County of Santa Clara Office of the County Executive. DATE: November 7, Board of Supervisors. David Campos, Deputy County Executive

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1 County of Santa Clara Office of the County Executive DATE: November 7, 2017 TO: FROM: Board of Supervisors David Campos, Deputy County Executive SUBJECT: Office of Labor Standards Enforcement RECOMMENDED ACTION Held from October 17, 2017 (Item No. 17): Consider recommendations relating to the creation of the Office of Labor Standards Enforcement in the County of Santa Clara County. (Office of the County Executive) Possible action: a. Receive report relating to the establishment of an Office of Labor Standards Enforcement. b. Direct Administration to create the Office of Labor Standards Enforcement with adequate staffing support and resources to conduct scoping work and develop plans for implementation of enforcement of the County Wage Theft Prevention Policy in accordance with Board of Supervisors Policy c. Direct Administration to report to the Board with implementing actions during Spring of FISCAL IMPLICATIONS There is no new impact to the General Fund in Fiscal Year (FY) The Board of Supervisors approved an ongoing budget allocation of $500,000 in the FY Adopted Budget for the creation of the OLSE. This budget allocation is sufficient to support the creation of the OLSE in the current fiscal year. The additional ongoing impact to the General Fund to implement the recommended actions in FY will be included in the County Executive s FY Recommended Budget. REASONS FOR RECOMMENDATION I. Wage Theft and the Need for Better Enforcement Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 1 of 7

2 While the County is at the forefront of advancing labor standards to further the rights of working individuals in the County as well as improve their quality of life, wage theft continues to be a serious problem in the County. According to the Wage Theft Coalition, workers in Santa Clara County file the highest number of claims in the State. The State Labor Commissioner awards an average of $1,000 more per worker in Santa Clara County than the statewide average. 1 Another challenge is what workers face at the State and federal levels. The California Division of Labor Standards Enforcement (DLSE) is the agency responsible for the enforcement of all provisions of the California Labor Code for the entire State and it is usually overextended in its enforcement. The United States Department of Labor is one of several federal agencies that has exclusive jurisdiction over federal wage and hour laws. National and local studies report that wage theft is a pervasive problem that disproportionately affects immigrants and low-wage workers, and as a result, these workers remain vulnerable to retaliation or unable to collect their owed wages. Furthermore, we do not believe that County departments have the full capacity or effective mechanisms to enforce wage theft violations. As a result, the creation of OLSE is vital to combatting wage theft in the County. OLSE would enable staff to take a more dynamic approach and conduct comprehensive analysis, and provide the Board with the tools and data to make informed decisions and thoughtful implementation plans to address wage theft. The functions of the OLSE could include the following: Receiving complaints, conducting investigations, and levying penalties for infractions and/or violations. Researching, tracking, reporting, and developing programs for enforcement of labor standards in unincorporated areas of the County. Facilitating the exchange and dissemination of information related to wage regulations to all parties contracting with the County. Providing training and educational materials to workers and employers, and maintaining a collaborative partnership with community based organizations (CBOs) and the business community. II. The County s Authority to Enforce its Wage Regulations a. Regulatory tools Over the past decade, several local governments throughout the country have implemented innovative mechanisms as a strategy to enforce labor standards within their jurisdictions. California law gives local jurisdictions like the County the authority under its police powers to enforce local wage laws. The County s authority in this area is generally limited to the unincorporated areas. 1 Santa Clara County Wage Theft Report, Gleeson, et al., Santa Clara County Wage Theft Coalition, 2014 Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 2 of 7

3 It is based on their police power that jurisdictions like the County of Los Angeles authorized the Director of the Department of Consumer and Business Affairs to recommend any license issued by the County be suspended, revoked, or denied if the business has violated the county s minimum wage ordinance. 2 Likewise, the City and County of San Francisco (consolidated city-county) used its police powers to create a mechanism to enable the City s OLSE to use license and permit requirements (e.g., health permits for restaurants) as a way to enforce compliance with San Francisco local labor laws. In fact, because San Francisco has passed numerous wage and labor ordinances, the mandate for San Francisco s OLSE includes the enforcement of more than a dozen local laws, including minimum wage, paid sick leave, health care security ordinance, fair chance, paid parental leave, and formula retail. After consulting with County Counsel, we believe that a newly created County OLSE should first focus on the areas where California law and existing County ordinances provide authority to enforce labor standards. More specifically, the Administration recommends that the initial mandate of OLSE be enforcing labor standards relative to County contracts and the business license pilot which is the subject of a separate legislative file. Furthermore, effective enforcement must include a strong education component as well as the involvement of community partners. b. Contracting Authority There is no question the County has the legal authority to enforce labor standards in accordance with provisions of County contracts. Board policy requires that any entity that contracts with the County must follow the County s Living Wage Policy as well as all other applicable laws, including the Federal Labor Standards Act, the California Labor Code, and any Minimum Wage Ordinance enacted by a city within the County. Thus, OLSE could begin its work by ensuring that all of the County s vendors and contractors are complying with the contractual terms pertaining to wage and labor laws. Currently, the Office of Countywide Contracting Management (OCCM) oversees the implementation of the County s Living Wage and Wage Theft Policies, but the County could assign that responsibility to OLSE thereby freeing up OCCM resources to focus on other important work. Even if OLSE were to have that responsibility, it would still need to work in alignment with OCCM which oversees County contracts and contract management. The goal of OLSE is to align existing internal resources while leveraging external resources to enforce the County s mission to protect the most vulnerable members of the community. It is worth noting that, in the future, the County could enter into contracts with cities within the County to enforce wage ordinances enacted by those cities. Since the County does not have a minimum wage ordinance, but a number of cities within the County do, the County could, by way of agreement, engage in a countywide wage theft enforcement effort by contracting with local jurisdictions to enforce their wage theft laws. Attachment 1 illustrates the Santa Clara County minimum wage trends, which also shows the various cities that currently contract with the City of San José to provide enforcement of their minimum wage 2 Los Angeles County Code, (B) Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 3 of 7

4 ordinances. Similarly, the County of Los Angeles entered into a contract with the City of Santa Monica to process wage enforcement claims and conduct investigation of any claims for that city. c. Business License Program The Administration is also separately reporting to the Board a proposed business license program for the unincorporated areas of the County. The first purpose of the proposed business license program is to institute business registration to provide the Board and relevant County departments with accurate data on commercial activity. The second purpose, which also aligns with the Board s interest to create OLSE, is to enhance efforts to enforce existing ordinances and federal, state, and local laws relating to pay equity and wage theft. The Board is authorized under its police powers to adopt and implement a business license program. The business license would be used to enforce both State law and County ordinances. The County may charge a fee to cover the reasonable regulatory costs associated with issuing and administering the business license program. Other jurisdictions have used their licensing and permitting authorities for the enforcement of wage and hour laws, and regulations pertaining to businesses. d. Pilot Program to Enforce Wage Theft Violations Using Food Facility Permits In conjunction with the Administration s report on a proposed Business License Program for businesses in the unincorporated areas of the County, the Administration is also proposing a pilot program to evaluate the feasibility of encouraging compliance with labor standards and enforcing wage and hour laws through the exercise of the County s authority over Food Facility Permits. This pilot program would be similar to San Francisco s program and its mechanism of using license and permit requirements as a way to enforce compliance with San Francisco labor laws. San Francisco s OLSE receives more than half it its wage violation complaints (48%) from restaurant and café workers. 3 The County s Department of Environmental Health issues permits to approximately 10,000 restaurants and other food facilities throughout Santa Clara County, and may require adherence to local and state laws as a condition of these permits. The program would entail providing access to the OCCM s database of DLSE and U.S. Department of Labor case files on hearing decisions to the proposed OLSE. If the County OLSE became aware of a judgment against a relevant business, OLSE staff would work with the business to resolve the judgment through appropriate means. If administrative efforts to remedy the violation have been exhausted, and the violation against the business remains outstanding, then the County could issue a notice to the business owner of the County s intention to revoke or suspend the business County-issued Food Facility Permit. Suspension of the permit would require the business to close and to refrain from conducting any food-related business. III. Community Outreach and Engagement 3 San Francisco Wage Theft Task Force Final Report, The San Francisco Wage Theft Task Force, 2013 Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 4 of 7

5 In order for OLSE to be successful, it is crucial for the County to partner with community based organizations (CBOs) and the labor and business communities to assist with education and outreach efforts. The goal is to take preventive measures to encourage businesses to comply with the wage theft prevention policy, as there needs to be an appropriate balance between education and enforcement. Over the past two months, staff from the County Executive s Office met with members of the Santa Clara County Wage Theft Coalition, Working Partnerships U.S.A., and the Silicon Valley Chamber of Commerce to discuss areas for partnership and collaboration to effectively address the issue of wage theft in the County. Such partnerships have proven to be fruitful for jurisdictions like the City and County of San Francisco and the County of Los Angeles. Both jurisdictions contract with a collaborative of CBOs to conduct outreach and to educate low-wage and immigrant workers. The collaborative also assists in filing wage theft complaints on behalf of workers. The City of Seattle also sets aside funding for its Community Outreach and Education Fund in the Office of Labor Standards. Community organizations in Seattle are encouraged to apply for funding to provide outreach, education, and technical assistance to low-wage working communities who disproportionately experience workplace violations. Should the Board approve the approach outlined in this memorandum, the Administration would come back to the Board at a later time with a detailed budget proposal for community engagement with respect to the work of OLSE and the enforcement of labor standards. IV. Next Steps The Administration recommends moving forward incrementally with the creation of OLSE. Should the Board approve the proposed strategy outlined in this memorandum, the Administration would begin to process the creation of these positions, and proceed to o commence recruitment for them, with a priority given to Director position. To facilitate OLSE s staffing needs, the Employee Services Agency (ESA) will be conducting a classification study to establish a job classification series specific to the unique functions of the investigator position for the Office. ESA supports the Administration s recommended action to add the positions outlined in Table 1 below, which includes 3.0 FTE positions (1.0 FTE position will be added after the completion of the classification study) to be added within the Office of the County Executive and 1.0 FTE Attorney position in the Office of the County Counsel. The goal is to begin laying the appropriate foundation for a robust OLSE while aligning critical resources within the organization to ensure that those impacted by wage theft will be better served. Table 1: Office of Labor Standards Enforcement Staffing Structure Class Title Position FTE Program Manager II Director of OLSE* 1.0 Sr. Management Analyst Policy Manager/Outreach 1.0 Coordinator* Pending classification study Investigator 1.0 Attorney IV/III/II/I** Deputy County Counsel* 1.0 Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 5 of 7

6 Total 4.0 *These positions will be for the nucleus of the OLSE in the current fiscal year ** This position will be budgeted in the Office of County Counsel CHILD IMPACT The recommended action will have a positive impact on children and youth by enabling the County to provide effective enforcement mechanisms to combat labor violations and enhance the economic and social well-being of children and youth. SENIOR IMPACT The recommended action will have a positive impact on seniors by enabling the County to provide effective enforcement mechanisms to combat labor violations and enhance the economic and social well-being of seniors. SUSTAINABILITY IMPLICATIONS The recommended action will have no/neutral sustainability implications. BACKGROUND The Board has adopted several wage policies, including a comprehensive Living Wage Ordinance and Wage Theft Prevention Policy. At its meeting on November , the Board adopted a resolution amending Board Policy Manual section relating to mandatory policy provisions in County contracts, adding an explicit Wage Theft Prevention Policy. Wage theft occurs when an employer fails to pay its workers the full wages or benefits they are owed. This theft of service is unlawful, and even criminal, 4 and comes in many forms: (1) paying workers less than the minimum wage or agreed-upon wage, (2) requiring employees to record fewer hours on their timesheets than they actually worked, (3) failing to pay overtime, (4) misclassifying employees to evade overtime requirements, (5) denying workers required meals and rest breaks, (6) stealing tips, (7) deducting fees from wages owed, or (8) not paying workers at all. These practices are illegal under State and federal law, but they persist nonetheless. Depending on the type of wage theft involved, an employer s action may be subject to State, federal, or local laws. On June 12, 2017, the Board approved Budget Inventory Item 40 relating to the creation of the County OLSE. The Board directed the Administration to report back on the County s authority to enforce its labor regulations, as well as to provide an assessment of the resources that will be needed to ensure effective enforcement. CONSEQUENCES OF NEGATIVE ACTION 4 California Penal Code 484. Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 6 of 7

7 The County will not have the adequate resources to provide effective enforcement of labor standards. STEPS FOLLOWING APPROVAL The Administration will return to the Board on November 7, 2017 with salary ordinance implementation actions and subsequently in Spring of 2018 with an implementation plan to effectuate the recommended actions. LINKS: Linked From: : Held from October 17, 2017 (Item No. 16): Direct Administration to develop a pilot program to enforce wage theft violations through Food Facility Permits. (Office of the County Executive) Linked From: : Held from October 3, 2017 (Item No. 11): Direct Administration to develop a Business License Program for businesses in unincorporated Santa Clara County. (Office of the County Executive) Linked To: : Referenced By: : Adoption of Salary Ordinance No. NS amending Santa Clara County Salary Ordinance No. NS-5.18 relating to compensation of employees adding one Program Manager II position and one Senior Management Analyst or Management Analyst position in the Office of the County Executive, and adding one Attorney IV-County Counsel or Attorney III-County Counsel or Attorney II-County Counsel or Attorney I-County Counsel position in the Office of the County Counsel. (Office of the County Executive) Linked From: : Held from October 17, 2017 (Item No. 15): Direct Administration to develop a Business License Program for businesses in unincorporated Santa Clara County. (Office of the County Executive) ATTACHMENTS: Santa Clara County Minimum Wage Trends (PDF) HISTORY: 10/17/17 Board of Supervisors HELD Next: 11/07/17 Board of Supervisors: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S. Joseph Simitian Page 7 of 7