GO Item #2
January 21,2016
Worksession
MEMORANDUM
January 19,2016
TO:
FROM:
SUBJECT:
Government Operations and Fiscal Policy Committee
Amanda Mihill, Legislative Attorney:
'..-/f,1 ,
,I/\Y)t)~'
,
Worksession: Bill 43-15, Contracts and Procurement - Wage Requirements ­
Amendments
Bill 43-15, Contracts and Procurement - Wage Requirements - Amendments, sponsored by Lead
Sponsors Councilmembers EIrich and Navarro and Co-Sponsors then-Council President Leventhal
and Councilmember Riemer, was introduced on October 20,2015. A public hearing was held on
December I, at which all speakers supported Bill 43-15 (see testimony on ©17-27).
Bill 43-15 would require certain contractors or subcontractors to submit certain payroll records to
the Chief Administrative Officer (CAO); specify the remedies for a violation of the wage
requirements; and specify that a violation of the wage requirements law is a potential cause for
debarment or suspension.
Issues for Committee Discussion
Collective Bargaining Exemption
County Code §llB-33A(d) requires each of the County's
contractors and subcontractors to pay an employee a specific living wage (currently $14.35/hr).
Section IlB-33A(t) exempts certain employees from the living wage requirements, including
employees "for whom a lower wage rate is expressly set in a bona fide collective bargaining
agreement." S.everal speakers at the hearing urged the Council to remove this exemption. This
language was included in the living wage law as originally enacted by the Council in 2002. Council
staff is unsure as to the rationale for including it in the law, but agrees with the recommendation
to remove it. If it is the Council's policy that employees of contractors should be paid a certain
rate, then even employees subject to a collective bargaining agreement should be paid that rate at
a minimum. Council staff recommendation: remove the exemption in the living wage law for
employees subject to a collective bargaining agreement.
Annual Cost of Living Increase
Some speakers at the hearing urged the Council to amend the
living wage law such that employees of contractors are entitled to receive an annual cost ofliving
adjustment. Council staff notes that the current law already requires the CAO to adjust the living
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wage that contractors and subcontractors must pay their employees by the average increase in the
Consumer Price Index (§1IB-33A(e)(2)).
Other issues
In the Procurement Director's testimony as well as meetings between Council staff
and Executive staff, several issues were raised. These issues are discussed below:
1.
Gross
v.
Net Wages.
Section llB-33A(e) requires that each covered employer pay each
employee a specific amount for the time the employee actually provides services to the
County. In her testimony at the hearing, Procurement Director Cherri Branson questioned
whether the amount required is based on gross wages or net wages (after deductions of
certain amounts).
Council staff comments:
Council staff agrees that it would be beneficial
to clarify this in the law and suggests that the law specify that the amount to be paid is
gross wages. Council staff notes that Bill 43-15 would require a contractor to also report
fringe benefits by type and amount (see ©3, lines 31).
2. Audit Costs.
Current law (§IIB-33A(i)(2)) requires the CAO to perform random audits as
part of the enforcement of the law. Bill 43-15 would make amendments to this Section to
allow for regular audits and provide for certain sanctions. These amendments would
conform the audit and sanction to those specified in the prevailing wage law. Director
Branson notes that this language does not clearly indicate whether the County can recoup
its costs for performing an audit.
Council staff recommendation:
amend Bill 43-15 to
specifically allow the County to recover costs for performing an audit. Committee members
may wish to discuss with Executive staff what (if any) the implications of this language
would be for future contracts.
3. Debarment.
Bill 43-15 would specify that a violation of the living wage law could be a
cause for debarment or suspension under the Procurement law (©6, line 130). Director
Branson noted her belief that the debarment and suspension system needed to be changed,
but suggested that the changes "occur holistically" in a separate bill.
Council staff
comments:
Council staff concurs that it would be beneficial for the Executive and Council
to consider whether changes to the debarment and suspension process are warranted.
However, that does not prevent the Council from adding living wage violations to the list
of causes for debarment/suspension. Even with this amendment, a future bill can revise the
debarment/suspension system in its entirety.
4. Submission ofPayroll Records.
Bill 43-15 would require payroll records to be submitted
within 14 days after the end of each payroll record. This would mirror the payroll record
submission requirement in the prevailing wage law. Procurement staff requested that
payroll records be submitted quarterly.
Council staff comments:
Council staff's
understanding is that there is currently an automated process used to spot issues of concern
regarding prevailing wage and that the automated process is not available for the living
wage law. Council staff is not opposed to amending Bill 43-15 to require quarterly
submission of payroll records, but suggests that the Office work toward having an
automated process similar to reviewing prevailing wage payroll records so that more
frequently reporting can be required.
2
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This packet contains:
Bill 43-15
Legislative Request Report
Press Release
Fiscal and Economic Impact Statements
Select correspondence
Circle#
1
8
9
12
17
F:\LAW\BILLS\I543 Contracts And Procurement-Wage Requirements\GO Memo.Docx
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Bill No. _ _ _
~~
_ _ _ __
Conceming: Contracts and Procurement
Wage
Requirements
Amendments
Revised: 10/14/2015
Draft No. 4
Introduced:
October 20, 2015
Expires:
April 20, 2017
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: _ _ _ _ _ _ _ __
Ch. _ _ Laws of Mont. Co. _ _ __
I
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmembers EIrich and Navarro
Co-Sponsors: Council President Leventhal and Councilmember Riemer
AN
ACT to:
(1)
(2)
(3)
(4)
require certain contractors or subcontractors to submit certain payroll records to the
Chief Administrative officer;
specifY the remedies for a violation ofthe wage or records requirements;
amend the causes for debarment or suspension; and
generally amend the County procurement laws.
By amending
Montgomery County Code
Chapter lIB, Contracts and Procurement
Section IlB-33A and IIB-37
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deleted from existing law by original bill.
Added by amendment.
Deleted from existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves thefollowing Act:
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BILL
No. 43-15
1
2
Sec. 1. Section 11B-33A is amended as follows:
11B-33A. Wage requirements.
3
4
'"
(g)
Wage reporting.
'"
'"
5
6
(1 )
The Director must insert into each contract subject to this Section
a provision that requires a covered employer to submit to the
Director a report (on a schedule determined by the Director)
showing a summary of the wages paid to its employees, who
performed direct, measurable work under the contract, by gender
and race.
7
8
9
10
11
12
ill
Each contractor and subcontractor must submit a complete
fQPY
of
its payroll records for work performed on
~
contract covered
Qy
this Section to the Chief Administrative Officer or
~
designee
within 14 days after the end of each payroll period.
13
14
15
16
17
18
ill
The payroll records must contain
~
statement signed
Qy
the
contractor or subcontractor certifying that:
(A)
the payroll records are correct; and
the wage rates paid are not less than those required
Qy
this
Section.
an
@)
19
20
21
22
Each payroll record must include:
(A)
the name, address, and telephone number of the contractor
or subcontractor;
23
an
©
the name and location ofthe job; and
each employee's:
24
25
26
27
ill
(ii)
name;
current home address, unless previously reported;
daily straight time and overtime hours;
(iii)
f;\I
~
ills\1543 contracts and procurement-wage requirements\bill4.docx
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BILL
No. 43-15
28
(iv)
total straight time and overtime hours for the payroll
period;
29
30
M
(vi)
rateof~
31
32
33
34
fringe benefits
Qy
~
and amount;
(vii) gross wages; and
(viii) the employer and the employee share of any health
insurance premium provided to the employee.
35
36
ill
Each contractor or subcontractor must:
(A)
keep payroll records covering work performed on
~
contract
covered
Qy
this Section for not less than
~
years after the
work is completed; and
37
38
39
40
m1
subject
to
reasonable
notice,
permit
the
Chief
Administrative Officer or
~
designee to inspect the payroll
records at any reasonable time and as often as the Chief
Administrative Officer deems necessary.
41
42
43
44
45
(Q)
The ChiefAdministrative Officer or
~
designee must make payroll
records obtained from contractors or subcontractors under this
Section available for public inspection during regular business
hours for
~
46
years after the Chief Administrative Officer receives
~
47
48
49
the records, unless disclosure of
federal or state law.
[(2)]
(1)
[(3)]
®
[(4)]
(2}
[(5)]
record is prohibited under
50
51
52
am
53
54
*
*
*
*
*
~
*
*
*
*
*
*
*
*
*
*
(i)
Enforcement.
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contracts and procurement-wage requirements\bill4.docx
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Bill
No.
43-15
55
56
57
58
(1)
The Chief Administrative Officer must requrre each covered
employer to:
(A)
certify that the employer and each subcontractor is aware of
and will comply with the applicable wage requirements of
this Section;
(B)
keep and submit any records necessary to show compliance;
and
(C)
conspicuously post notices informing employees of the
requirements of this Section, and send a copy of each such
notice to the Chief Administrative Officer's designee.
59
60
61
62
63
64
65
(2)
The Chief Administrative Officer or
~
designee must [enforce this
Section,] perform random or regular audits [and any other audit
necessary to do so,] and investigate any complaint ofa violation of
this Section. If the Director determines that
~
66
67
68
provision of this
~
69
70
71
Section has been violated, the Director must issue
written
decision, including imposing appropriate sanctions, and may
withhold from payment due the contractor, pending
decision, an amount sufficient to:
~
final
72
73
ill
eii)
~
each employee of the contractor or subcontractor the
74
75
76
77
full amount of wages due under this Section; and
satisfy
~
liability of
~
contractor for liquidated damages as
provided in this Section.
(3)
An employer must not discharge or otherwise retaliate against an
employee for asserting any right under this Section or filing a
complaint of violation. Any retaliation is subject to all sanctions
for noncompliance with this Section.
78
79
80
G)
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BILL
No. 43-15
81
82
(4)
The sanctions ofSection IlB-33(b) which apply to noncompliance
with nondiscrimination requirements apply with equal force and
scope to noncompliance with the wage requirements of this
Section.
83
84
85
86
87
88
(5)
Each contract may specify that liquidated damages for any
noncompliance with this Section includes the amount of any
unpaid wages, with interest, and that the contractor is jointly and
severally liable for any noncompliance by a subcontractor. In
addition, each contract must specify:
(A)
that liquidated damages may be imposed on the contractor
in the event that a
[a]
covered employer violates the wage
reporting or payroll records reporting requirement in
subsection (g).1 including for providing late or inaccurate
payroll records; and
(B)
that an aggrieved employee, as a third-party beneficiary,
may by civil action enforce the payment of wages due
under this Section and recover any unpaid wages with
interest, a reasonable attorney's fee, and damages for any
retaliation for asserting any right under this Section.
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
(§)
If
~
contractor or subcontractor fails to submit, or is late in
submitting, copies of any payroll record or other report required to
be submitted under this Section, the County may deem invoices
unacceptable until the contractor or subcontractor provides the
required records or reports, and may postpone processing
payments due under the contract or under an agreement to finance
the contract.
IlB-37. Debarment or suspension.
aJ
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requirements~iII
4.docx
~.
.
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BILL
No.
43-15
108
*
(C)
suspension may include:
(1)
*
*
109
110
Causes for debarment or suspension.
The causes for debannent or
111
112
113
conviction for commission of a criminal offense incident to
obtaining or attempting to obtain a public or private contract or
subcontract, or in the performance ofthe contract or subcontract;
114
(2)
conviction of embezzlement, theft, forgery, bribery, falsification
or destruction of records, receiving stolen property, kickbacks or
any other offense indicating a lack of business integrity;
115
116
117
118
(3)
conviction under state or federal antitrust statutes arising out ofthe
submission of bids or proposals;
119
120
121
122
123
124
(4)
violation of County contract provisions of a character which is
regarded by the Director to
be
so serious as
to
justify debarment
action. These provisions may include:
(A)
deliberate failure without good cause to perform under the
specifications or within the time limit provided in the
contract; or
(B)
a record of failure to perform or of unsatisfactory
performance under the provisions of one or more contracts;
however, failure to perform or unsatisfactory performance
caused by acts beyond the control of the contractor are not
a basis for debannent;
125
126
127
128
129
130
131
132
133
(5)
violation of the wage requirements in Section
IlB-33A;
any other serious cause the Director determines to be so
compelling as to affect the competency or integrity of a potential
contractor, including debannent by another public entity; or
®
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BILL
No.
43-15
134
135
136
[(6)]
m
violation of the ethical standards set forth in this Chapter or
Chapter 19A.
(d)
Decision.
The Director must issue a written decision to debar or suspend.
The decision must:
(1)
(2)
state the reasons for the action taken; and
inform the debarred or suspended person of the right to an
administrative appeal, after the decision becomes final, to the
Circuit Court under the Maryland Rules.
137
138
139
140
141
142
143
144
145
146
(e)
The Director must send a copy ofthe decision to the person involved and
the ChiefAdministrative Officer who may approve, revise, or remand the
decision. If the Chief Administrative Officer takes no action within 5
working days, the decision ofthe Director becomes final.
(f)
Appeal to court.
The debarred or suspended person may appeal the
decision to debar or suspend to the Circuit Court under the Maryland
Rules governing administrative appeals. The debarred or suspended
person and the County may appeal the decision ofthe Circuit Court to the
Court of Special Appeals.
147
148
149
150
151
0)
/'J)
f:\law\bills\1543 contracts and procurernent-wage requirements\bill4.docx
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LEGISLATIVE REQUEST REPORT
Bi1l43-15
Contracts and Procurement Wage Requirements
-
Amendments
DESCRIPTION:
Bill 43-15 would require certain contractors or subcontractors to
submit certain payroll records to the Chief Administrative officer;
specify the penalties for a violation of the wage requirements; amend
the causes for debarment or suspension; and generally amend the
County procurement laws.
There have been reports that some County contractors and
subcontractors may be implementing paycheck deductions for benefits
that employees have not requested and services like cellphones and
uniforms. There are not adequate reporting requirements in the current
Living Wage law.
To strengthen enforcement of the Living Wage law.
Procurement
To be requested.
To be requested.
To be requested.
To be researched.
Amanda
M. Mihill,
Legislative Attorney 240-777-7815
N/A
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A
F:\LAw\BILLS\1543 Contracts And Procurement-Wage Requirernents\LRR.Docx
®
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Montgomery
County Council
For Immediate Release
.
Oct.
16,
2015
Contact: Neil H. Greenberger 240-777-7939
1
Delphine Harriston 240-777-7931
Sonya Healy
240-777-79261
Namita Acharya 240-777-7819
N
E
Montgomery Councilmembers Marc Eirich
and Nancy Navarro to Introduce Bill to
Strengthen Reporting Requirements and
Enforcement of County's Living Wage Law
New Law Would Close Reporting Loopholes and
Expand Enforcement Options
ROCKVILLE, Md., Oct. 16, 20 IS-Montgomery County Councilmembers Marc
EIrich, chairs the Council's Public Safety Committee, and Nancy Navarro, who
chairs the Government Operations and Fiscal Policy Committee, on Tuesday, Oct.
20, will introduce Bill 43-15 that would strengthen enforcement of the County's
W
S
R
Living Wage Law. The bill, which is also co-sponsored by Council President
George Leventhal, would require additional reporting requirements for County
contractors and subcontractors and expands enforcement options to help ensure
compliance with the County's living wage requirements.
"There have been reports that certain County contractors and subcontractors
implement paycheck deductions for benefits, which employees have not requested,
and services like cellphones and uniforms," said Councilmember EIrich. "These
deductions reduce employee pay below the County's living wage. The new
reporting requirements and enhanced enforcement actions proposed in Bill 43-15
are intended to crack down on these practices. County law requires that our
contractors pay a living wage, and the actions by some to circumvent the intention
of that law have made this legislation necessary."
The bill will be introduce during the morning session of the Council's regular
weekly meeting that will be held in the Third Floor Hearing Room of the Council
E
L
E
A
S
E
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2
Office Building at 100 Maryland Ave. in Rockville and will be televised live by
County Cable Montgomery (CCM-Cable Channel 6 on Comcast and RCN,
Channel 30 on Verizon). The broadcast also will be streamed at:
http://tinyurl.com/khktggw.
A public hearing on the bill is tentatively scheduled for 1:30 p.m. on Nov. 17.
"Companies that do business with Montgomery County have an obligation to treat
their employees fairly," said Councilmember Navarro. "Bill
43~15
will help
protect working families by ensuring that contractors and subcontractors are truly
paying a living wage to their employees and are not side-stepping their responsibly
by implementing unauthorized payroll deductions and other fees. This bill expands
reporting requirements and provides real penalties for those who fail to comply
with the County's Living Wage Law."
The County Council enacted its Living Wage legislation in 2002 (Bill 5-02). The
law requires certain businesses that provide services to the County to pay
employees working on a County contract a minimum living wage that was
originally set at $10.50 per hour. The County's chief administrative officer must
adjust the rate each July 1 by the annual average increase, if any, in the Consumer
Price Index for all urban consumers for the Washington-Baltimore metropolitan
area. Effective July 1,2015, the living wage is $14.35 through June 30,2016.
As proposed, Bill 43-15 requires County contractors and subcontractors to submit
a complete copy of all payroll records for work performed within 14 days after the
end of each payroll period and must certify that the records are correct and that the
wage rates comply with County law. In addition, County contractors and
subcontractors must retain payroll records for no less than five years after the work
is completed. The chief administrative officer or a designee may inspect payroll
records at any reasonable time and as often as necessary.
In addition, Bill 43-15 provides that the County may withhold payments from a
contractor in an amount sufficient to pay each employee the full amount of wages
due and may postpone payments due until the contractor or subcontractor provides
the required records or reports. If a violation of the County's living wage
requirements is found, debarment or suspension of a contractor may be considered.
"This measure will improve the County's ability to ensure our law is being
complied with, and workers are being treated fairly," said Council President
Leventhal.
####
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1-1­
From: "Zhang, Felicia" <Felicia.zhang@montgomerycountymd.gov>
Date:
11130/20152:52:38
PM
To: "County Council" <County.Council@montgomerycountymd.gov>, "Lauer, Linda"
<Linda.Lauer@montgomerycountymd.gov>, npecoraro, Karen"
<Karen.Pecoraro@montgomerycountymd.gov>
Cc: "Kirkland, Bonnie" <Bonnie.Kirkland@montgomerycountymd.gov>, "Austin, Lisa"
<Lisa.Austin@montgomerycountymd.gov>, "Nurmi, Joy"
<Joy.Nurmi@montgomerycountymd.gov>, "Lacefield, Patrick"
<Patrick.Lacefield@montgomerycountymd.gov>, "Beach, Joseph"
<Joseph.Beach@montgomerycountymd.gov>, "Hughes, Jennifer"
<Jennifer.Hughes@montgomerycountymd.gov>, "Espinosa, Alex"
<Alex.Espinosa@montgomerycountymd.gov>, "Platt, David"
<David.Platt@montgomerycountymd.gov>, "Coble, Monika"
<Monika.Coble@montgomerycountymd.gov>, "Babra, Gulshan"
<Gulshan.Babra@montgomerycountymd.gov>, "Mia, Naeem"
00
<Naeem.Mia@montgomerycountymd.gov>, "Finn, Erika Lopez"
--:
<Erika.Finn@montgomerycountymd.gov>, "Branson, Cherri"
<Cherri.Branson@montgomerycountymd.gov>
Subject: RE: FEIS for Bill 43-15, Contracts and Procurement - Wage Requirements­
Amendments
Please see the attachment of the FEIS for Bil143-15, Contracts and Procurement - Wage
Requirements - Amendments.
Thank you.
Felicia Zhang
Administrative Specialist
Office of Management and Budget
Montgomery County Maryland
(240) 777-2788
IFelicia.Zhang@montgomerycountymd.gov<mailto:Felicia.Zhang@montgomerycountymd.gov>
®
,
I •
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Fiscal Impact Statement
Council Bill 43- 15; Contracts and Procurement - Contracts and Procurement - Wage
Requirements - Amendments Wage Requirements - Amendments
1. Legislative
Summary.
The proposed legislation will require contractors or subcontractors
to
submit certain
payroll records to the Chief Administrative officer; specify the remedies for a violation of
the wage or records requirements; and amend the causes for deban:nent or suspension.
The proposed legislation also requires audits to be performed and shortens the time for
contr~ctors
to submit payroll records from one quarter to fourteen (14) days.
2. An eStimate of changes
in
County revenues and expenditures regardless ofwhether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
sourc.e of information, assumptions,
and
methodologies used.
The proposed legislation does not affect County revenues.
The proposed legislation would require additional staff time, estimated at 2.0 FrEs
($184,268 total), redaction costs ($4,200 for software), and audit costs ($100,000).
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
Over 'the next six years staffing costs would be $1,105,611 for the two FTEs. Audit costs
are estimated at $600,000.
4. An actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
The proposed legislation does not affect retiree pension or group insurance costs.
5.
An
estimate of expenditures related to County's information technology (IT) systems,
including Enterprise Resource
~lanning
(ERP) systems.
The proposed legislation does not affect ERP systems.
6. Later actions that may affect future revenue and expenditures
jf
the bill authorizes future
spending.
The proposed legislation does not authorize future spending.
7.
An
estimate of the staff time needed to implement the bill
Procurement estimates two full-time FTEs, a ProcUI.ement Specialist and a'Living Wage
Program Manager, at a grade 23 to implement the bilL Staffing costs are estimated at
@
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$184,268, and associated one time, operating expenses are $2,074 (furniture, desk
installation).
"/
The Living Wage Program Manager (Grade 23) Wbuld review vendors' wage
requirement law (WRL) eligibility, conduct site visits, review payroll reports, track
submission status, follow up with vendors on submissions, and validate compliance. The
position also wouW compile and analyze operational reports, monitor audits and manage
audit contractors, process
and
track MPIA requests, monitor and follow up on violating
contractors' corrective actions, and conduct outreach. Procurement estimates this
additional work would require 2,035 annual hours on its employees, or a one FTE staff
equivalent. DBRC estimates biweekly tracking logging and reviewing payrolls at 1,020
hours per year. Site visits would account for 680 hours, and audit related activities
(memos, meetings, and logistics) would be 100 hours for four random audits and two
regular annual audits. DBRC estimates vendor outreach at 35 hours per year and
redaction efforts
at
200 hours per year.
The Procurement Specialist (Grade 23) would manage the increase in the number of
compliance related contract actions, research and analyze alternative contract options and
interim contractors on an emergency basis, provide analysis and guidance on
determinations and findings, increase outreach to using departments on operational
impacts resulting from recommended actions or options, as contractor violations are
identified. Procurement estimates an approximately 2,000 annual hours for its employees,
or one FTE staff equivalent. The proposed legislation will add 760 hours for increased
frequency of payroll reports and new auditing requirements.
l
Procurement estimates 260
hours for data management, website updates, redactinginfonnation, and reviewing
impacts to other contractors.
2
Procurement estimates 900 hours for Contract
Administrator training, identifying issues, and making recommendations related to the
procurement process under the enhanced enforcement.
8.
An
explanation of how the addition of new staff responsibilities would affect other duties.
The proposed legislation requires contractors to submit payrolls "within 14 days after the
end of each payroll period". The current requireJ;llent is quarterly payroll reports. For
a
comparison, the Prevailing Wage Law (PWL) Program uses a contractor
to
monitor bi­
weekly payroll submission for all County constructions contracts. The contractor uses a
payroll submission and monitoring system (LCPtracker) and 2-3 full time employees for
the monitoring services.
The proposed legislation also requires the County make the records available for public
inspection. Payroll records often contains personal and proprietary information (ex:
social security numbers, home addresses, etc.) which must be redacted. Redactions will
be a significant workload and potential legal issue
if
Procurement inadvertently discloses
This figure is based on eight hours per contracts
and
an increase of 95 contracts.
2
This figure
is
based on five hours estimated per week on these tasks for 52 weeks.
!
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a record prohibited under federal or state law. Redactions may also involve coordination
with other departments and the contractor.
The proposed legislation also requires random audits, and Procurement
has
used the
Intenial Audit Office's auditors. Given then increase
in
audits required by the legislation,
ProcUrement estimates $100,000
in
associated audit costs which include contracts for
auditing and in house staff time to administer the audit contractor(s) and resulting
procurement contract actions.
9.
An
estimate of costs when an additional appropriation is needed.
The proposed legislation would require additional stafftime, estimated at 2.0 FTEs
($184,268
total),
redaction costs ($4,200 for software), and audit costs ($100,000).
10. A description of any variable that could affect revenue and cost estimates.
A key variable which could influence revenue and cost estimates are the number of
payroll records Procurement receives.
11. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not applicable.
12. If a bill is likely to have no fiscal impact, why that is the case.
Not applicable.
13. Other fiscal impacts or comments.
The proposed legislation may add an administrative burden to small businesses in order
to comply with added requirements to the WRL.
14. The following contributed to and concurred with this analysis:
Pam Jones, Office of Procurement
Grace Denno, Office of Procurement
Erika Lopez-Finn, Office of Management and Budget
s, Director
e of Management and Budget
Date)
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Economic Impact Statement
Bil143-15, Contracts and Procurement - Wage Requirements Amendments
M
Background:
This legislation would:
• require certain contractors or subcontractors to submit certain payroll records to
;the
Chief Administrative Officer (CAO),
• kpecify
the remedies for a violation of the wage or records requirements; and
• amend the causes for debannent or suspension.
Essentially. Bil143-15 amends Section llB-33A(g)(2) of Chapter
lIB,
Contracts and
Procurement, ofthe County Code that would require each contractor and subcontractor to
submit complete copy of
its
payroll records to the CAO
within
fourteen (14)
days
after
the end of each payroll period. Section llB-33A(g)(4)
lists
the items included in each
payroll record that
is
submitted to the CAO. . .
a
1.
The sources of
~rormation,
assumptions, and methodologies used.
The source of information is the Office ofProcurement (procurement). There are no
assUmptions or methodologies used in the preparation ofthe economic impact
statement. Based on the infonnation provided by Procurement, there are over 400
contractors and subcontractors that are affected by
Bill
43-15. According to
Procurement, Bi1l43-15 could impose additional administrative costs on vendors to
comply with the legislation. Without specific
data,
it
is uncertain the amount of
additional administrative costs. Such additional costs could include additional
administrative
staff
to the vendor or additional hours for the current staff to complete
the new requirements.
2. A description of any variable that could
affect
the
economic
impact estimates.
The variables that could affect the economic impact
estimate
are the number of
additional
staff,
the additional hours
for
the current
staff
to complete the new
requirements, and the number of vendors affected
by
the legislation.
3. The Bill's positive
or
negative effect,
if
any on employment, spending, savings,
investment, incomes, and property values in the County.
Bil143-15
may
impose additional
admini~trative
costs on vendors but the potential
negative effect could be offset by a positive effect on the County's economy through
an increase
in
wage and salary income with the addition of
staff
or the additional
hours for current employees. The difference
in
the amount of the offset between the
County's business income and employee's wage and salary income is uncertain
without specific
data.
Therefore, ifboth effects are equal, that
is,
the
cost
to the
vendor.is identically offset by the incomes to
staff,
Bill
43-15 would have no
economic impact
Page 1 of2
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Economic Impact Statement,
Bill 43-15,
Contracts and Procurement- Wage Requirements - Amendments
4.
If
a Bill
is
likely to have no economic impact, why is that the case?
'
It
is uncertain without specific data whether Bil143-15
would
have a net economic
impact on employment and incomes in the County.
5. The following contributed to or concurred
with
this analysis: David Platt,
Mary
Casciotti. and Rob Hagedoom. Finance; Grace Denno, Office of Procurement: Erika
Lopez-Finn, Office of Management and Budget.
Department of Finance
Page 2 of2
{[01
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l
Testimony on behalf of County Executive Isiah Leggett
Bill 43-15, Contracts and Procurement - Wage Requirements Law - Amendments
Good afternoon, Council President Leventhal and Members of the County Council. I am
Cherri Branson, Director of Montgomery County's Office of Procurement, and I am here
to testify on behalf of County Executive Isiah Leggett regarding Bill 43-15, Contracts and
Procurement - Wage Requirements Law amendments.
If enacted, Bill 43-15 would require contractors and subcontractors subject to the Wage
Requirements Law ("WRL") to submit bi-weekly payroll records to the County; provides
specific remedies for a contractor's violation of the WRL's wage or records requirements;
and adds a violation ofthe WRL to the list of items for which a contractor may be
debarred or suspended.
The County Executive supports the intention of this Bill and the Council's efforts to give
the Office of Procurement more WRL enforcement authority. However, there are certain
provisions which may undermine the goal of improving the efficacy of our WRL
enforcement efforts, and we look forward to working with you to resolve these concerns.
The County has approximately 400 contracts subject to the Wage Requirement Law.
Although worker transition makes it difficult to produce an exact number, we believe that
these contracts employ at least 4,500-5,000 people.
Currently, the Office of Procurement requires quarterly submission of the payroll records
of these vendors. A quarterly submission schedule requires the submission of the payroll
records of each covered employee. More frequent submissions may enable us to detect a
failure to pay employees properly under the WRL. Once a WRL violation is suspected,
an audit is commenced. Thus, more frequent inspections may trigger more audits.
However, it should be noted that more frequent payroll submissions would also increase
the administrative costs of implementing this program. Additionally, while the language
of the bill provides for withholding payment in the event of a violation, it should be noted
that withholding payment during an on-going service contract may affect the ability of
the vendor to meet payroll obligations.
Further, while the County Executive supports the bill, it would be helpful for this bill to
address ambiguities within the law that also may negatively impact the enforcement
process.
When we meet for the upcoming work session on Bill 43-15, there are several issues
which we would like to put forward as potential items for discussion:
I) The WRL specifies that a violation occurs when the wage rate is less than the
established dollar amount. However, the law does not specify whether the
relevant dollar amount to be considered is the Gross Wage or the Net Wage.
Many desirable fringe benefits that positively affect employee well-being may
reduce the net wage dollar amount resulting in a figure that is lower than the
@
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living wage. On the other hand, consideration of the gross wage as the only
measure which should be relied upon would increase the efficiency of
enforcement. Because each measure--net wage and gross wage--has advantage
and detriment, a legislative clarification of whether the dollar amount that should
be considered is the net wage or the gross wage would be helpful.
2) As the County Attorney
has
noted in his Memorandum dated October 29,2015,
the bill requires the CAO to make payroll records available for public inspection.
The Maryland Public Information Act prohibits the disclosure of an individual's
fmancial information. Therefore, to comply with the MPIA and this bill,
additional staff time would need
to
be devoted to assuring the proper redaction of
personally identifiable information.
3) The bill permits the County to withhold payments from a contractor if a violation
of the WRL is found. However, the bill does not clearly indicate whether the
county may recoup the audit costs it incurs as a result ofthe enforcement action.
We would ask that audit costs be included in those liquidated damage costs that
the county may recoup.
4) The bill acknowledges the need to reconsideLthe county's current suspension and
debarment system. We agree that the system needs to be changed and ask that the
changes occur holistically in a separate bill.
County Executive Leggett supports the intent of this bill and believes that stronger
enforcement of the WRL will send a powerful message to the contractors and their
employees. Executive branch staff is committed to working with the Council on this
measure.
@
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Testimony of Adisa Muse
Political and Legislative Director
MD Working Families
on B43-15
December
1,
2015
r31()~
Thank you
~veIltha:l
for holding this hearing today on B43-15. My name is AdisaMuse,
and I serve as the political and legislative director for Maryland Working Families. We are in
conversation with thousands of Montgomery County residents every year, including the working
people that we support and are assembled here today.
Maryland Working Families supports the concept of a living wage and without a doubt we support
B43-15. The modem living wage movement started in Maryland when Baltimore passed an
ordinance requiring
firms
that did business with the city to pay employees a rate above the minimum
wage while working on city contracts. Since then, over 120 communities have followed, some
setting wage floors more that twice the federal minimum
wages, and others, like Montgomery County, have required various benefits.
The most common themes among our fellow proponents of a living wage are (1) that wages should
be high enough to allow workers to meet basic needs, and (2) that municipal policy should encourage
or require living wages for its employees and contractors, rather than exacerbate the problems faced
by low-wage workers.
It has been proven that living wages lift workers out of poverty and improve local economies by
increasing the circulation of money. But the only way for workers to benefit from living wage laws
is if they are covered by laws that are implemented and enforced.
If
few workers are covered and/or
policies are not actually mtl'lft'ftted or enforced, there is little reason to
think
that workers will gain.
I'JII..·...
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~pt~~
B43-15 accomplishes six critical things that strengthens accountability procedures for the County's
Living Wage contractors and increases penalties for violators:
1.
Requires the county's Living Wage contractors to submit certified payrolls.
Maryland Working Families 12524 North Charles Street, Ste 3A 1Baltimore, MD 21211
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2. Allows the CA0 or a designee to perform regular not just random audits - for Living Wage
compliance.
If
there is a violation, the Director must issue a written decision and impose appropriate
sanctions.
3. Allows the Director to withhold a sufficient amount of payment from a contractor violating the
Living Wage to pay the back wages due to employees.
4. Extends liquidated damages to include providing late or inaccurate payroll records.
5. Allows the county to withhold payments to living wage contractors who fail to submit or are late
in submitting payroll records.
6. Adds violations ofLiving Wage requirements as a cause for debarment or suspension.
Finally, in this specific case, the CBA carve out shields Potomac Disposal from the automatic wage
increases needed to comply with the County's living wage law, and the company has used this
technicality to deny workers any cost of living increase. We need to fix this, and B43-15 provides
the opportunity to do so.
For more information contact Adisa Muse, Legislative and Political Director,
amuse@workingfamilies.org or (804) 721-5011
Maryland Working Families 12524 North Charles Street, Ste 3A 1Baltimore, MD 21211
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3
Testimony
of Blanca
Portillo on B43-15
December 1, 2015
Thank you Madam Chair for holding this hearing. My name is Blanca Portillo. I am a
proud resident of Montgomery County. I live in Poolesville, Maryland. I am also
employed as a driver by Potomac Disposal.
I support 843·15 and ask that you pass this bill. I have workedfor Potomac Disposal
for about four years. I have experience with Living Wage enforcement in
Montgomery County. The October 2014 audit conducted by the county found that
my employer had failed to pay me the Living Wage, and that I was owed several
hundred dollars in back pay. Unfortunately, it took me many, many months to get
my back pay from Potomac Disposal. 843·15 will allow the county to withhold
payments to its contractors who are Living Wage violators. The county would then
use that money to pay back wages so that other workers won't have to wait as long
as I did. As a mother of three, I could have used the back pay sooner.
I was also part of the LiONA team that met with the management of Potomac
Disposal late last year to discuss an annual wage increase. The owner of the
company told us he was satisfied with what he was paying his workers, and that he
was going to apply for, but not share, any cost ofliving increase with those of us who
actually collect the trash. Please change the Living Wage law so that all county
contract workers are entitled to receive at ieast an annual cost of living adjustment.
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843-15
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Testimony of Erin Yeagley, UFCW Local 1994 Field Services
Representative/Organizer on B43-15 - Strengthening
Enforcement of the County's Living Wage Law
The 8,000 Montgomery County employees we represent enjoy protections from a
negotiated agreement that pays a living wage. However, we've discovered on too
many occasions that contractors working for our County are bilking their workers
despite the protections the County has put in place.
The workers at Potomac Disposal know this reality all too well. They've seen this
unscrupulous employer take advantage of loopholes in the living wage law, refusing
to negotiate wages despite having gained price adjustments on its County contract.
They've also failed to pay back wages in a timely manner despite being ordered by
the County to do so. This is unacceptable.
We need to eliminate any employers' ability to work the system. The intent of price
adjustments is to give companies with long-term County contracts a tool to cover
increased operating expenses - including increases in labor expenses consistent
with the Consumer Price Index. Bill 43-15 would close the loopholes being exploited
by contractors like Potomac Disposal and would force living wage contractors to
submit certified payrolls. This creates parity in the contracting system, since
prevailing wage contractors are also required to submit certified payrolls. Record
keeping like this would help deter wage theft. The bill would also allow the County
to impose appropriate sanctions when necessary.
Companies that do business with the County should be held to the highest standard,
and the County needs to do all it can to protect workers and their families from
employers who would rob them of a living wage. Strengthening the enforcement
and reporting requirements for County Contractors will send a clear message that
its unacceptable to
try
to circumvent the law.
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UFCW Local 1994 MCGEO urges the Council to pass B43-15 .
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Testimony
of Jhunio
Medina on B43-15
December 1,2015
Thank you Chairwoman Floreen for holding this hearing today on B43-15.
My name is Jhunio Medina. I am a business agent with Local 657 of the Laborers'
International Union of North America, or LiONA for short. Local 657 represents more than
1,600 members in the Washington DC area, including the 80 drivers and helpers of
Potomac Disposal, a company with a county contract to pick up residential trash and yard
waste. Potomac Disposal drivers and helpers work very hard. They service roughly 40,000
homes and collect between 60 and 100 tons of trash and yard waste each day.
LiONA supports B43-15. In 2013, a county audit was undertaken at Potomac Disposal to
investigate workers' claims of underpayment. The audit covered a two-and-a-half year
period-May 2011 through November 2013-and found violations. The audit found that
29 drivers and 20 helpers were owed back wages, and that the employer was not
maintaining proper documentation. B43-15's requirement that Living Wage contractors
submit certified payrolls will more easily provide the county with the data it needs to
perform audits, and will increase contractor accountability. B43-15 will also allow the
County to withhold payments to a contractor and use that money to pay employees any
back wages due from Living Wage violations. This would have helped the workers of
Potomac Disposal. While the company was instructed by the county to pay employees any
back pay owed within two weeks of receiving the October 2,2014 final audit, workers
waited considerably longer than two weeks.
I would also like to ask that you modify B43-15 to remove the exem ption of collectively
bargained agreements from the Living Wage law. The county allows companies with long­
term sanitation contracts to request price adjustments to cover increased operating
expenses - including increases in labor expenses consistent with the Consumer Price Index.
Our agreement with Potomac Disposal provides for annual negotiated adjustments to
wages. In late 2014, LiONA representatives, including me, met twice with Potomac Disposal
to discuss wages. During these negotiations, the company refused to discuss any wage
increases whatsoever. The owner told us that the company was seeking price adjustments
for its sanitation contracts with the county. He told us that if the price adjustments were
granted, he had no intention of allocating that money toward employee wage increases. He
said he was satisfied with what his workers were being paid. When we sought assistance
from the county, we were told there was nothing that could be done because of the
exemption. Situations such as this surely were not anticipated when the Living Wage law
was originally passed. Please eliminate the CBA carve out. When the Paid Sick leave bill was
passed in June, the Council rejected a CBA carve-out because the goal was to create a
minimum standard that must be met by businesses working in the county. We ask that you
apply the same principle here.
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December 1
st,
2015
The Honorable Nancy Floreen
Montgomery County Council
Council Office Building
100 Maryland Avenue, 5th Floor
Rockville, MD 20850
CAS'
~
AI
U
~
WE ARE CASA
SOMOS CASA
"-./
Dear Council President Nancy Floreen and members of the county council,
CASA is the region's largest organization serving the immigrant community,
representing more than eighty thousand lifetime members, operating 4 locations
within Montgomery County, and strongly supporting Bi1l43-15 because it protects
the rights of our workers.
CASA supports Montgomery County Living Wage Law Bill 43-15 for the 3
following reasons.
1. It strengthens enforcement of the county's living wage law by requiring that
county contractors and subcontractors maintain proper payroll documentation
providing the county with data to perform audits.
2. It ensures that unjust contractors have an economic incentive to pay their
workers a county mandated living wage when on a timely basis.
3. It also creates a base for county contractors to pay all of their workers the
living wage.
Furthermore, CASA strongly supports Bi1l43-15 because it enforces the County's
existing Living wage law and moves us toward the right direction ensuring that our
hard working families, the backbone of our communities, are treated with respect
and dignity by being paid a wage that covers their basic needs for a safe, decent
standard ofliving. Montgomery County contract and subcontract employees should
be the example of living wages not the case for it. CASA respectfully urges a
favorable report. Thank you.
Sincerely,
Kim Propeack, Esq.
Chief for Politics and Communications
8151 15
th
Ave, Hyattsville, Maryland, 20783
kpropeack@wearecasa.org
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Testimony of Michael Rubin, Jews United for Justice Board Member, for Bill 43-15
Good afternoon, members ofthe County Council, my name is Michael Rubin, and I am here representing
Jews United for Justice, where I serve as a member of the Board of Directors. JUFJ encourages your full
support of Bill 43-15 and agrees fully with the two sponsors, Council Members Navarro and Eirich and
co-sponsor, Council President Leventhal, on the need to strengthen accountability procedures for the
County's Living Wage contractors and increase penalties for violators. These needed changes are clearly
in line with the intent ofthe County's Living Wage Act.
It is my understanding that Potomac Disposal and CAMCO, two county contractors covered by the living
wage law have both violated this law by underpaying employees in the case of Potomac Disposal, and
charging workers for cell phones and deducting such costs from the Living Wage in the case of CAMCO.
Additionally, the current CBA carve out shields Potomac Disposal from the automatic CPI-based wage
increases due employees under the current Living Wage law, while still allowing the company to request
CPI-based price adjustments.
I know that labor costs are the primary expense in any service business such as those provided by
CAMCO and Potomac Disposal. In the nonprofit where I work, 85% of our expenses are labor and
benefit costs. I would imagine that those of these county contractors are similar. It is immoral to get a
CPI-based price aqjustment to a county contract and not pass on a fair share to those working at or it
seems sometimes below the living wage of $14.35 per hour. In my mind that is a clear violation of the
intent of our Living Wage Act.
Bill 43-15 will do much to improve on current deficiencies:
Requiring certified payrolls will increase contractor accountability. Regular audits performed by the CAO
or designee creates a uniform policy which is always good government practice. Allowing the Director
to withhold payments to Living Wage violators will speed up the payment of back-wages due
employees. Extending liquidated damages to include providing late or inaccurate payroll records gives
the law more teeth and provides greater incentives for compliance. So too, with a1I0wing the county to
add Living Wage requirement violations as a cause for debarment and suspension of a contractor.
The Jewish tradition teaches the importance of treating workers fairly, particularly low wage workers
who require prompt payment of wages for basic needs. The Torah or Bible tells us in Leviticus 19:13:
"Thou shalt not oppress thy neighbor, nor rob him: the wages of a hired servant shall not abide with
thee all night until the morning"
Our County's Living Wage Law is an important way to ensure fair treatment of laborers providing
services paid for by public funds. It appears that the current law has some loopholes that allow for what
the Torah would call "oppression of our neighbors."
JUFJ encourages full-Council support of Bill 43-15 which improves the current law and should ensure
improved compliance with the Living Wage Act. It is moral, it is good government and it is the right
thing to do. Thank you.
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State Headquarters
33 University Boulevard East
Silver Spring, MD 20901
www.ProgressiveMaryland.org
Baltimore Office
9 W. Mulberry St., 4th Floor
Baltimore, MD 21201
Phone: 301.494.4998
Mailing Address:
P.O.
Box 2181
Silver Spring, MD 20915
q
Contact@progressiveMaryland.org
-------------------------------------.~-
---­
Testimony on Montgomery County Bill 43-15
DATE:
POSITION:
December 1st, 2015
Support
Thank you to CouncUmembers Elrich, Navarro and Council President Leventhal for sponsoring Bill 43-15
and the opportunity to testify on this issue. I am here on behalf of Progressive Maryland, a grassroots,
nonprofit organization of more than 23,000 individual members and 35 organizational affiliates
statewide. Our mission is to improve the lives of working families in Maryland. Please note our strong
support for this bilL.
As advocates for working peopLe in MaryLand, we recognize the need for decent wages that allow
workers to provide for the needs of their families. As wages stagnate and anti-Labor policies become
increasingly commonplace nationwide, it is crucial for Montgomery County to set itself apart as a
progressive community that protects the hard fought victories of working people.
We fully support efforts to ensure compliance with the County's l1ving wage requirement. It is not
enough to have such a Law in place if employers are able to skirt its requirements without penalty.
Furthermore, workers should not have to wait months to receive compensation for back wages when
violations are found to have occurred. Many of our families rely on every dollar we earn to pay for life's
basic needs such as rent, utilities, food, and childcare. When employers cheat the system and fail to pay
their workers what is due, the consequences for families can be severe.
Workers deserve quick recourse when these situations occur and the County must have the authority and
financial means to pay them the wages they are due. We therefore support this bill's proposal to allow
the County to withhold payment to contractors who have violated the living wage statute for the
purpose of paying back wages and recouping damages.
In addition to our support of this bill, we ask the CounciL to eliminate the collective bargaining carveout
currently in place. Because of this existing provision, organized workers have no recourse when
employers refuse to raise wages even after they receive cost adjustments from the County. These
adjustments are intended to cover additional operating costs, including labor, but that is not always the
reality. We stood against the coLLective bargaining carveout for paid sick leave and do not believe it
should be the policy of the Council to exclude organized workers from any workforce protections.
In closing, we ask that you support Bill 43-15 to ensure all County contractors comply with Montgomery
County's living wage standard. We also urge you to modify this bill by eliminating the collective
bargaining agreement carveout. Thank you.
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Testimony of Estanis Lagos on B43-15
December 1,2015
Thank you Chairwoman Floreen for holding this hearing. My name is Estanis Lagos. I
have worked for Potomac Disposal for the past four years. I am employed as a
driver. I am also a resident of Montgomery County. I live in Germantown.
I am here to ask you to pass B43-15. In 2013, my co-workers and I went on strike
because many of us were being not being paid the county's living wage. The County
investigated our claims and found that 49 workers were owed back wages. It took
the company a long time to pay the back wages. B43-15 will allow the county to
withhold payments to contractors who are violating the Living Wage, and use that
money to pay back wages to workers. This change in the law will be very beneficial
to workers.
I would also ask that you update the Living Wage law to address another situation.
The workers at Potomac Disposal have a collectively bargained agreement that
requires management and labor to meet and discuss a wage increase each year. Late
last year, when our representatives sat down with management, they were told that
the company was unwilling to provide a 1.6 percent cost of living increase to
workers. Management also said that the company was going to apply for a cost of
living increase and not give the employees a raise. I was very upset when I heard
this. We went to the county for help and we were told there was nothing that that
the county could do because of the way the Living Wage law is currently written.
Please fix the law so that all county contract workers are entitled to receive at least a
cost of living increase each year.