(July 8, 2005) California Chamber of Commerce-opposed legislation to increase California's minimum wage to the highest in the nation and impose billions of dollars in new costs on employers will be heard by the Senate Appropriations Committee on Monday.

'California's economy is recovering despite the state having the nation's highest energy costs and unemployment insurance tax rates for businesses. Legislators should avoid providing another disincentive for employers to locate or expand jobs here. Adding billions of dollars in costs and giving California the highest minimum wage in the nation,' said Julianne Broyles, Chamber director of employee relations and small business.

AB 48 (Lieber; D-Mountain View) is on the Chamber’s annual ‘job killer’ list because it provides a significant disincentive for employers to create jobs in California by giving our state the highest minimum wage in the country. This bill increases the cost of doing business by at least $2.08 billion annually by raising the state minimum wage to $7.25 in 2006 and to $7.75 in 2007, and indexing increases every year thereafter. Similar legislation was vetoed by the Governor last year.

Increase Cost for Employers
When AB 48 was originally introduced, the Chamber estimated the cost for  employers would be $2.08 billion annually, which was directly related to the mandated wage increase.  But, the bill also affects managerial and other exempt worker salaries due to the 1999 enactment of AB 60 (Chapter 134).

That statute recast California overtime law and permanently linked to the minimum wage the threshold for classifying salaried executive, administrative and professional employees as exempt to the state minimum wage. As a result, AB 48 also mandates a wage increase for thousands of exempt workers.

In other words, to be exempt from state overtime requirements, executive, administrative, and professional employees must earn at least two times the state minimum wage for full-time employment, as well as meet a detailed duties test.  This means that any salaried employee who makes less than $28,080 per year today must be classified as a non-exempt salaried employee.

AB 48 proposes to increase the exempt worker annual base salary requirement by $4,160-to no less than $32,240 per year.

Economic Impact
On top of the $2.08 billion direct increase in direct minimum wage payments, AB 48 would also force an increase in exempt worker wages in California in order to meet the California's exempt worker base wage test.  While the Chamber cannot provide a firm estimate until the Labor and Workforce Development Agency provides the data in response to our request, there is no doubt that AB 48’s mandated wage increase will force an increase in certain exempt worker wages in order to meet California’s exempt worker base wage test.   The Chamber believes that policymakers should be seriously concerned that AB 48 contains a significant, but unknown, cost increase for both public and private employers.

Further, business costs such as workers' compensation, health care premiums and other employment-related taxes all go up whenever payroll costs increase.  If AB 48 were enacted, workers' compensation costs for employers of minimum wage workers would rise by an additional $120 million annually, according to estimates by the Workers' Compensation Insurance Rating Bureau.

Action Needed
The Senate Appropriations Committee is AB 48’s last stop before it goes to the full Senate for a vote.  The Chamber is urging all employers to send letters opposing AB 48 to committee members.  A sample letter is available on the Chamber website.

For more information on AB 48 or for up-to-date information on all “job killer” bills, please visit the www.calchamber.com/jobkillers.