Dec. 25 – In the weeks since Ballot Measure 1 passed by a significant margin, many Alaska employers are beginning to understand its implications.
The measure, which takes effect July 1, will increase the minimum wage and establish the state’s first sick leave requirement. It will ban employers from holding mandatory meetings on political or religious issues.
The changes are likely to impact every employer in Alaska, and at a minimum will require new workplace policies and training for managers, said Mike O’Brien, an attorney at Davis Wright Tremaine, who along with other attorneys is advising companies on the impact of the measure.
The vast majority of Alaska employers already pay above the minimum wage, especially after the pandemic caused a labor shortage, O’Brien said.
But fewer companies offer sick leave. Many entrepreneurs say they expect higher costs for that part of the measure. They are struggling with ways to avoid passing costs on to customers or cutting back on hours, they say.
Brock Wilson, a research assistant professor of economics at the Institute of Social and Economic Research at the University of Alaska Anchorage, said studies show the measure could lead to fewer work hours in the short term as companies respond to higher costs.
Prices for customers could increase for businesses with many minimum-wage workers, such as restaurants where tips are combined with wages, Wilson said.
But the measure will have clear benefits for workers, such as higher wages for some, lower turnover in the long term and fewer cases of illness among workers, he said.
Mark Robokoff, owner of AK Bark pet store in Anchorage, was part of a coalition of small businesses that supported the measure. He said he believes the measure will improve Alaska’s economy — more people will have more money to spend at local businesses because more people will be better paid.
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“It only works if everyone does it,” he said. “Then we all get more money to help us pay our employees.”
Questions about sick leave
The sick leave requirements generate the most questions from companies, people familiar with the measure say.
The measure increases the minimum hourly wage to $13 in July, $14 a year later, and $15 in July 2027. The increases after that will be tied to inflation.
The minimum wage will rise to $11.91 per hour on January 1, from $11.73 under existing law.
Under the measure, nearly all Alaska workers will receive at least one hour of sick leave for every 30 hours worked.
Larger employers will have higher sick leave requirements. Employers with 15 employees or more must allow employees to accrue at least 56 hours annually. Employers with fewer than 15 employees must allow them to accrue 40 hours annually.
Companies can exceed these levels if they wish. They can also combine sick leave with paid leave, as some already do, as long as employers meet the sick leave minimum.
Under the initiative, the areas covered by sick leave are broad. This includes physical and mental problems, but also support in matters related to domestic violence, sexual assault or stalking. Employees can take sick days to support sick family members or someone “whose close relationship is the equivalent of a family relationship,” the measure said.
The state Labor Department’s Wage and Hour Division plans to post information about the measure on its website early next year, answering frequently asked questions, said Jeremy Applegate, head of the department.
Applegate spoke at an educational event about the measure held early this month by the Anchorage Chamber of Commerce. Many companies were present.
The agency will draw up the regulations for the ballot measure. An attempt will be made to clarify questions such as how to measure employment in a company whose annual figures hover around the fifteen-employee threshold. The draft regulations are expected to be available for public comment in March.
I’m trying to figure it out
The measure was funded primarily by the Fairness Project, a Washington, D.C.-based organization that has worked on several ballot measures in other states to raise minimum wages or guarantee paid leave. The group spent about $2.6 million on the campaign, about 25 times more than opponents such as The Alaska Chamber and other organizations.
Celeste Hodge Growden, chair of the Alaska Black Caucus, said she voted for the measure because everyone deserves a decent wage.
But she worries about the sick leave requirement, which will increase caucus costs.
“Now I’m thinking, ‘Oh shoot, what did I do?’ she said.
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Growden said she doesn’t want to reduce the programs. And cutting hours could lead to turnover, she said. A solution could be to find more volunteers.
“I just want to support our employees, so I have to make good business decisions to make this happen,” she said.
Josh Howes, president of Premier Alaska Tours, which transports tourists in motor coaches, said the measure is positive for many Alaska workers because it provides better base pay.
His company and many others in the tourism industry already pay well above the minimum wage, he said.
Premier employs approximately 800 people, mostly seasonal workers.
Expanding the company’s sick leave to seasonal employees could add nearly $500,000 in annual costs, he said. Keeping track of leave time will also involve administrative tasks and costs.
The additional costs cannot be quickly passed on to consumers, if that is even possible, he says. Contracts in the industry often have a term of two years.
How will Prime Minister Alaska handle the changes?
“That’s what we have to figure out,” he said. “We’re going to have to find ways to save money to cover those costs.”
‘The impact will be dramatic’
Laile Fairbairn, president of Locally Grown Restaurants, which operates four restaurants in Anchorage, including Snow City Cafe, said the company will have to expand sick leave to 56 hours, from 40 hours, for an employee’s first year.
The minimum wage will also have to increase for servers, baristas and other staff who also receive tips.
“The impact will be dramatic and the numbers are really challenging,” she said. “We offer comprehensive benefits such as 401(k), health insurance and paid time off. We will have to look at all of our benefits and see what makes the most sense in light of the changes.”
Fairbairn said Alaskans clearly supported the new employee benefits. It’s up to companies like hers to figure out how to implement them, she said.
But the higher costs cannot be fully passed on to customers, she said.
The restaurant group, with about 300 employees, will look for ways to operate more efficiently, she says.
But Fairbairn said she worries the changes could be “crippling” for smaller businesses with few employees and less flexibility to find savings, she said. These additional costs come on top of the restaurant industry’s already tight profit margins, often around 3-4%, she said.
“We’re all going to have to tighten our belts,” Fairbairn said.
[Shipping fees for Alaska-bound products are increasing. A small rise in store prices could add up.]
Goldie’s Coffee Roasters, which operates a coffee shack on Old Seward Highway near 76th Avenue, has six part-time employees.
Owners Jenna Frederic and Kristen Redfield said they pay their staff more than minimum wage, so that won’t be an immediate problem.
But the sick leave requirement will increase costs for the company starting this summer, they said.
They are letting customers know they will end the loyalty program in June for a discounted or free cup of coffee, Redfield said.
“This will help us prevent coffee prices from rising for everyone,” Redfield said.
The owners, who are sisters, said they want to continue operating while supporting employees and customers.
“We’re just adapting,” Jenna Frederic said. “It’s part of being a small business owner. We’ve been in business for 11 years and every year we have to make adjustments.”
Derrick Green, owner of Waffles and Whatnot restaurant at 500 Muldoon Rd. and was an early supporter of the measure, saying his employees already make more than $15 an hour and get paid sick leave.
He does that by cutting his wages, he said.
“I am literally the least compensated member of the staff,” he said.
If he takes care of the workers, they’ll take care of everything else, he said.
