STATEMENT AS TO THE BASIS FOR

INDUSTRIAL WELFARE COMMISSION

TAKE NOTICE that the Industrial Welfare Commission (hereinafter the "IWC"), having proceeded according to its authority in the Labor Code and the Constitution of California, article 14, §1, has amended Sections 1, 2, 3, and 5 of the General Minimum Wage Order, MW-98. Section 4, Separability, has not been changed. The IWC began its review of the minimum wage in December 1999 and voted to convene a wage board on March 31, 2000. Following its receipt of the report of the wage board, the IWC held additional public meetings and public hearings pursuant to Labor Code §§ 1178.5(c) and 1181 during which it considered the recommendations of the wage board, proposed new minimum wage regulations, and received testimony and written materials regarding the proposed regulations. The only recommendation that received a two-thirds (2/3) or more vote of the wage board was that the IWC consider the appropriateness of continuing the existence of exemptions from the minimum wage for certain occupations and industries. Therefore, after consideration of all of the non-statutory full and partial exemptions from the minimum wage, the IWC included the elimination of some of these exemptions in its proposed regulations. The public hearings on the proposed regulations were held in September and October 2000.

The IWC adopted the amendments to the General Minimum Wage Order on October 23, 2000. They will become effective January 1, 2001, and will be included in the appropriate sections of the IWC's industry and occupations orders. The IWC considered all correspondence, verbal presentations, and other written materials that were submitted prior to the amendment of the Order. IWC submits the following statement as to the basis for the amendments to Sections 1, 2, 3, and 5 of the Order.

This Order is applicable to all workers in the State unless specifically exempt.

The IWC received some testimony and information on exemptions from the minimum wage regarding personal attendants, carnival employees, public employees, professional actors, and sheepherders. Employers of personal attendants, carnival employees, public employees, and professional actors, initially expressed concerns about the action contemplated by IWC. Once they were clear that the IWC proposed to make the employees at issue subject to minimum wage requirements, their concerns were alleviated. Employers in and attorneys for the sheep herding industry registered fervent opposition to the repeal of their exemption and presented some employees who supported their position. They argued that the federal H2a program covering this industry worked fine and did not need to be fixed. On the contrary, other employees and their legal representatives testified about abject living and working conditions. Based on that information, the IWC decided that it should conduct an investigation of hours and conditions of labor of sheepherders in California.

In light of the information received, and in the absence of other public comment, the IWC determined that it should retain the exemptions from the minimum wage for outside salespersons, administrative, executive and professional employees, and any individual who is a parent, spouse, or child of the employer previously contained in this order and the IWC's industry and occupation orders. The IWC eliminated the following non-statutory full and partial exemptions from the minimum wage: employees of the State and local government and any political subdivision thereof, full-time carnival ride operators, professional actors, personal attendants in private homes except for persons under the age of eighteen who are employed as baby sitters for a minor child of the employer in the employer's home, student nurses, and minors paid not less than 85% of the minimum wage rounded to the nearest nickel. The IWC amended the present partial exemption for learners to include minors.

The IWC also amended the provisions in Section 1, Applicability, of Wage Order 14 to be consistent with Labor Code § 515(a). Thus the remuneration test set forth in subsection (A) is now increased from $900.00 per month to a monthly salary equivalent to no less than two times the state minimum wage for full time employment.

The IWC received testimony and correspondence from, employees, labor organizations, private employers and their representatives, attorneys representing all these groups, and state and local legislators, as well as information from government and educational publications. As with the report from the wage board, there was no consensus regarding the adequacy of the minimum wage. Employees and their representatives and supporters testified as to the difficulty in finding safe and affordable housing, and in being able to otherwise provide for families and enjoy a tolerable standard of living. They urged the IWC to increase the minimum wage to at least $8.00 per hour. Employers who testified primarily represented the restaurant, farming, movie theater, and manufacturing industries. They and their representatives testified that an increase in the minimum wage would result in an increase in costs to the public for products and services, the inability to provide adequate health care benefits for employees, the relocation of businesses from California to other states or abroad, and/or the complete failure of some businesses. The IWC determined that an increase in the minimum wage was appropriate. In light of the vast differences in the testimony it received, the IWC decided to adopt its proposal for an increase of fifty (50) cents for each of the next two years, such that on and after January 1, 2001 the minimum wage will be no less than $6.25 per hour, and on and after January 1, 2002 the minimum wage will be no less than $6.75 per hour.

The IWC increased the amounts for meals and lodging that may be credited against the minimum wage to amounts that are proportionate to the increase in the minimum wage. Meals or lodging may not be credited against the minimum wage without a voluntary written agreement between the employer and the employee.

This order amends the minimum wage and meals and lodging credits in MW-98 as well as in the IWC's industry and occupations orders. Other provisions of the IWC's industry and occupations orders are also amended by this order so that they are consistent with the IWC's actions regarding the repeal of exemptions from the minimum wage for the types of employees set forth in Section 1, Applicability, above.