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Issue: Arizona Restaurant Association

Court declares state law to limit minimum wage initiative illegal

Definition of the word Minimum wage in a dictionary

The state Court of Appeals has slapped down efforts by Republican lawmakers to block local governments from mandating that private employers provide workers with even more fringe benefits than required by state law.

In a unanimous ruling Tuesday, the judges said it was clear that when voters adopted the state’s first wage law in 2006 they wanted to give local governments the power to go above and beyond the bare minimums in that initiative. And they said that includes not just wages – now $11 an hour – but also any requirement for benefits, whether that’s time off or even health insurance.

Tuesday’s ruling is a setback for the Arizona Restaurant Association and its Republican allies in the state Legislature who approved the law the appellate judges found illegal. Association lobbyists, unable to block the minimum wage law in the first place, sought to at least trim the ability of cities and counties to impose even more requirements on them.

But appellate Judge Jennifer Campbell said the Voter Protection Act in the Arizona Constitution precludes lawmakers from tinkering with what has been approved at the ballot. And she rejected as not making sense arguments by Attorney General Mark Brnovich, seeking to defend the law, that somehow when voters authorized local governments to regulate minimum wages and benefits that they really didn’t intend for that to extend to actual fringe benefits.

There was no immediate response from Brnovich on whether he will seek Supreme Court review.

But unless Tuesday’s ruling is overturned it paves the way for local governments to consider what kinds of requirements they want to put on private employers, above and beyond what already is mandated statewide.

There already have been discussions in that direction.

Regina Romero, a member of the Tucson city council, has been pushing for years to require employers in the city to offer paid parental leave.

Romero told Capitol Media Services on Tuesday that, for the moment, she is content with the city having adopted a policy of six weeks off for its own employees. She said, though, the hope is that private employers follow suit, particularly in a place like Tucson which Romero describes as a “low-wage city.”

But if they do not, Romero, who is a supporter of what she calls a “working family agenda,” said the council may have to force the issue.

It is precisely that kind of local law that the Republican-controlled Legislature sought to prevent.

Sen. J.D. Mesnard, R-Chandler, opposed both the original 2006 initiative that set the state’s first-ever minimum wage at something higher than required by federal law, and the 2016 initiative that increased it further. Employers now must pay at least $11 an hour as compared with the $7.25 figure set by Congress.

The 2016 initiative also requires employers to provide at least three days of paid personal leave. Those laws also specifically empower local governments to regulate minimum wages and benefits as long as they do not provide for a wage lower than what voters approved.

Having been approved by voters, Mesnard and his GOP colleagues are powerless to block communities from imposing their own minimum wages. But Mesnard, seeking to limit the effect of the measure, wrote a law to redefine “wages” – the thing that the state cannot preempt because it was approved at the ballot – to include only the salaries being paid to workers.

His measure defined everything else as “nonwage compensation,” ranging from sick pay, vacation pay and severance benefits to commissions, pension contributions and maternity leave. More to the point, the legislation dictated that local governments cannot approve any forms of “nonwage compensation” beyond what is already required by law.

Legislative Democrats who opposed the law filed suit challenging the change.

In seeking to defend the law, Brnovich conceded that the law does allow cities to set their own minimum wages and benefits.

But he argued that the word “benefits” somehow does not apply to things like paid time off but instead only “the advantage or privilege something gives.” And Brnovich even suggested that the judges read the word “benefits” – the thing the initiative says lawmakers cannot regulate – as the word “protections.”

Campbell said that is not logical, saying the state’s interpretation of the statute “makes even less sense.”

And the judge rejected the whole effort by Brnovich to come up with some alternate meaning.

“Because the text of the statute is unambiguous, our statutory interpretation stops at the plain meaning of the words,” she wrote. And using that as a test, she said the GOP-approved law is illegal.

Tuesday’s ruling also means state taxpayers will pick up the tab for the private attorney hired by the Democrat lawmakers in their legal fight.

Court says Ducey can’t allow restaurants to sell booze to go

Group Of Friends Enjoying Evening Drinks In Bar

Gov. Doug Ducey broke the law when he told police and liquor agents not to enforce statutes that prohibit restaurants from selling alcoholic beverages to go, a judge ruled Monday.

But, for the moment, it appears the governor is going to ignore the ruling — and allow the restaurants to keep competing illegally with bars — as he contemplates an appeal.

In an 18-page decision, Maricopa County Superior Court Judge Pamela Gates brushed aside most of the claims by more than 100 owners of bars throughout the state that it was wrong of the governor to single out their establishments for closure while other alcohol-serving establishments like restaurants were allowed to remain open.

Gates said there was sufficient evidence that bars posed more of a threat to public health due to the spread of COVID-19 than other kinds of business establishments. And with the legislature having granted the governor broad powers during an emergency, he had sufficient justification for the orders.

But the judge said nothing in the Arizona Constitution or even the emergency powers statutes entitles Ducey to ignore laws entirely. And in this case, she said, legislators had expressly prohibited the off-premises sale of alcoholic beverages by restaurants, reserving that privilege for those who obtained licenses to operate bars.

“A provision that bars the enforcement of unlawful conduct is contrary to state law and thus, exceeds the power delegated to the governor,” Gates ruled.

Pamela Gates
Pamela Gates

Both Ducey and the Arizona Restaurant Association had argued that the special privilege was necessary to help keep the businesses financially afloat.

They, like the bars, had initially been shuttered entirely. And even now they have to operate with limited capacity.

Gates said that is all legally irrelevant.

“The court takes no position on whether the law should be changed to allow to-go alcohol,” the judge wrote. “It merely holds that action is outside the power delegated to the governor … during a state of emergency because the action is contrary to current Arizona law.”

One reason bar owners brought the claim is that, under state law, they are the ones who can sell drinks and alcohol to go.

That is one of the privileges they get by buying the more expensive bar license versus a restaurant liquor permit. The other is not having to maintain 40% of sales in food as do restaurants.

Attorney Ilan Wurman said that his clients, already harmed by a ban on indoor operations — more recently changed to restrictions — are being further hurt financially as those off-premises sales were going to the restaurants which can be their direct competitors.

Gates as much as acknowledged that in ordering Ducey to rescind his illegal order.

She pointed out that, under other circumstances, anyone who suffers monetary damages from the actions of another can seek to recoup. But that’s not the case here.

“The court … finds the governor’s immunity will likely preclude plaintiffs from collecting damages,” Gates wrote. And that, the judge said, tips the balance in favor of her enjoining Ducey from continuing his order allowing the off-premises sale of alcohol from restaurants.

Ducey press aide Patrick Ptak said that the governor is reviewing the decision.

But there apparently are no immediate plans to actually comply while he contemplates an appeal. And here, too, the issue is providing financial relief to the restaurants.

“We want to make sure that we continue to help small businesses, and the Arizonans they employ, navigate through this pandemic,” Ptak said.

Dan Bogert, chief operating officer of the Arizona Restaurant Association, called the ruling “unfortunate,” pointing out they were closed for all of April and part of May and remain limited now to 50% capacity. The result, he said, is increased reliance on to-go orders — with those picking up meals also wanting alcoholic beverages.

“Without the ability to include alcohol with to-go orders, a key lifeline has been stripped from these businesses,” Bogert said. “This will no doubt lead to less profitability and possibly more permanent closure of our favorite gathering spots.”

For the moment, though, Gates said that other restrictions on bars can stand, even if they don’t apply to restaurants and other similar businesses. She said testimony covinces her there are certain things that happen in bars that make them “likely high-risk environments for the spread of the virus.”

“For example, bar patrons often move between groups and tables, mixing with other groups with whom they did not arrive,” the judge said.

“Also, bars are often loud, which causes individuals to draw closer to hear one another and to speak louder, thus increasing the risk of transmission,” Gates continued. “Furthermore, mask wearing is incompatible with drinking, and drinking alcohol impairs decision-making.”

Then there are the dance floors. The issue, the judge said, is that people not only mix but that limited ventilation and turbulent airflow patterns result in an environment where respiratory droplets are more easily spread.

And, if nothing else, it comes down to who are the patrons.

“Bars also tend to attract a younger adult population, which currently represents a significant demographic carrying COVID-19 in Arizona,” Gates said.

Wurman said the ruling is not the last word.

While Gates refused to immediately enjoin what Wurman said is the disparate treatment of bars, he said that still gives him a chance to make his case at a full-blown trial that there is no legitimate reason for discrimination. And that, he said, is buttressed by testimony from John Cocca, head of the Department of Liquor Licenses and Control, that in many cases there really is no difference between the activities of bars and restaurants.

 

 

Ducey delays evictions for businesses

Gov. Doug Ducey issued an executive order today that would halt evictions until May 31 for small businesses and nonprofits unable to pay rent due to the COVID-19 pandemic.

The order is similar in tone to Ducey’s order barring evictions for residential areas. It also encourages commercial landlords to defer rent payments for tenants and considers waiving all fees and interest associated with late payments.

The coronavirus was gutting small businesses in Arizona and beyond, and one local chef was trying her best to make sure the restaurant industry was able to remain intact for as long as possible.

Danielle Leoni
Danielle Leoni

Danielle Leoni, who co-owns The Breadfruit & Rum Bar in downtown Phoenix, has been hit hard from COVID-19. Her restaurant was one of the first ones to close due to the unsustainable nature of take-out or drive-thru-only operations under one of Ducey’s executive orders to prevent spread of the virus.

Leoni took it upon herself to help form a small restaurant coalition with its main goal to bar evictions for restaurant owners in the state. She said there are now more than 1,200 restaurants who are part of the group and they kept trying to get a response from Ducey or his staff to lend a helping hand. Legendary spots like Durant’s and Chicago Hamburger Company are some of the restaurants to hop on board.

“I’m not asking [Ducey] for money, I’m just asking him to not cost me more money. That has been our angle,” she said.

Leoni and the coalition got their wish today.

“This order helps ensure no small business or nonprofit will face eviction due to COVID-19 and that landlords and small businesses work in partnership to make sure we get through this emergency together,” Ducey said in a statement.

Leoni and other restaurant owners have obviously taken a financial hit, but still have to pay rent for the buildings that house those restaurants and they still have to pay for their transaction privilege tax, which can add up especially when the restaurant is no longer operating. The amount due for February sales was supposed to be paid before the end of March, but Leoni said she used her TPT money to pay her staff instead.

“I know that I owe that money. And it’s not my money, it’s owed to the state, I get it. We don’t have that money today, and we want to pay that. But it’s gonna be harder for us to pay it if [Ducey’s] going to pile on,” Leoni told Arizona Capitol Times last week.

Dan Bogart, the Arizona Restaurant Association’s COO, said the tax is due each month, but how it works is by paying the tax on the previous month’s sales.

“One of the first things we asked for was a delay in these dates,” he said. “We did not get that so a bunch of restaurants missed their deadline and we’re now working to get late fees and penalties waived.”

Leoni said they’ve been using the Twitter hashtag “hit pause” to halt the payments right now so these businesses have a chance to survive.

“Not all of us, but a lot of us are facing commercial eviction,” she said on April 1.

Restaurants are sometimes given a three-day grace period for rent and other payments, she said, and April 3 was their “do or die day.”

Leoni rents two properties, the brick-and-mortar restaurant, where the landlord is working with her and will not evict her. She also has a warehouse that stores expensive equipment where she says that the landlord would not work with her at all.

“If you don’t pay then there’s fines assessed,” Leoni said about that landlord. “And if you don’t pay that then we go to the eviction process.”

Leoni’s request for the governor for roughly two weeks had been consistent — give the businesses an eviction moratorium similar to the one for residential areas.

“People need homes to stay safe, but if our businesses don’t have homes so we can stay safe then there’s not going to be an economy when the pandemic is over,” she said. “He’s going to kill small business.”

The Governor’s Office heard those demands and put this new order in place, to their delight.

Ducey had already taken some action prior to today based on requests from the coalition, but Leoni said it was something toward the bottom of their demands. On March 31 he issued an executive order deferring all liquor licenses and fees for bars and restaurants for 90 days.

“I’m glad that he addressed it, but he addressed one thing out of our list and it was the most minute, insignificant and least impactful of all of our asks,” she said.

Inflation drives minimum wage raise

wages

Workers at the bottom of the Arizona wage scale appear to be in line for a pay hike of $26 a week.

And you can credit — or blame — inflation.

New figures reported Tuesday by the Bureau of Labor Statistics show that prices as measured by the Consumer Price Index for urban consumers, have risen 5.3% between August 2020 and last month.

What makes that important is that laws approved by voters in 2006 and again in 2016 require annual inflation adjustments based on the August figures.

The official calculations won’t come until later this week when the Arizona Industrial Commission, which is in charge of such things, makes the pronouncement.

But tacking that 5.3% figure onto the current $12.15 an hour minimum translates out to 64.4 cents. Rounded to the nearest nickel, as the law requires, puts it at 65 cents and pushes the minimum up to $12.80.

By contrast, the federal minimum wage, which can be adjusted only with congressional action, has been stagnant at $7.25 an hour since 2009.

How many workers might be affected is unclear.

The most recent data compiled by the state Office of Economic Opportunity, from last year, shows a series of occupations where at least 10% of workers earn less than $12.15. That was at a time when the minimum wage was just $12.

The biggest category is in food preparation and service. And those workers make up about 8.5% of the state economy.

But Steve Chucri, president of the Arizona Restaurant Association which opposed both voter initiatives, said the latest scheduled increase won’t have as big an effect as might be anticipated, at least not immediately. The issue, he said, is supply and demand.

It starts with what Chucri said has been a bounce in customers.

“I think this is probably going to be the busiest June on record for Arizona restaurants,” he said. “A lot of people stayed here.”

At the same time, however, there are more eating places looking for help than people willing to do the job.

“We had a lot of people leave our industry,” he said, some going back to school and others pursuing a different line of work.

What that did is drive up wages, to the point where Chucri said some restaurants were paying $24 an hour to hire someone to wash dishes.

But he said this 65-cent-an-hour wage boost — and others that will follow annually — will make a difference.

“Now there’s a new floor,” he said, which will set the minimum that eating establishments can pay even when there are more people looking for work.

Other industries also are likely to be affected.

Another group with starting wages that are less than the new minimum are those in what are called health care support occupations, everything from pharmacy aides to physical therapy aides.

Then there are all the folks who now are earning more than $12.15 but less than the new minimum. They, too, are in line for a raise.

And, on top of that, you add in the people who currently are being paid $12.80 who may argue that they are entitled to be paid more than the minimum.

Arizona voters mandated in 2006 that the state have its own minimum wage not tied to the federal figure. That set the bottom of the pay scale here at $6.75 an hour, $1.60 higher than what federal law mandated at the time.

Plus there were inflation adjustments.

A decade later, voters decided to turbocharge the raises, imposing a $10 minimum with automatic increases up to $12 as of 2020.

Last year, with inflation at just 1.3%, that gave workers at the bottom an extra 15 cents an hour.

What’s driving this year’s inflation figure is the cost of fuel.

BLS reports that gasoline prices are up 41.9% over a year earlier.

There also has been a 21.1% increase in the cost of piped gas, versus a 5.2% hike in electricity.

Grocery prices, while rising, are up just 3.0% year over year. But the cost of eating out has risen by 4.7%.

The other big hike has been the price of used cars and trucks, up 31.9%.

At least part of that might be attributed to the fact that there are fewer new vehicles available, with supply chain issues holding up computer components and other parts that manufacturers need. New car prices are up 7.6% year over year.

Shelter prices, including rent and what the BLS calls the owners’ equivalent rent of residences, are up 2.8% nationally.

Of note, that figure is significantly less than for the Phoenix metro area, for which the agency does a separate computation. There, shelter costs are up 6.4% in the past year, a reflection of the tight housing market in Arizona and rising rents and home prices.

The latest state minimum wage hike comes as voters in Tucson are set to decide in November whether to impose their own $15-an-hour minimum wage by 2025.

That would start with setting the floor at $13 on April 1, going to $13.50 in 2023 and $14.25 in 2024 before hitting the target. After that, as with the state minimum, adjustments would be made based on inflation.

Law to ban cities from mandating employee benefits dead

judge-court-620

State lawmakers cannot block local governments from mandating that private employers provide workers with even more fringe benefits than required in law, the Arizona Supreme Court has ruled.

In a brief order August 28, the justices refused to disturb a decision by the state Court of Appeals which concluded that when voters adopted the first minimum wage law in 2006 they wanted to give local governments the power to go above and beyond the bare minimums of that initiative. And that, the appellate judge said, includes not just wages – now $11 an hour – but also any requirements for benefits, whether that’s time off or even health insurance.

The decision paves the way for local governments to consider what kinds of requirements they want to put on private employers, above and beyond what already is mandated statewide.

It also is a setback for the Arizona Restaurant Association and its Republican allies in the state Legislature who sought the curbs.

At the root of the fight is the original 2006 initiative that set a state minimum wage at a figure higher than the $7.25 required under federal law. A decade later, voters approved another increase to $10 an hour, a figure that is set to go automatically to $12 next year, along with a provision for employers to provide at least three days of paid personal leave.

Both the 2006 and 2016 measures also specifically empower local governments to regulate minimum wages and benefits as long as they do not provide for a wage lower than what voters approved.

Because both measures were approved by voters, lawmakers were powerless to preclude the kind of higher wages already instituted in Flagstaff.

But GOP lawmakers, seeking to limit the effect of the measure, wrote a separate law in 2016 to redefine “wages” – the thing the state cannot preempt because it was approved at the ballot – to include only the salaries being paid to workers.

The legislation then defined everything else as “nonwage compensation,” ranging from sick pay, vacation pay and severance benefits to commissions, pension contributions and maternity leave. More to the point, the legislation dictated that local governments cannot approve any forms of “nonwage compensation” beyond what is already required by law.

In seeking to defend the 2016 law, Attorney General Mark Brnovich conceded that what voters approved does allow cities to set their own minimum wages and benefits.

But he argued that the word “benefits” somehow does not apply to things like paid time off but instead only “the advantage or privilege something gives.” And Brnovich even suggested that the judges read the word “benefits” – the thing the initiative says lawmakers cannot regulate – as the word “protections.”

Appellate Judge Jennifer Campbell wrote that is not logical, saying the state’s interpretation of the statute “makes even less sense.” And the judge rejected the whole effort by Brnovich to come up with some alternate meaning.

“Because the text of the statute is unambiguous, our statutory interpretation stops at the plain meaning of the words,” she wrote. And using that as a test, she said the GOP-approved law is illegal.

The August 28 ruling does more than preserve the right of cities to set fringe benefit standards. It also means state taxpayers will pick up the tab for the private attorney hired by the Democrat lawmakers in their legal fight.