S.F. to put $15 minimum wage on ballot City Hall deal sends voters $15 hourly minimum wage

Raymundo Gutierrez at the Young Workers United office on Wednesday, April 2, 2014, in San Francisco, Calif., where he volunteers to help other workers seeking assistance. Gutierrez works two minimum wage jobs to make ends meet in San Francisco, Calif., having to share his apartment with several family members who also work minimum wage jobs. less Raymundo Gutierrez at the Young Workers United office on Wednesday, April 2, 2014, in San Francisco, Calif., where he volunteers to help other workers seeking assistance. Gutierrez works two minimum wage jobs ... more Photo: Carlos Avila Gonzalez, The Chronicle Buy photo Photo: Carlos Avila Gonzalez, The Chronicle Image 1 of / 9 Caption Close S.F. to put $15 minimum wage on ballot 1 / 9 Back to Gallery

San Francisco voters will be asked to gradually raise the city's minimum wage over the next four years until it's the highest in the nation at $15 an hour in 2018, under a deal finalized Tuesday.

The mayor, city supervisors and business and labor leaders came together on the compromise - even the Chamber of Commerce was on hand - but service industry representatives warned the plan would be hard on restaurants and other hospitality-related businesses.

The compromise announced at City Hall would increase the city's current hourly base pay, $10.74, to $12.25 next May 1, then to $13 in July 2016 and $1 each subsequent year until it reaches $15 in 2018. That would bring the annual pay for a full-time minimum-wage worker to $31,000.

The deal means that labor activists, who had filed a separate ballot measure to raise the wage to $15 by 2017, will drop their effort.

"I can't tell you how happy I am - San Francisco is yet again setting the bar on workers' rights," said Supervisor Jane Kim, who helped broker the deal. "All San Francisco employers will be paying $15 an hour by 2018 - there will be no tip credit, no health care credit. These are pure wages workers will be bringing home to their families."

Win for Lee

The compromise measure is a victory for Mayor Ed Lee, who promised in December to increase the minimum wage but was taken by surprise when labor activists introduced their plan in April.

It's also a coup for left-leaning supervisors and labor activists who have been pushing for a hike in the minimum wage since last year. They predicted that it would set an example that other Bay Area cities would soon follow.

Wade Rose, a vice president at Dignity Health and a Chamber of Commerce board member, said businesses are "pleased that a single ballot measure will appear in November" and relieved that the wage hike would be phased in.

He said that 80 percent of the city's 600,000 workers are employed by small and medium-size businesses that need time to prepare for the increase.

Restaurants unhappy

But not everyone was happy. Gwyneth Borden, executive director of the Golden Gate Restaurant Association, said restaurant owners wanted workers who receive tips to be exempted from the minimum wage hike. She also said employers should get credit for what they spend on workers' health care - provisions that were included in Seattle's measure.

"We are a very different type of industry - hospitality is the backbone of the city and a very labor-intensive endeavor," Borden said. "For businesses with tight margins and low prices, it's going to be hard."

She called the deal "an agreement between the mayor and labor. This is not what the business community has been talking about."

If voters approve the measure in November, San Francisco would have the highest minimum wage in the country. Seattle's City Council voted last week to raise that city's base pay to $15 over the next seven years, then tie it to inflation.

Also Tuesday, supervisors resolved another long-standing debate involving business, voting to close a loophole in San Francisco's universal health care law that let employers take back millions of dollars earmarked for medical care.

The board unanimously approved the compromise reached late Monday by Supervisors David Campos, Mark Farrell and London Breed, which, like the minimum wage agreement, will be implemented gradually.

The city's health care law requires employers either to offer insurance to their workers or pay between $1.63 and $2.44 an hour per employee toward health care. Employers who pay the hourly rate may choose between giving that money to the city for care or putting it into a health account that the employee can draw from.

Windfall for employers

But there are a number of problems with those accounts, according to Campos and other supporters of the 2006 law. Businesses were allowed to put restrictions on how that money could be spent - in 2012, for example, at least 35 percent of employers paying into the health accounts barred workers from using the money to pay for health care premiums. Instead, they could use the money only for expenses such as doctor visits and dental and vision care.

Also, employers could take back money that their workers failed to spend in two years, a windfall that has amounted to tens of millions of dollars annually. And under the national health care law that took effect in January, workers can no longer use the accounts to pay for regular medical care or to buy insurance - a change that could increase the return flow of cash to their employers and result in fewer workers having access to health care.

Under the agreement that Campos, Farrell and Breed reached, 60 percent of the money in those accounts will be irretrievable for employers starting next year. That total will rise to 80 percent in 2016 and 100 percent in 2017.

Campos said the change would remove employers' incentive to funnel money to the health accounts and encourage them to pay for insurance directly, or give the money to the city to help individuals secure care. Under the legislation, the Department of Public Health will set up a system to help workers buy full coverage under the state health care exchange.

Smooth shift

Breed said phasing in the change would give businesses time to make the switch smoothly.

"Our No. 1 goal was to make sure employees have access to these funds, and No. 2, we don't want businesses to be negatively harmed by such an abrupt change," Breed said. "Larger businesses won't be, but for smaller entities with 20, 30, 40 or 50 employees, if this had happened all of a sudden, it could have had a major impact."

But Borden, of the restaurant association, said the group is also displeased with the deal. Association members oppose making the health care accounts irrevocable, regardless of when the change is phased in, she said.

Lee, who vetoed a similar proposal in 2011, plans to sign the new measure.