Human Services Group Ponders Living Wage

The city of Ann Arbor’s living wage ordinance was the topic of a special session of the city’s housing and human services advisory board (HHSAB) held on Dec. 18. The current levels for Ann Arbor’s living wage are $12.17/hour for employers that offer benefits and $13.57/hour for those that don’t. It’s adjusted every year based on federal poverty guidelines.

HHSAB members as a group displayed little enthusiasm for a possible revision to the city’s living wage ordinance – a change that would exempt some nonprofits from compliance. The nonprofits that would not have to pay their workers a living wage are those that provide human services under contract with the city.

However, the group formed a consensus around the idea that their board was, in fact, an appropriate body to review the possible change to the ordinance. Some members felt their attitude toward the possible exemption depended in part on whether they construed the responsibility of the HHSAB narrowly, to focus exclusively on those who receive human services, or broadly, to include humans generally.

The HHSAB review of a possible change to the living wage ordinance will be informed in part by work done by a class of University of Michigan students, to be taught in the winter 2013 term by Ian Robinson, a lecturer in the department of sociology. Robinson attended the Dec. 18 meeting of the HHSAB, and sketched out the range of work he thought his students might be able to do to assist the board. The original timeline for the board to deliver a recommendation to the Ann Arbor city council was mid-February. But it appears now that will be pushed at least to March and possibly April.

The HHSAB is reviewing the living wage ordinance at the direction of the Ann Arbor city council, which had considered an ordinance revision at its Nov. 19, 2012 meeting. The council postponed the matter until mid-February, pending advice from HHSAB.

But discussion of the city’s living wage ordinance had begun at meetings of the HHSAB two months before that. At its Sept. 13 meeting, HHSAB board members were addressed by Joan Doughty, executive director of Community Action Network (CAN), on the topic of the city’s living wage ordinance. She indicated that CAN hired many part-time work/study students for its after-school programs – and her organization had to pay them $13.57 an hour under the city’s living wage ordinance. That detracted from CAN’s ability to pay its full-time staff, who depend on wages paid by CAN to earn a livelihood. HHSAB discussed the idea of forming a subcommittee to study the issue.

City councilmembers Sandi Smith and Jane Lumm, who then served as council liaisons to HHSAB, had introduced a resolution at the council’s Sept. 17, 2012 meeting on the topic. Their resolution would have waived the living wage requirement for those nonprofits that provide human services under contract with the city – which include CAN, although CAN was not mentioned in the resolution or the council’s discussion. That resolution was withdrawn, because it amounted to an ordinance change, which can’t be accomplished with a simple resolution. Councilmembers were told to expect a proposal for an ordinance change in the future.

HHSAB discussed the living wage again at its Oct. 16 meeting, determining that additional study was needed before making a recommendation. But at the city council’s Nov. 8, 2012 meeting, Lumm introduced a resolution to grant a waiver to CAN. Her resolution invoked the ordinance provision that allows the council to grant such a waiver for a specific nonprofit. The council granted the waiver, but on just a 9-2 vote. That relieved some of the immediate pressure – because it meant that CAN could receive its grant under contract with the city. The city had been withholding CAN’s allocation, because CAN could not sign an attestation that it was complying with the living wage ordinance.

So when the city council subsequently considered the proposed change to the living wage ordinance, at its Nov. 19 meeting, it did so without the sense of urgency that came with the earlier context of CAN’s financial difficulties. [.pdf of marked up proposed changes to living wage ordinance] The council’s postponement included a referral to HHSAB for its input.

The well-attended special meeting of HHSAB on Dec. 18 included some who were involved in the push to establish Ann Arbor’s living wage ordinance back in 2001. It was clear from the discussion that the situation of nonprofits that deliver human services had been consciously considered when the local law was first enacted over a decade ago. And because of that previous consideration, it seems unlikely – based on the board’s conversations on Dec. 18 – that HHSAB would make a recommendation in support of an ordinance change. 

Legal Issues

Existing provisions in the ordinance, as well as its current legal foundations, arose as topics at the Dec. 18 HHSAB meeting.

Legal Issues: Exemptions, Applicability

The city of Ann Arbor’s living wage ordinance does not apply to employers in the city of Ann Arbor generally, but rather only to those that have contracts with the city. So a private company, based in Ann Arbor and operating within the city limits, is not impacted by the city’s living wage ordinance – unless it seeks to win a contract or receive a grant from the city.

So the city itself, as an employer, does not fall under the terms of the ordinance. The city is not exempted per se – rather, the city is simply not subject to the living wage ordinance based on its terms. Still, this circumstance is often described as the city “exempting itself” from the ordinance.

At the Dec. 18 meeting of the HSSAB, this situation was identified as an equity issue: If the city of Ann Arbor expects contractors to pay a living wage, how can the city justify paying less than the living wage standard to some of its own employees – for example, seasonal, temporary workers? Eliminating existing exemptions in the ordinance, absent additional changes, would still not result in the law’s applicability to the city.

One of the ordinance changes the city council is being asked to consider is to add an exemption for those nonprofits that provide human services through a contract with the city. During the Dec. 18 HHSAB discussion, Ned Staebler floated the idea that perhaps the board’s recommendation eventually should be: Don’t add any more exemptions, and remove those that already exist in the ordinance. Jane Lumm’s response to Staebler was unambiguous: “I’m not going to be the councilmember to put forward an amendment to un-exempt those who are now exempted.”

Entities to which the living wage standard currently does not apply include:

• For-profit organizations that have fewer than five employees, and nonprofit organizations that have fewer than 10 employees. A 2001 survey of 56 nonprofits with city contracts showed that 19 had fewer than 10 employees. The survey was conducted to inform the city council’s decision on the possible enactment of a living wage law.
• Organizations that hold contracts totaling less than $10,000 for a 12-month period. A 2001 survey of 56 nonprofits with city contracts showed that 15 had contracts/grants totaling less than $10,000 for 12 months.
• Organizations that receive grants from the city’s community events fund. This was a provision added in 2008. As a practical matter, only one organization benefits from this exemption – the Ann Arbor Summer Festival. But it’s not singled out explicitly in the ordinance for a waiver. Before 2008, the Summer Festival received a $10,000 grant from the city. But the city council wanted to grant a larger amount. In 2012, for example, the city granted $25,000 to the festival. But granting more that $10,000 to the Summer Festival pushed that organization past the dollar-amount threshold triggering application of the living wage law. The new exemption, based on the specific city funding source, allows the Summer Festival to pay its workers less than the living wage standard, while still receiving more than $10,000 from the city.
• Organizations that have been granted a waiver by the city council based on the submission of a plan to achieve compliance within three years. This was the kind of waiver granted to the Community Action Network at the council’s Nov. 8, 2012 meeting. The council and the staff on that evening did not recall any previous waiver being granted since enactment of the ordinance. But resident Jim Mogensen brought material from his files to the Dec. 18 HHSAB meeting to show that the Shelter Association of Washtenaw County (SAWC) – which runs the Delonis Center – had been granted such a waiver soon after enactment of the ordinance. The city’s online Legistar archive of meeting minutes show that the council passed the living wage ordinance on March 5, 2001, and the council granted the waiver to SAWC four months later, on July 16. Mogensen was active in the movement to establish the living wage in Ann Arbor as a member of the Washtenaw Coalition for a Living Wage.

Legal Issues: Legal Foundations for Regulation of Wages

At the Dec. 18 HHSAB meeting, board member Ned Staebler raised the question of the legal foundations for the city’s living wage ordinance. He indicated a lack of enthusiasm for investing time in revising an ordinance that had been found to be illegal.

Staebler was alluding to a case decided by the court of appeals in 2009 involving Detroit’s living wage law. By way of background, in that ruling the court of appeals felt bound by a 1923 Michigan Supreme Court decision. The 1923 decision had determined – based on the state constitution – that only the state legislature could regulate wages. [.pdf of court of appeals opinion] Although the court of appeals analyzed that precedent as binding, it expressed frustration that the basis of the 1923 decision – the Michigan state constitution – had changed since then. Specifically, the court of appeals cited a change to Section 34 of Article 7:

The provisions of this constitution and law concerning counties, townships, cities and villages shall be liberally construed in their favor. Powers granted to counties and townships by this constitution and by law shall include those fairly implied and not prohibited by this constitution.

On that basis, the court of appeals expressed the view that the state Supreme Court should review the case: “…we respectfully urge our Supreme Court to revisit Lennane [the 1923 decision] and reconsider whether the rule therein continues to have a place in today’s jurisprudence.”

However, a Michigan Supreme Court order from April 7, 2010 declined to hear the appeal on the Detroit living wage case, leaving the court of appeals ruling to stand in that case – a result that’s led many observers to conclude that a challenge to Ann Arbor’s living wage law would be struck down at least initially, and would require an appeal to the Michigan Supreme Court to maintain it.

The court of appeals ruling was classified as unpublished – which means it’s not binding on other courts. It’s only the classification of the case as published versus unpublished that matters to determine precedence, not whether the case is broadly disseminated. In actual practice, however, judges may use the logic and reasoning available in unpublished opinions to inform their thinking about how to correctly analyze a case. And it’s this practical issue that has led many observers to conclude that Ann Arbor’s living wage ordinance is not on a solid legal foundation.

At the Dec. 18 HHSAB meeting, Jane Lumm allowed that the ruling was an unpublished opinion, but pointed out that Detroit no longer has a living wage law as a consequence of it. She told the board that the city council had been given a lengthy legal advice memo from the city attorney’s office, and that it’s subject to attorney-client privilege – so she was not in a position to share that memo.

Board member Soni Mithani – an attorney with Miller Canfield – sketched out the background of the 2009 case. Staebler indicated that while he didn’t want to make a recommendation on something that could be illegal, he was content that what’s at stake is not the creation of a new ordinance – but rather a recommendation either to modify the existing ordinance, or to leave the existing ordinance alone.

Other Possible Living Wage Law Changes

A blanket exemption to human services nonprofits is one of several proposed changes to the city’s living wage ordinance, considered and postponed by the city council on Nov. 19. Among other amendments are: (1) changes to the threshold amount per year that triggers application of the living wage standard, increasing it from $10,000 to $25,000; (2) a change from the entity that can grant a hardship waiver (from the city council to the city administrator); and (3) a change in the description of bureaucratic procedures related to enforcement. [.pdf of marked up proposed changes to living wage ordinance]

Other Changes: Minimum Threshold

Currently the threshold that triggers application of the living wage standard on a contract with the city is $10,000 for a 12-month period. At the Dec. 18 HHSAB meeting, Jane Lumm reported that the recommendation to raise the threshold to $25,000 stemmed from conversations with the city attorney’s office and financial staff. It was based in part on the idea that the dollar figure should be in line with another threshold – one triggering city council approval of contracts in general.

The city council is required by ordinance to approve any contract with the city of more than $25,000. Lumm mentioned at the Dec. 18 meeting that this amount had been the subject of a voter referendum in the mid-1990s. By way of additional background, the city charter stipulates that the council is to enact an ordinance to regulate which contracts can be approved without a city council vote; but the charter sets an upper bound on such contracts.

On Aug. 21, 1995, the council voted to place a charter amendment on the ballot, to raise the upper bound to $25,000 – from $15,000. That amendment was subsequently approved by voters. Contracts under $25,000 can be approved by the city administrator, without explicit approval by the city council.

So at the time of the initial passage of the living wage ordinance in 2001, it appears that a conscious choice was made to set the threshold triggering application of the living wage standard ($10,000) to an amount that was different from that triggering a need for the city council to approve contracts ($25,000).

Other Changes: Council vs. Administrator

The contrast between the city council and the city administrator as approving agents appears in another proposed change to the living wage ordinance. Currently a hardship waiver can be granted only by a vote of the city council. The change now being contemplated by the city council is to allow the city administrator to handle such waivers.

Based on city council deliberations on Nov. 19, this kind of change appears to have some traction with councilmembers. They see it as more likely that a nonprofit might ask for a waiver – as opposed to just flouting the ordinance – if that waiver could be pursued without the publicity associated with a formal request to the city council. The question of how many nonprofits that have contracts with the city might not be complying with the ordinance has been mooted publicly, at both the city council’s sessions and at meetings of the HHSAB.

Other Changes: Agent of Enforcement

If the living wage ordinance is to be enforced at all, then from a technical point of view, some revisions of the living wage ordinance appear to be warranted – based purely on the fact that the city’s bureaucratic organization has changed since the passage of the ordinance. The current ordinance refers to a “human rights officer” and the “human rights office,” which no longer exist at the city. The proposed change is to revise the language to specify the “procurement officer.”

At the Dec. 18 HHSAB meeting, potential future board appointee Julie Steiner, who’s executive director of the Washtenaw Housing Alliance, pointed out that problem with the ordinance. She noted that she had been the last employee of the city’s human rights office, before it was eliminated from the organizational structure. Board member Tony Ramirez told her: “Roger [Fraser, former city administrator] worked real hard to get rid of you!”

On the question of the actual compliance by nonprofits with the living wage, some of the correspondence from CAN executive director Joan Doughty to city officials this past year indicates that she does not believe that conformance is very good:

So it’s really become this joke among some nonprofits (recently I heard someone say – as if incredulous – in a nonprofit meeting: do they really think we are paying the living wage?). So those who follow the ordinance as it’s written are schmucks … ?

At the Dec. 18 HHSAB meeting, Lumm shared her own perspective on compliance as a board member of several nonprofits. She reported that one nonprofit had characterized the living wage standard as “not-applicable.” Lumm continued by saying that nonprofits are “creative” in how they account for employee compensation. Part-time student employees are paid out of different grants so the nonprofits can pay them less than full-time workers, she ventured.

Lumm said she did not believe there was malice on the part of nonprofits in their creative approaches. She wished it were possible to increase human services allocations from the city equal to the consumer price index (CPI). But everyone has been through tough economic times, she said. Lumm was more concerned with the fact that full-time employees, who are supporting families, aren’t getting increases in their wages.

Mary Jo Callan, head of the city/Washtenaw County office of community and economic development, countered Lumm’s view by saying she thought that nonprofits with whom the city had contracts were, in fact, meeting the living wage standard. The OCED oversees the process of making funding recommendations for human services nonprofits, as part of a coordinated approach with the city, county, United Way of Washtenaw County, Washtenaw Urban County, and the Ann Arbor Area Community Foundation.

A Narrow or Broad View?

A key point of discussion was how narrow or broad a view HHSAB should take in evaluating the proposed changes to the living wage ordinance.

At its Nov. 20 meeting, board chair David Blanchard had questioned the appropriateness of HHSAB weighing in on every aspect of the living wage ordinance, and had ventured that it might be more suitable to identify just those elements within the purview of the HHSAB. The question of scope was also discussed at the Dec. 18 meeting, which enjoyed far better attendance than did the meeting on Nov. 20.

The idea of holding the line on the living wage standard, even for human services nonprofits, seemed to have a substantial amount of sympathy on the board. What caused some board members to hesitate was the idea that conclusions they might reach as HHSAB board members could be different from those they’d draw if they were members of a different body – like the human rights commission.

Narrow or Broad: Human Rights Commission?

Even though the human rights office no longer exists within the city’s bureaucracy, a volunteer commission persists. Members of the human rights commission are appointed by the city council. HHSAB board member Tony Ramirez remarked that he’d served on the human rights commission back in 2001 when the living wage ordinance had been enacted – and that body had been consulted on the ordinance. He wondered if it were not appropriate for the human rights commission to be consulted now.

Narrow or Broad: Initial Impressions of Board Members

The notion that nonprofits providing human services to the city shouldn’t be exempt from the living wage standard enjoyed substantial support in remarks from board members. Rosemary Sarri noted that she’d been a social worker for many years – and social workers are primarily women. She indicated that an exemption for human services nonprofits could have a disparate impact on women.

Andrew Gilroy allowed that he didn’t have a lot of day-to-day interaction with these types of issues. He saw it as a question of trying to solve the problem or apply a band-aid. By not allowing an exemption to the living wage standard, you make it more challenging to provide human services – but if you make exceptions, where does it stop? he wondered. Ultimately, he said, the goal is not to rely on human services organizations as much as we do now. If we don’t keep to our standards to make a world that provides a living wage to everyone, he wondered, what are we really doing? He indicated a greater willingness for the issue to be handled on a case-by-case basis rather than to grant a blanket waiver.

Adam Zemke, newly elected to represent the 55th District in the Michigan house of representatives, characterized it as a complicated problem. He said that obviously we don’t want to add to the pool of people who’d be recipients of human services – by reducing the wages that human services nonprofits are required to pay. [It's a point that is frequently raised – that workers of human services nonprofits are often eligible to receive services themselves, and reducing their wages would further exacerbate that problem].

At the same time, Zemke did not want the ability to provide services to be diminished due to the need to pay workers more than the market rate. There’s just not enough human services funding, he said, and that’s a result of many different factors. Still, he said, he did not think funding levels would change anytime soon. So it’s a careful balancing act, he concluded.

Stephen Pontoni said he had a hard time looking at the issue pragmatically – because he’s so pro-worker. He found it difficult to endorse a cut to the living wage for anybody. He felt that higher funding levels for human services should continue to be a priority for HHSAB.

Ned Staebler indicated that his initial reaction was similar to that of Sarri and Pontoni. But he was also worried about unintended consequences – as funding goes down and expenses go up.

Gary Hayden made two observations. First, there’s a contention now that there’s a problem with the ordinance because it’s claimed to be over-broad in its application to human services nonprofits. But he rejected that idea, because this had been an issue that was discussed at the time the living wage ordinance was enacted. Second, Hayden did not see a contrast being presented between nonprofits that deliver human services and nonprofits that don’t.

Tim Colenback, a recent appointee to HHSAB, reiterated the point that others had made previously – that the ordinance had been passed without an exemption for human services nonprofits, even though the potential impact on such organizations was explicitly and consciously considered at the time. He wanted HHSAB’s discussion to acknowledge a larger issue of growing inequality. Over the last 30 years, he said, we have seen income inequality grow.

He also put the conversation in the context of the “right to work” legislation that had been signed into law earlier in December by Gov. Rick Snyder during the lame duck session of the state legislature. Colenback described “a rather concerted effort to lower the wages of people who are working in these positions.” The living wage ordinance was enacted to say: “In Ann Arbor, we set a higher bar.”

Given the reports that the ordinance wasn’t being followed by some human services nonprofits, he felt at a minimum HHSAB should give the advice that the ordinance be enforced. Colenback also argued against making exemptions for part-time workers, because he felt it would create disincentives to hire people on a full-time basis. That was a sentiment expressed by Jim Mogensen during public commentary as well. Colenback also stated that HHSAB should ask the city to pay all their workers a living wage.

Soni Mithani began by saying she didn’t know where she fell on the issue. She identified a real tension between the city’s commitment to human services funding, and the living wage ordinance. If the city were to increase its human services budget, she ventured, people might feel more comfortable requiring human services agencies to pay the living wage standard. Still, she found herself hard pressed to change a philosophical position in response to an economic crisis. She indicated a more favorable view of granting exceptions on a case-by-case basis.

Ingrid Ault began by sharing her own background – saying she works in the nonprofit world and has served on many nonprofit boards. She found the idea frustrating that part-time workers should not be subject to the living wage standard – because she works two part-time jobs herself. [One of those jobs is as executive director of Think Local First.] She’d prefer one full-time job, she said, but works two part-time jobs because she has to. And in her own work for a nonprofit, if the budget was short by $2,000, “then maybe you need to figure out how to raise that.” She said it would be hard to sell her on the idea of exempting human services nonprofits from the living wage law.

[The $2,000 figure stemmed from the amount that Community Action Network had indicated its costs increased, as a result of an increase in the living wage from last year to this year – from $13.19/hour to $13.57/hour.]

Narrow or Broad: Mission of the HHSAB

A vignette from the meeting featuring Soni Mithani and Tim Colenback illustrated the tension some members of HHSAB felt in their roles as board members. Mithani said she was sympathetic to the arguments made by Colenback. But she ventured that there was a good reason that back in 2001 it had been the human rights commission that had weighed in. She read aloud the formal charge of the HHSAB:

Purpose: To make recommendations to the city council, city administration and the office of community development regarding policies and programs to address the needs of low income residents of the city of Ann Arbor. To monitor the implementation of the city’s housing policy and the creation of a city housing Coordinator to oversee, carry out and coordinate these policies.

She took that to mean that HHSAB is supposed to care about human services nonprofit organizations. A different body – like the human rights commission – might look at the proposed revisions and say it’s a “slam dunk” not to grant an exemption in the ordinance. But it might not be a slam dunk for HHSAB.

Colenback drew a laugh when he countered Mithani by saying, “Human services are primarily for humans – and the humans working for low wages are our concern.”

But Pontoni also indicated that he felt he’d draw a different conclusion depending on whether he saw the responsibility of the HHSAB as advocating for a constituency of human services nonprofits – which he ventured would prefer not to pay wages at the living wage standard. That speculation was not met with universal agreement, with Lumm contending that nonprofits would be “the last ones to choose not to compensate their employees well.”

Mary Jo Callan, head of the city/county office of community and economic development, was clear about the idea that she felt it was appropriate for HHSAB to weigh in on the question of the living wage ordinance: “This is the most beautiful board to be weighing in on this issue.” The living wage policy is squarely within the board’s purview, she said.

Ned Staebler did not feel constrained to weigh in on the narrow view contained in the purpose statement of the HHSAB. If the city council was asking HHSAB to weigh in, then he was interested in doing that, he said. Staebler also indicated he was interested in getting results from the work that Ian Robinson’s University of Michigan students would be doing.

Open Questions for Further Study

It’s clear from the 2001 survey of nonprofits that the impact on such organizations was taken into consideration.

At one point during the Dec. 18 HHSAB meeting, reacting to a $2,000 figure associated with a specific impact on CAN, Ned Staebler ventured that if it’s $2,000 the board was arguing about, then he felt the conversation was over.

A more recent survey was not as exhaustive as the 2001 effort. [.pdf of November 2012 human services nonprofit survey] Responding to the survey were 30 out of 38 nonprofits. A key question was answered by 20 of them:

2. How much in additional annual wages does your agency pay as a direct or indirect result of the Living Wage Ordinance?

Of the 20, eight nonprofits gave a non-zero dollar amount. The total impact was $156,592. The range of impacts on each nonprofit was $1,040 to $43,000 annually. Twelve nonprofits replied with $0 or NA; 10 didn’t answer the question.

So HHSAB members wanted to get a clearer idea of what the actual impact is of the living wage ordinance on human services nonprofits in Ann Arbor. It’s the kind of work that University of Michigan sociology lecturer Ian Robinson felt his students could help with – by interviewing leaders of nonprofits, reviewing documents or handling other tasks under the direction of the board or the city/county staff.

Robinson is teaching a winter 2013 course called “Understanding Ethical Consumption.” He told the board that currently six students are enrolled, so he could not promise a huge group. Still, he felt that some of them might be intrigued by the idea of working with the city on this project.

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