Following a developing nationwide trend, on September 3, 2014, Chicago Mayor Rahm Emanuel signed an executive order that will require City of Chicago contractors and concessionaries (those operating retail businesses on City property) to pay a minimum wage of $13 per hour to all employees.  The September 3 executive order is anticipated to affect approximately 1,000 employees who perform work for the City in areas such as landscaping, maintenance, security, concessions, and custodial work.  

The September 3 executive order is consistent with similar actions in other jurisdictions.  In February, President Barack Obama signed an executive order raising the minimum wage for federal contractors to $10.10 per hour for contracts solicited on or after January 1, 2015.  Last May, the mayor of Philadelphia likewise signed an executive order that will increase the minimum wage for individuals working for city contractors to $12 per hour, effective January 1, 2015.  In June, the Seattle City Council approved a phased-in increase in the minimum wage to $15 per hour.  Similar state initiatives have led to increased minimum wages in California, Connecticut, Delaware, Hawaii, Maryland, Michigan, Minnesota, West Virginia, and Washington D.C. in the last year.

Pursuant to the September 3 executive order, all City contracts and concession agreements advertised on or after October 1, 2014 are required to contain provisions stipulating that: (1) the contractor or concessionaire will pay its employees no less than $13 per hour for work performed under the contract or concession agreement; and (2) the contractor or concessionaire will require all subcontractors, sublicensees, subtenants, or subconcessionaires to pay their employees no less than $13 per hour for work performed under the contract or concession agreement.  The executive order does not apply to not-for-profit organizations.  Additionally, the $13 per hour requirement is indexed to inflation, and will increase proportionately every July 1.  

Certain employees are exempt from the $13 per hour requirement, including employees whose work is: limited to providing general support for the contractor’s operations, does not directly relate to the services to be provided under the contract, and is included in the contract price as overhead (unless the employee’s regular work location is on City property or at the jobsite of a city project).  Employees under the age of 18, camp counselors, certain probationary employees, and employees classified as “learners” under the Illinois Minimum Wage Law are also exempt from the executive order.  

Concessionaire employees who work for gratuities will not be required to be paid a straight cash wage of $13 per hour; however, the September 3 executive order separately requires concession agreements advertised on or after October 1, 2014 to provide that such tipped employees will be paid no less than the minimum hourly wage set by the Illinois Minimum Wage Law for workers who receive gratuities (currently $4.95 per hour), plus an additional $1 per hour – and that sublicensees, subtenants, and subconcessionaires will also pay the same wage.  In addition, because the executive order provides that such an employee must receive at least $13 per hour, in combined salary and gratuities, to the extent that the cash wage (currently $5.95 per hour under the executive order) plus gratuities do not reach $13 per hour, the employer would have to make up the difference in order to comply with the executive order.  This tipped employee wage, similar to the straight cash wage of $13 per hour for non-tipped employees, is also indexed to inflation, and will increase proportionately every July 1.    

It is unclear whether employers may collectively bargain out of the requirements of the order.  On the one hand, the order states that “[a]fter the effective date of the Order, its requirements may be waived in a bona fide collective bargaining agreement, but only if the waiver is set forth explicitly in such agreement in clear and unambiguous terms,” indicating that employers and unions can collectively bargain for a lower wage.  On the other hand, that notion appears to be contrary to language in that same section which states that nothing in the order shall interfere with the right of employees “to bargain collectively with their employer . . . to establish wages or other conditions of work in excess of the applicable minimum standards of the provisions of this Order.”     

It is important to note that the September 3 executive order does not address the status of existing City contracts.  It thus appears that existing contracts are not affected by the September 3 executive order.  However, existing contractors should note that the executive order does not purport to supersede or invalidate Chicago’s living wage ordinance, and contractors currently subject to that ordinance must still abide by any applicable requirements.  Due to the 2012 living wage ordinance, the minimum wage for City contractors is already much higher ($11.93 per hour) than the statewide minimum wage ($8.25 per hour).  

The September 3 executive order has largely been reported as a political maneuver aimed at rallying support for the November ballot initiative to increase the Illinois minimum wage to $10 per hour and creating momentum for Mayor Emanuel’s proposed legislation to increase the minimum wage to $13 per hour for all workers in Chicago by the year 2018, both of which are expressly referenced in the order.  

Nevertheless, Wednesday’s executive order will have a real impact on affected employers and employees.  At the very least, contractors and concessionaires that seek to do business with the City of Chicago in the future will need to leave room in the budget to accommodate these new changes.