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4.
An
actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
Not applicable.
5. Later actions that may affect future revenue and expenditures if the bill authorizes future
spending.
Not applicable.
6.
An
estimate of the staff time needed to implement the bill.
See number 2.
7.
An
explanation of how the addition of new staff responsibilities would affect other duties.
See number 2.
8.
An
estimate of costs when an additional appropriation is needed.
See number 2.
9. A description of any variable that could affect revenue and cost estimates.
The number of complaints, resulting investigations, and assessment of civil penalties are
the primary variables that could affect the County's revenues and costs.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
See number 2.
11. If a bill is likely to have no fiscal impact, why that is the case.
Not applicable.
12. Other fiscal impacts or comments.
Not applicable.
13. The following contributed to and concurred with this analysis:
James Stowe, Office of Human Rights
Pam Jones, Grace Denno, Department of General Services
Phil Weeda, Office of Management and Budget
10 /'2.I/l
9
Date
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Economic Impact Statement
Bill 27-13, Human Rights and Civil
Liberties­
County Minimum Wage - Dollar Amount
Background:
This legislation would:
• Require certain private sector employel's
in
the County to pay a minimum wage to
employees working in the County,
• Provide a credit for an employer who provides health insurance to employees
working in the County,
• Provide enforcement by the Office ofHuman Rights and the Human Rights
Commission.
• Authorize the Human Rights Commission to award relief for violations; and
• Generally regulate the minimum wage paid to a private sector employee working
in
the County.
Bil127-13
(Bill)
would establish a minimum wage in the County for private sector
employees worldng in the County unless the State or Federal minimum wage
is
greater
than
the County's minimum wage. The County's minimum wage would be phased in
over several years. The minimum wage would start at $8.25 per hour beginning on July
1,2014, increase to
$9.75
per hour beginning on July 1,2015,
and
increase to $12.00 per
hour beginning on July 1,2016. Beginning on July 1,2017, the $12.00 rate would be
raised by any increase in the Consumer
Pllce
Index on an annual basis.
1. The sources of information, assumptions, and methodologies used.
The sources of information include various economic studies that analyzed the effects
ofincreasing the minimum wage on employment. Those studies include the
following:
• David Card and Alan B. Krueger, "Minimum Wages and Employment: A
Case Study ofthe Fast-Food Industry
in
New Jersey and Pennsylvania";
The
American Economic Review,
Volume
84,
Number
4,
September
1994.
• David Neumark and William Wascher, "Minimum Wages and Employment:
A Review ofEvidence from the New Minimum Wage Research, NBER
Working Paper Series} National Bureau ofEconomic Research, November
2006.
• OUi
Ropponen, "Reconciling the Evidence of Card and Krueger
(1994)
and
Neumark and Wascher (2000)", Discussion Paper No. 325, Helsinki Center of
Economic Research, April 2011.
Page
1
of4
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Economic Impact Statement
Bill 27-13, Human Rights and Civil Liberties -
COlmty
Minimum Wage - Dollar Amount
• Saul D Hoffman and Diane M. Trace, "NJ and PA Once Again: What
Happened to Employment When the PA-NJ Minimum Wage Differential
Disa~peared?",
Eastern Economic Journal.
Volume 35, 2009.
• John P. Fomby, John A. Bishop, Hoseong
Kim,
"The Redistributive Effects
and Cost Effectiveness ofIncreasing the Federal Minimum
W~ge",
Employment Policy Institute, October 2009.
There is disagreement among economists as to the economic impact ofminimum wages.
This disagreement is based on two models of economic analysis:
• The "neoclassical" model ofdemand and supply that by requiring a minimum
wage above the equilibrium wage established by the demand and supply of labor
would result in unemployment. The result, it is argued by some economists, is
there would be a greater number ofindividuals willing to work at the higher wage
rate while a lower number ofjobs would be availa,ble at that rate.
• An
alternative model to the "neoclassical" model is that low-wage labor markets
are characterized as
monopsonistiC
competition whereby employers have
significantly more
market power
than do workers. This monopsony could be the
result ofpricing power by the employer, that is, he or she is able to pass along the
increase in the wage rate through higher prices. This ability to pass on the wage
increase is attributed to the
elastic/inelastic
demand for the product by the
consumers.
Card and Krueger argued that the negative employment effects on the minimum wage
laws range from minimal to non-existent.
In
subsequent research, Neumark and Wascher
analyzed the effect of increases in the minimum wage for large fast food restaurant chains
that were followed by decreases in employment.
Ropponen reconciled the differences between Card-Krueger conclusion and Neumark­
Wascher conclusion. Both studies, according to Ropponen, lead to the conclusion that
the conditional employment effects are positive for small
fast~food
restaurants but
negative for big fast-food restaurants. He suggests
that
the effect of an increase in the
minimum wage on employment is based on the location ofrestaurants and a demand side
effect:
An
increase in the minimum wage would have multiplier effect on the local
economy, that is, the increase in wages would result in an increase spending by the
employees.
Alan
Blinder, former Vice Chairman of the Board ofGovernors ofthe Federal Reserve
System, suggests three reasons minimum wages do not affect employment: higher wages
may reduce turnover and therefore training costs, raising the minimum wage may
eliminate the problem of recruiting work:ers at a higher wage than CUlTent workers, and
minimum wage earners represent a small portion of the employer's cost that an increase
is relatively insignificant to the employer's total cost ofproduction.
Page 2 of4
@)
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Economic Impact Statement
Bill 27-13, Human Rights and Civil Liberties ­
County Minimum Wage - Dollar Amount
Based on 2012 data from the Bureau ofLabor Statistics (BLS) and the Maryland
Department ofLabor, Licensing and Regulation, there were 67,000 employees in
Maryland earning at or below the minimum wage which represents just 2.3% ofthe total
state workforce as measured by the labor force series data. Since the 2012 data are based
on a survey ofhouseholds nationwide, there is no specific data on minimum wage
employees in Montgomery County. Based on BLS data, minimum wage employees are
typically in the leisure and hospitality industry, retail, and education and health services.
In
terms of occupations, nearly 44% are in food preparation and serving related
occupations nationwide.
2. A description of any variable that could affect the economic impact estimates.
• The ability ofthe employer to pass the increase ofthe minimum wage to his or
her customers
• The share ofminimum wage eru.ners to total employment for a particulru.· business
• The elastic/inelastic demand for the business's product or service
• The costs ofretraining workers
• The extent to which higher minimum wages induce greater spending
in
the local
economy
3. The
Bill's
positive or negative effect,
if
any on employment, spending, savilllg,
investment, incomes, and property values in the County.
As stated previously, there is no consensus among economists on the effects ofthe
minimum wage and employment. Based on the review of the research, it
is
not certain
whether an increase in the minimum wage would increase or decrease employment. This
uncertainty is based on the following factors presented in Section 2:
• The ability ofthe employer to compensate for the increase in the minimtUn wage
by passing such increase onto customers
with
higher prices
• The proportion of the wage costs among workers earning the minimum wage to
the total costs ofproduction
• The multiplier effect ofincreasing the minimum wage on the local economy
Finally, in the research studies presented above, the conclusions are based on the datasets
used to determine the effect of the minimum wage on employment, the statistical
methods used to reach those conclusions, and the model used as the theoretical
framework to conduct the analysis.
4. H
a
BiU
is likely to have no economic impact,
why
is that the case?
It is uncertain whether increasing the minimum wage would increase or decrease
employment among low-wage workers. As stated in Section 3, the economic impact
Page 3 of4
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Economic Impact Statement
Bill 27-13,
Human Rights and Civil Liberties
­
County Minimum Wage - Dollar Amount
would
be based
on
the
assumptions
and
the
characteristics and
location ofthose
businesses that would
be
required to raised the minimum wage.
5.
The following contributed to and concurred with this
analysis:
David Platt and
Rob Hagedoorn, Finance.
Date
I
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