Public Hearing to Examine the Overall Process of the Fast-Food Wage Board of 2015

1 BEFORE THE NEW YORK STATE SENATE

STANDING COMMITTEE ON LABOR 2 ---------------------------------------------------- 3 PUBLIC HEARING 4 TO EXAMINE THE OVERALL PROCESS OF THE 5 FAST-FOOD WAGE BOARD OF 2015 6

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Legislative Office Building 8 181 State Street, 2nd Floor

Van Buren Hearing Room A - 2nd Floor 9 Albany, New York 12247 10 September 10, 2015

11:00 a.m. to 2:00 p.m. 11 12 PRESIDING: 13 Senator Jack M. Martins

Chair 14 15 PRESENT: 16 Senator Kathleen A. Marchione 17 Senator Terrence P. Murphy 18 Senator James L. Seward 19 20 21 22 23 24 25 1

SPEAKERS:PAGE QUESTIONS 2

Linda Donahue 14 18 3 Chairperson of 2009 Wage Board, and

Director of Online Studies 4 The ILR School at

Cornell University 5

Angelo Amador 24 40 6 Senior Vice President &

Regulatory Counsel 7 National Restaurant Association 8 Melissa Fleischut 24 40

President & CEO 9 New York State Restaurant Association 10 Pat Pipino 57 69

Owner 11 Ben & Jerry's, Saratoga Springs, NY 12 Jeff Hanscom 73 82

Director of State Government 13 Relations & Public Policy

International Franchise Association 14

Ken Pokalsky 92 102 15 Vice President

Business Council of New York 16

William Pompa 108 115 17 Owner

Mr. Subb restaurants 18 19 20 21 22 23 24 25 1 SENATOR MARTINS: Thank you very much for 2 being here. 3 My name is Senator Jack Martins, and I chair 4 the Senate's Standing Committee on Labor. 5 Before I begin my opening remarks, I'd like 6 to introduce the other members who are here with us 7 this morning. 8 From my left, Senator Jim Seward, 9 Senator Kathy Marchione, and 10 Senator Terrence Murphy. 11 Just to give a little background as to why we 12 are here, in May, the acting commissioner of labor, 13 Mario Musolino, at the direction of the Governor, 14 convened a wage board to inquire into and report and 15 recommend adequate minimum wages and regulations for 16 fast-food workers. 17 This is in spite of the fact that the 18 minimum-wage increase, which the Legislature and the 19 Governor adopted in 2013 is still being phased in. 20 And as we all know, it's at 8.75 now. It 21 will be $9.00 by the end of this year. 22 On July 31st, the fast-food wage board issued 23 its report and recommendations to the acting 24 commissioner. The acting commissioner must issue a 25 wage order in response to those recommendations by 1 September 15th. 2 Now, I don't know, but I understand that that 3 actually may come sooner than later, because there 4 may be an event in New York City today, sometime 5 early this afternoon. 6 A number of concerns have been raised about 7 the process in which the board arrived at the 8 conclusions, including the process by which the 9 board itself was convened, and the process by which 10 the members were selected, and, the classification 11 of this particular class was arrived at. 12 First, the circumvention of the legislative 13 process. 14 Minimum-wage increases have traditionally 15 been implemented through legislation, approved by 16 the State Legislature, signed into law by the 17 governor. 18 In this case, an unelected three-member board 19 has attempted to create a minimum wage that will not 20 apply to all workers, or even a single occupation; 21 but, rather, to workers, based upon the construct of 22 their employer, which is unheard of anywhere in the 23 history of this state, and certainly in the history 24 of this country, that we determine a minimum wage 25 based not on the skill set of the individual worker, 1 not based on the occupation of the individual 2 worker, but on the construct of their corporate 3 employer. 4 In this case, if there are 30 or more 5 franchises in more than one state, whether they are 6 working the counter, the grill, clearing tables, 7 they're entitled to that same minimum wage. 8 Under their proposal, someone working the 9 counter at McDonald's would make a different minimum 10 wage than a person doing the exact same job at a 11 local pizza place. 12 Again, that's unprecedented. 13 Second point is the selected class. 14 At any time in the past when we've discussed 15 a wage board, or when a wage board has been 16 convened, it has always been with respect to a 17 specific occupation. 18 I think we all have a right to know why 19 fast-food workers was chosen. 20 The wage board statute specifically refers to 21 occupation, and fast-food workers, I would say, is 22 not an occupation, certainly not within that 23 definition. 24 And so I think it's incumbent upon us as a 25 committee to ask of the executive and of the 1 appointees how they arrived at that, because, 2 frankly, we have a right to know, and our 3 constituents across New York State, private business 4 or otherwise, certainly have a right to know. 5 And, lastly, the board's composition. 6 The board included the secretary/treasurer of 7 the SEIU, a labor union who has spent tens of 8 millions of dollars nationally in this campaign, 9 Fight for 15; specifically, to have the minimum wage 10 for fast-food workers raised to $15 an hour. 11 Now, a member, an officer, from that union 12 that had made -- certainly, spent that kind of 13 money, is on that wage board; yet not a 14 representative from the food industry, or certainly 15 any of the franchisees, who are going to be affected 16 by this. 17 So we should ask why, and how they arrived at 18 that. 19 All of these questions, obviously, are 20 contingent upon our ability to have people who are 21 going to respond. 22 Today's hearings will examine those issues, 23 as well as other aspects of the overall process of 24 this fast-food wage board. 25 It will not deal, and I want to emphasize 1 this, it will not deal with the board's specific 2 recommendations, as the acting commissioner has yet 3 to rule on them and issue a wage order. 4 So I'd ask all the speakers today to remember 5 that. 6 We will, in all likelihood, and I fully 7 expect, that we will hold other hearings that 8 address those questions once the commissioner has 9 issued an order. 10 Trade associations, local business owners, 11 and a prior wage board president who holds a 12 leadership role with the ILR School at Cornell will 13 be testifying here today, and I thank each and every 14 one of you for being here. 15 I would like to note for the record that 16 Acting Commissioner of Labor Mario Musolino and the 17 three members of the fast-food wage board were all 18 invited to testify here this morning. 19 Actually, they were invited more than once. 20 They declined to participate. 21 The wage board chairman, Mayor Brown, 22 actually responded, saying that he had a prior 23 commitment today, but we did not hear from the other 24 two wage board members who were invited, and simply 25 chose not to respond. 1 I find it disturbing that they would decline 2 the Legislature's request to provide insight and 3 clarity, as well as answer questions about this 4 process. 5 It's even more troubling, given that one of 6 the major concerns about this process is that it 7 circumvented the Legislature. 8 It's a level of transparency that New York 9 citizens deserve. 10 We also extended invitation to the 11 New York State AFL/CIO to testify, but they were 12 unable to participate. 13 With that, I want to thank you again for 14 being here. 15 I want to thank the speakers for 16 participating and providing us with your unsights 17 and expertise. 18 And I'll ask the members of our Committee if 19 they would like to say a few words. 20 Senator Seward. 21 SENATOR SEWARD: Thank you. 22 First of all, I want to commend you, 23 Senator Martins, as Chair of our Labor Committee in 24 the Senate, for scheduling today's hearing to 25 examine the process of the fast-food wage board of 1 2015. 2 You know, any decision, particularly as 3 important as setting a minimum wage here in 4 New York State, any decision as important as that 5 deserves to have a process that provides an 6 opportunity for full transparency, and proper and 7 appropriate input from all stakeholders. 8 And, personally, I believe that is best 9 achieved through the legislative process. 10 The legislators from all over the state, and 11 from various political parties and philosophies, all 12 coming together on behalf of the people of the state 13 of New York to make a decision based on full input 14 from all stakeholders in our state. 15 Also, I have concerns about the disruption in 16 the labor market when one segment of one part of the 17 labor force is singled out for a possible 18 minimum-wage increase, and what that means in terms 19 of disruption in the labor market in New York State. 20 There are a number of other concerns that 21 I have, and I think that this hearing today, and 22 subsequent hearings, will have an opportunity for us 23 to fully examine all of these concerns and help us 24 to move forward as our state. 25 Bottom line, we all want all workers in 1 New York State to have good-paying jobs. 2 That's not the issue. 3 It's how we get there, in terms of setting a 4 minimum wage through a transparent and -- process 5 that involves everyone. And, also, and most 6 importantly, creating the right business climate and 7 the environment in New York State so that employers 8 want to be here and want to invest here and, 9 particularly, want to invest in their workforce. 10 That's really where we need to be, and, 11 hopefully, these hearings that we commence today 12 will help us get to that point. 13 So thank you, Mr. Chairman. 14 SENATOR MARTINS: Thank you very much. 15 Senator Marchione. 16 SENATOR MARCHIONE: Thank you, Mr. Chairman. 17 I also want to express my thanks to you for 18 holding this hearing, and to everyone here who is 19 here both to listen and to testify this morning. 20 We are a state that says we're open for 21 business. You know, we are a state who constantly 22 talks about being transparent. 23 I'm a senator. I thought my job was to be 24 here, to be part of the process, to represent the 25 people from my district, from the 43rd Senate 1 District. 2 And in this instance, I don't feel that my 3 voice is being heard, or was heard. 4 And when my voice isn't being heard, my 5 businesses and the people in my area are not being 6 heard. 7 It is important that we have a process in 8 New York State that we follow; that people from our 9 districts, people who live here, can be assured is 10 the process for New York State. 11 I have heard from many of my businesses. 12 Many are confused. 13 Some of the questions I can't respond to 14 myself. 15 I have businesses that are -- that -- a 16 gentleman owns more than 30 businesses. It's 17 Stewart's, and, you sell sandwiches. 18 Does that make him fall under the parameters 19 of what we're doing? 20 I have businesses who have a franchise, where 21 there's more than thirty in the state, but they only 22 own one of those franchises. 23 So are they now having to follow these new 24 guidelines, if they're put in place, and we think 25 they are? 1 The process, as far as I'm concerned, has 2 been extremely flawed. And when the process is 3 flawed, and it's our responsibility to make sure 4 it's not, the people in the state of New York lose. 5 And I'm grateful for these hearings and the 6 opportunity to listen. 7 I am sorry that the invitations that were 8 extended to the people who are -- who have been part 9 of the process aren't here to even let us know why 10 they're doing what they're doing, and the process 11 that they used to get there, but I'm grateful that 12 you extended an invitation. 13 I'm grateful that we're trying to open up 14 this process so I feel like I can represent the 15 district that has sent me here to do that. 16 So thank you, Mr. Chairman. 17 SENATOR MARTINS: Thank you, Senator. 18 Senator Murphy. 19 SENATOR MURPHY: (Microphone turned off.) 20 Yes, first of all, I'd just like to -- 21 (Microphone turned on.) 22 SENATOR MURPHY: Good. Thank you. 23 -- thank Senator Martins, the Chairman of the 24 Labor Committee, for the invitation here today. 25 And I'd like to thank the speakers for coming 1 out of their way to testify here today. 2 I am an owner of two small businesses, and 3 these -- this effect is -- could be, and will be, 4 extremely devastating to a lot of small-business 5 owners. 6 We are ranked 50th, dead last, in America 7 as a business-friendly state. 8 We have grade F for rules and regulations. 9 We have over 140,000 pages of rules and regulations 10 for small-business owners to get going here in 11 New York State. 12 This effect, this $15 minimum wage, could 13 have a mass exodus of New York State. 14 We're trying to create business here in 15 New York State; not have it flee. 16 We've lost hundreds of thousands of people 17 over the past few years leaving New York State 18 because it's very difficult to get businesses going 19 here in New York State. 20 And, we're just looking for transparency 21 here. 22 We'd like to know how they came about this. 23 We'd like to know the three members of the 24 board that came about this, and the way they came 25 about this. 1 So I would just like to thank Senator Martins 2 for holding this hearing. 3 I'd like to thank the speakers for going out 4 of their way and coming to this hearing today. 5 I'm looking forward to hearing from you. 6 Thank you so much. 7 SENATOR MARTINS: Thank you, Senator. 8 And with that, I will call our first witness. 9 Our first witness is Linda Donahue. She was 10 the chairperson of the 2009 wage board, and a 11 director of online labor studies at The ILR School 12 at Cornell University. 13 Welcome, and thank you for being here. 14 LINDA DONAHUE: Thank you very much for the 15 invitation. 16 And, Senators, thank you for being here 17 today. 18 In 2009, then-New York State Labor 19 Commissioner M. Patricia Smith convened a 20 minimum-wage board to review the wage orders in the 21 restaurant and hotel industries. 22 That board was composed of two 23 representatives of the hospitality industry, two 24 labor representatives, and two members of the 25 general public, which I was one. 1 I was asked by Commissioner Smith to serve as 2 chair, a position I filled as a New York State 3 citizen, not as a representative of my employer. 4 My familiarity with wage boards and wage 5 orders, then, is based solely on my experience in 6 2009, at which time the members of the board were 7 provided with copies of the laws and regulations 8 pertinent to our charge, including the Minimum Wage 9 Act, the wage orders for the restaurant and hotel 10 industries, and New York State Labor Law governing 11 the payment of wages. 12 New York State Department of Labor staff were 13 freely available to answer questions and provide 14 research and other requested information. 15 Commissioner Smith charged the 2009 wage 16 board with contemplating a number of considerations 17 related to the wage orders then governing the 18 restaurant and hotel industries; most notably, 19 whether the two wage orders should be combined into 20 one. 21 Additionally a number of issues related 22 specifically to food-service workers, including 23 gratuities, meal and lodging allowances, uniforms, 24 and hours of work, were in the commissioner's 25 instructions. 1 While on the wage board, I learned that 2 the term "food-service worker," as used in the 3 Minimum Wage Act, refers specifically to employees 4 who serve food or beverage, and, who regularly 5 receive tips from customers. 6 Much of what we reviewed in 2009 dealt with 7 regulations affecting food-service workers, such as 8 tip-sharing, tip-pooling, and the calculation of 9 overtime rates. 10 The 2009 board also examined provisions that 11 applied to hospitality workers in general, including 12 regulations related to uniforms and meal and lodging 13 allowances. 14 The minimum hourly wage at the time of 15 2009 wage board was $7.15. 16 The hourly cash wage for food-service 17 workers, those who served food or beverages who 18 regularly received tips, was $4.60, provided that 19 the tips paid to those workers, when added to the 20 wage, would equal at least $7.15. 21 Service workers, however, who received tips 22 had a higher wage rate than food-service workers. 23 We were asked to consider if moving toward a 24 single tipped rate was desirable. 25 As the wage board has the power to conduct 1 public hearings, the 2009 board held hearings in 2 Buffalo, Albany, and New York City. 3 Testimony at those hearings, as well as 4 written testimony submitted by interested parties, 5 helped to inform our understanding of the concerns 6 of workers, as well as industry reps. 7 Following the hearings, the board met to 8 review all information that had been gathered, and 9 eventually submitted to Commissioner Smith our 10 recommendations in accordance with her earlier 11 charge. 12 We unanimously agreed that the consolidation 13 of the hotel and restaurant wage orders into one 14 hospitality-industry wage order, and submitted 15 recommendations concerning wages paid to 16 tipped-employees; clarifying the calculation of 17 overtime rates; updating or clarifying certain 18 definitions, such as "tip-pooling," "tip-sharing," 19 "meals," "lodging," "uniforms"; and requiring that 20 employers pay an hourly rate, rather than weekly or 21 piece-work rates, to all workers covered by the 22 hospitality wage order in order to simplify the 23 computation of overtime rates. 24 The 2009 wage board made a sincere effort to 25 streamline and clarify the provisions of the wage 1 orders under review, in accordance with the 2 Minimum Wage Act stipulation, that a wage board 3 inquire into and report and recommend adequate 4 minimum wages and regulations for any occupation or 5 occupations. 6 We were pleased that the commissioner 7 accepted the vast majority of our recommendations. 8 SENATOR MARTINS: Thank you very much. 9 You know, one of the considerations that 10 I understand of a wage board, is that you also have 11 to take into consideration those who are employed in 12 similar occupations in the area, to determine 13 whether or not there would be any impact to those 14 other occupations as you consider the group that you 15 were charged to review. 16 Was that part of your evaluation as well? 17 LINDA DONAHUE: It really wasn't. We weren't 18 asked to look at the wage rate per se. 19 So I would have to say no. 20 We looked -- I guess, let me just get 21 clarification. 22 Do you mean geographic region? 23 SENATOR MARTINS: Well, I just mean -- 24 LINDA DONAHUE: Or are you talking about 25 people who work in other positions, besides 1 tipped-positions? 2 SENATOR MARTINS: Right. 3 Other positions, where, for example, if there 4 were people receiving -- employees, waiters, 5 waitresses, service workers -- working in a 6 restaurant receiving tips as part of their 7 compensation, whether they would be 8 disproportionately affected if you were to change a 9 portion of hotel and restaurant workers' salaries, 10 which is, essentially, what you were asked to do. 11 LINDA DONAHUE: Yeah, actually, in terms of 12 the provisions, some, for example -- and I may not 13 be answering your questions, but I hope I am -- for 14 example, uniforms would affect people other than 15 food-service workers; housekeepers, for example, 16 would be affected by decisions we made on the 17 definition of "a uniform," for example. 18 SENATOR MARTINS: So there were people who 19 were working, in many instances, side by side, that 20 were affected by two different orders. 21 LINDA DONAHUE: They can have been. 22 SENATOR MARTINS: And you were asked to 23 reconcile those two orders so that there would be 24 greater parity between those two groups? Whether it 25 was tipped-workers or whether it was employees of a 1 hotel, they should have a standard way of being 2 paid? 3 I guess that was the question for your wage 4 board? 5 LINDA DONAHUE: I believe all of the 6 occupations, and, again, this was six years ago, but 7 I'm pretty sure that all the occupations we dealt 8 with were tipped-workers. And I don't recall us 9 evaluating the impact on any non-tipped workers. 10 I just don't recall that we did. 11 SENATOR MARTINS: Okay. 12 The members of the board who were appointed, 13 you were a citizen member of the board, there was 14 another citizen member of the board -- 15 LINDA DONAHUE: Correct. 16 SENATOR MARTINS: -- but there were two 17 members that were representatives of the affected 18 industry. Right? 19 LINDA DONAHUE: Right. 20 SENATOR MARTINS: What was -- who were they, 21 and how were they representative of the industry? 22 LINDA DONAHUE: One of them was a 23 representative of the restaurant industry, and the 24 other was a representative of the hotel industry. 25 SENATOR MARTINS: So people who were 1 intimately familiar with the industries that were 2 being discussed? 3 LINDA DONAHUE: Indeed they were. 4 SENATOR MARTINS: Okay. 5 I appreciate that. 6 Senator? 7 SENATOR MURPHY: Yeah, first of all, thank 8 you so much for being here today. 9 I understand you -- you know, your board was 10 made up of approximately six people? 11 LINDA DONAHUE: Uh-huh. 12 SENATOR MURPHY: And I commend you on 13 actually getting people that have skin in the game, 14 that actually know what they're talking about. 15 I'm curious to find out where we are with our 16 wage board here, about what kind of skin in the game 17 there is for them, because there's no better person 18 to find out what's going on than the person who's in 19 the trenches. 20 And I thank you for allowing your hospitality 21 and the restaurateurs. 22 My family, actually, has a restaurant, and 23 we're very concerned about this, extremely concerned 24 about this. 25 And it's one of those things that 1 transparency is what I believe in, and I think we 2 all believe in this, to let the people know what's 3 actually going on so they have an idea of what 4 they're getting themselves into. 5 And I commend you on actually having a board 6 member of six, and not three in the background. 7 Thank you. 8 LINDA DONAHUE: Yeah, well, I would like to 9 take personal credit for that, but I really can't. 10 The commissioner selected the members of the 11 board. 12 Thank you. 13 SENATOR MARTINS: Senator Marchione. 14 SENATOR MARCHIONE: I just have a comment. 15 You know, listening to what your board did, 16 it certainly doesn't sound like you looked at 17 tip-wages and -workers who worked for a mom-and-pop 18 organization differently than you looked at 19 tip-wages that worked at Olive Garden. 20 You looked at tip-wage workers with parity 21 across the board, and I think that's a reasonable 22 process to follow. 23 In comparison, we're looking at, you know, 24 minimum-wage workers now that, if they work in 25 McDonald's are treated differently than minimum-wage 1 workers who work in the mom-and-pop. 2 And just as a statement, I just think that's 3 patently unfair. 4 Thank you, Mr. Chair. 5 SENATOR MARTINS: Thank you, Senator. 6 LINDA DONAHUE: Thank you. 7 SENATOR SEWARD: I have no questions. 8 SENATOR MARTINS: Thank you. 9 You know, I appreciate you being here, 10 because it gives us context of a prior wage board 11 that, frankly, stayed within the parameters of the 12 wage law. 13 The law's there, it's rather specific. It 14 calls for certain parameters, you have certain 15 guidelines, you stay within those guidelines, and 16 you come out with a conclusion on the far end. 17 And the process has worked since the 1930s, 18 since this wage act went into effect. 19 This particular wage board that we're 20 discussing today, not yours, seems to have gone off 21 the rails, or outside of those guides, that were 22 there for so many years, for so many boards prior. 23 And, so, your experience with the wage board 24 is very telling, and I appreciate you being here. 25 Thank you very much. 1 LINDA DONAHUE: Thank you again. 2 SENATOR MARTINS: Next up we have, 3 Mr. Angelo Amador, who is senior vice president and 4 regulatory counsel for the National Restaurant 5 Association, as well as Ms. Melissa Fleischut, the 6 president of the New York State Restaurant 7 Association. 8 Welcome, good morning, and thank you both 9 very much for being here. 10 We have received copies of your testimony. 11 Which one of you would like to go first? 12 Ladies first. 13 Thank you. 14 MELISSA FLEISCHUT: Thank you, 15 Senator Martins, and members of the Committee, for 16 giving us the opportunity to be here and speak 17 today. 18 My name is Melissa Fleischut. I am president 19 and CEO of the New York State Restaurant 20 Association, and have been since September of 2013. 21 During my tenure as CEO, I have lived through 22 two wage boards already. 23 And prior to that time, I have been with the 24 New York State Restaurant Association for 15 years, 25 and was able to view and testify at various other 1 wage boards as well. 2 So, hopefully, my experience there as well 3 could be helpful. 4 The New York State Restaurant Association 5 represents the restaurant industry throughout the 6 state. We are the largest state restaurant 7 association in New York. 8 And on behalf of our more than 2,000 members, 9 and thousands more restaurants across the states, 10 and in your districts, we're grateful to be here, 11 and submit the following comments on the fast-food 12 wage board process. 13 Under New York State law there are two types 14 of wage boards, as you have already addressed. 15 One is often called, and is, in fact, 16 required to be called, within six months of a 17 statutory minimum-wage increase by the Legislature. 18 This wage board investigates wages of 19 fast-food workers, and is detailed in Section 2 of 20 the New York Labor Law, Section 653. 21 Recently, this type of wage board was called 22 to investigate the adequacy of the cash wage for 23 tipped-employees, and, ultimately, recommended a 24 50 percent increase to the cash wage, from $5 an 25 hour, to $7.50 an hour, if tips equaled at 1 least $1.50 an hour, bringing them up to the 2 $9.00 statutory minimum wage as of December 31st 3 of this year. 4 The second is outlined in Section 1 of 5 New York Labor Law, Section 653, and has never been 6 used to create a higher minimum wage for one sector 7 of a single industry. 8 This is the section of law that Acting 9 Commissioner Mario Musolino and Governor Cuomo used 10 to form the most recent fast-food wage board. 11 It states, "The commissioner shall have power 12 on his own motion to cause an investigation to be 13 made of the wages being paid to persons employed in 14 any occupation or occupations, to ascertain whether 15 the minimum wages established in accordance with 16 provisions of this article are sufficient to provide 17 adequate maintenance and to protect the health of 18 the persons employed in such occupation or 19 occupations." 20 The acting commissioner did not on his own 21 motion cause an investigation. 22 He was instructed to do so by Governor Cuomo 23 who holds significant leverage over the acting 24 commissioner because the Governor has the option of 25 appointing him to be the commissioner of labor or to 1 seek someone else for the position. 2 We know Governor Cuomo instructed the acting 3 commissioner to form the fast-food wage board 4 because he stated so in a May 6, 2015, opinion 5 editorial in "The New York Times," in which he said, 6 "I am directing the commissioner to impanel such a 7 board to exam the minimum wage in the fast-food 8 industry." 9 Furthermore, New York State statute allows 10 the acting commissioner to call such a wage board 11 for an occupation or occupations. 12 "Fast-food worker" has never been a defined 13 occupation in New York State law. 14 The wage board itself created this 15 distinction, and in that act, took on the role of 16 the Legislature to set policy. 17 Nowhere in the statute is the acting 18 commissioner or the Governor given the authority to 19 create an occupation to regulate without legislative 20 action. 21 There have long been distinctions in 22 New York State law for food-service workers who 23 receive tips, and wage boards are often improperly 24 assembled to determine what regulation should be for 25 this sector of employees. 1 The reason the regulations for these workers 2 are set outside of the normal process is that they 3 are paid differently; namely, through tips, and 4 regulating them requires distinct knowledge of how 5 the industry operates, so these wage boards include 6 industry and employee representation. 7 This was not the case for the fast-food wage 8 board. 9 The fast-food wage board did not include 10 proper or fair representation from the restaurant 11 industry. 12 Under Section 655 of the Labor Law, the wage 13 board requires that the board have equal 14 representation from business groups, employee 15 groups, and the public, and that representatives 16 must be selected in, quote, so far as practicable, 17 from nominations submitted by employers and 18 employees in such occupation or occupations. 19 As the largest and only statewide restaurant 20 association, it would have been quite practicable, 21 in our opinion, to call, e-mail, write, fax, tweet, 22 or even send us a Facebook message, asking us if we 23 would be willing to serve on the wage board. 24 We would have happily obliged, and provided 25 valuable insight that was sorely missed from the 1 process, or, we would have been pleased to recommend 2 a qualified restaurant owner to serve in this 3 capacity. 4 The business representative was Kevin Ryan, 5 the owner of a web company whose background is in 6 fashion and technology, and he could not have 7 possibly properly represented the restaurant 8 industry and its interests because he has no 9 experience or stake in the business. 10 Not one member of the board had any 11 experience in the restaurant industry, and all three 12 publicly supported a higher minimum-wage increase 13 before the process even began. 14 From the beginning, the association decried 15 these actions as unfair, and correctly predicted 16 they would lead to a biased decision and bad public 17 policy. 18 Furthermore, during the public hearings, 19 restaurant owners were not given a fair shake at 20 testifying. 21 Labor groups bussed in large numbers of 22 people to intimidate and heckle anyone who testified 23 against a $15 minimum wage. 24 The association had several members attend 25 the hearings, but after seeing how business owners 1 were being treated by the crowd and the board, they 2 decided not to put their business at risk. 3 Throughout the hearings, business owners were 4 booed and jeered during their testimony, and board 5 members did little to control the crowd. 6 Also, a business owner's time was cut short 7 during the first hearing -- the final hearing in 8 Albany, something that did not happen to a single 9 other advocate for a minimum-wage increase. 10 Finally, the New York State Public Officers 11 Law, Article 7, Section 103, states that, "Any 12 proposed resolution, law, rule, regulation, policy, 13 or any amendment thereto that is scheduled to be 14 subject of a discussion by a public body during an 15 open meeting shall be made available, upon request, 16 therefore, to the extent practicable, as determined 17 by the agency or the department, prior to the 18 meeting during which the records will be discussed." 19 During the fast-food wage board's July 27, 20 2015, public meeting, the members of the board met 21 via teleconference, and voted on the final written 22 report the wage board sent to acting commissioner 23 for his approval. 24 However, the final written report that the 25 board members voted on was not available to the 1 public until late in the afternoon on Friday, 2 July 31st. 3 Thank you very much for inviting me to speak 4 today, and I would be happy to take any questions. 5 Or, if you want Mr. Amador to speak first, and then 6 take questions after, we'll be happy to do that too. 7 SENATOR MARTINS: Yes, I appreciate that. 8 We will have some questions, but, I'm going 9 to ask Mr. Amador to give us his statement, and then 10 we'll get into some of those very fine points that 11 you've presented here today. 12 MELISSA FLEISCHUT: Okay. 13 SENATOR MARTINS: Thank you. 14 Mr. Amador. 15 ANGELO AMADOR: Thank you. 16 First, thank you for the invitation to 17 testify here today. 18 I have prepared an oral statement, but by the 19 time I landed in Albany last night, I had gotten 20 plenty of e-mails, letting me know that there was 21 going to be another event in New York City today, 22 that I thought I should use some of my time to 23 address two things, in addition to the legal aspects 24 of this. 25 One is, the political nature of this. 1 You know, having the Vice President, who is 2 looking at a presidential race, bring this issue in 3 the form that they're bringing it shows that this is 4 more political than trying to come up with good 5 policy. 6 I'm going to talk about the legal rules that 7 this Legislature, with the Governor's signature, set 8 in place for a wage board, that we're not following. 9 Last night, also, when I was watching TV, 10 I was watching the local news. They had a political 11 hour, and they had a democratic senator speaking on 12 another issue. But one of the things he said about 13 oversight, and I think, you know, this is a good 14 reason to have this oversight hearing, was: Light 15 is the best disinfectant. 16 And I liked that, because, you know, none of 17 the people that were involved in this decision, they 18 were all invited, but they weren't here. 19 And I wonder, you know, why they're scared 20 off, that they decide that, only if they're 21 surrounded by loving crowds, you know, cheering 22 their names, they're not willing to speak about the 23 issue. 24 So, I wanted to digress a little bit, and 25 also because, in addition to the legal aspects, 1 I wanted to talk about the economics and the impact 2 on members and workers, you know, people that are 3 investing and mortgaging their houses and taking 4 risks, to make a better life, that are being 5 impacted by this. 6 It is important to know what this is not 7 about, and I want to also follow on what 8 Senator Seward said. 9 This is not about the wage itself. You know, 10 we're not saying that the Legislature cannot do 11 this, and we're not saying that we want people not 12 to get better wages and to move up in life. 13 You know, we all want that for our workers. 14 And -- but we think it's important that the 15 process and system that we have of checks and 16 balances is followed. 17 One thing that, you know, I did years ago, 18 I did teach state and local law, so, I had a chance 19 to review the laws in many states. 20 And I think it's interesting, also having 21 worked for a governor for 5 1/2 years, it is 22 frustrating sometimes when the Legislature doesn't 23 go your way, but that doesn't excuse trying to act 24 as they did in this case. 25 It's actually illegal, trying to act as if 1 there wasn't a Legislature. 2 There is a Legislature, let's have that 3 debate. 4 You know, we will be here, you know, the 5 New York State Restaurant Association, and others, 6 to have the debate, and to put forward economic 7 analysis and other information. 8 So, now, the Legislature in New York we know 9 has the authority to set up minimum wage. 10 They can concede that power and give that 11 power to somebody else, you know, if they so wish to 12 do so. And they have created a method, and they 13 have created a process to do that, by doing with 14 wage boards. 15 And hear -- we just heard the witness before 16 ours -- before us talk about how it was done in 17 2009, where they followed all the procedures. 18 They can have up to nine members in that wage 19 board. 20 And the reason for that number, is that they 21 want to make sure that all of the industries, all of 22 the groups impacted, are well-represented. 23 So they picked the minimum number, they start 24 with three. 25 But then when you pick the minimum number of 1 members that you can have there, they didn't follow 2 that, because it says that you have to have, as 3 Melissa just said, as much as practicable, 4 representative from the industries and from the 5 groups. 6 Now, I will even question whether the 7 representative from SEIU represents workers in the 8 fast-food sector. 9 They want to, but, I would question whether 10 they do now. 11 But putting that aside, it is clear that the 12 representative for the employers is not a 13 representative from the restaurant industry. 14 And, usually, you know, we -- I wouldn't even 15 be here today if it wasn't for the fact that they 16 are targeting companies, and they're punishing 17 New York restaurants, based on a relationship that 18 they have in name only with restaurants outside of 19 this state. 20 So, they didn't contact us either. 21 I don't if I would have been able to find out 22 on Tweeter (sic), and I don't know where my fax 23 machine is, but they certainly didn't send a letter, 24 or call, or write an e-mail, saying, Hey, you know, 25 we're doing this. Can you send us someone? 1 Either someone from our association, or we 2 would have gotten them a good member in New York 3 that owns restaurants in New York, a franchisee, to 4 be on that board to be able to give insight. 5 None of that happened. 6 Now, it is not that it's just an oversight, 7 and it's not just that this is unfair. 8 It is illegal. 9 The board, the Legislature set up this 10 process, and it must be followed, because the power 11 that the Legislature is giving away, or giving or 12 lending to somebody else, they do, after having 13 analyzed, under what circumstances, under what 14 process, would we allow for this to happen. 15 So, it is more than a big deal. 16 We think it is illegal, and in addition to 17 unfair. 18 The other very important point to bring up is 19 what -- Senator Martins, what you said earlier, and 20 what keeps coming up with the idea of occupation. 21 "Occupation" is defined as "industry created 22 or a class of work." 23 Now, I have never seen, and in all of the 24 analysis that they did, the supposedly economic 25 analysis that was done, looks at "fast-food" as 1 defined in law. It's never defined as 2 30 restaurants sharing the same name throughout the 3 country. That doesn't exist anywhere. 4 So, they are picking this at random. 5 This is not the authority that was given to 6 them, because, if not, any business would be at risk 7 of being picked like that and chosen for this kind 8 of impact. 9 Now, I'm not going to go into the details of 10 other constitutional issues. 11 I know that Jeff is going to talk about it 12 from the perspective of the franchise association. 13 But, you know, there is constitutional issues 14 when you start treating people differently, and 15 companies differently, of based on where their 16 headquartered, or based on the relationship of 17 interstate commerce. 18 But, again, I'm going to leave that aside. 19 What I do want to use some of my time for as 20 well is, to talk about the economic impact, and 21 I want to give you a story. 22 I was in Mobile, Alabama, a couple of weeks 23 ago, and I got to speak to a franchisee that owns 24 one franchise. And he used the word for a company, 25 you know, "corporate." 1 He was a big official there. You know, he 2 was moving up. 3 And I asked him, Why did you decide to own 4 your own franchise instead of continuing to be a 5 corporate employee? 6 And he said, You know, I wanted to be in 7 charge of my own destiny. 8 And I asked him, you know, How do you view 9 your franchise? How is this different? 10 He used to own three. 11 He sold one to his brother. 12 And he sold the other one -- he now only owns 13 one -- to his long-term manager, because his manager 14 wanted to have that experience. 15 He said, You know, Angelo, when I go and 16 apply for a loan, the corporation is not signing 17 that loan with me. 18 It is my house, it is my kids' savings. It 19 is all of that on the line. 20 If I do not make payroll, and I have to 21 close, the company is not going to come in. It's 22 not going to come and bail you out. 23 As a matter of fact, they're paying for what 24 he calls "a playbook." 25 We get a playbook that has proven 1 successfully in other places, and they said, If you 2 work hard and you follow this playbook, you know, 3 your chances go up. 4 So I'm paying for that playbook, and it's not 5 that they're paying me. 6 They're looking at income from companies that 7 is based, in most cases, not from sales of food in 8 New York City or anywhere else, or New York State, 9 but, real estate, lease agreements, and other things 10 as well. 11 They're making lots of money; therefore, they 12 can pay more. 13 They're not looking at this one guy that 14 mortgaged his house, that borrowed the savings that 15 he has in his 401(k) from the company, to open this 16 business. 17 That's who's getting penalized. 18 And now he's going to have a competitive 19 disadvantage because of the way this definition. 20 And, again, it's not only unfair, but it's 21 illegal. 22 And that's why, you know, we sent all of 23 these objections, but I'm sure they fell on deaf 24 ears. 25 And we're looking, and that's the reason w- 1 we are here today. 2 So, I cannot thank you enough, you know, for 3 holding this hearing, and for inviting me to 4 testify. And I hope I can answer some of your 5 questions. 6 Thank you. 7 SENATOR MARTINS: Thank you. 8 Thank you very much. 9 You know, I have seen, I'm sure we all have 10 seen, comments made. 11 Billion-dollar companies. Taxpayers 12 subsidizing billion-dollar companies. These people 13 are on public assistance. And this is going to be 14 our way of being able to elevate them away from 15 their need to rely on public assistance, by sticking 16 it to these billion-dollar companies. 17 But I, like you, have had conversations with 18 people who own franchises in my district, and they 19 own one franchise. 20 "One," for which they've gone into debt, and 21 they've put their life and risked their livelihoods 22 and their family's livelihoods as a result. 23 That billion-dollar company is not the 24 company that owns the franchise in our communities. 25 It's a community member. It's a 1 small-business owner, every bit as much as the 2 person who owns the local pizzeria in the strip mall 3 or on the corner, or the person who's just trying to 4 make ends meet. 5 So, could you speak to that? 6 Because, there has been, and along this way, 7 and in this discussion, on numerous occasions, times 8 when there have been references to these 9 billion-dollar companies. 10 And, again, for me this is a very personal 11 issue, because we're playing -- or, somebody is 12 playing politics with the ability of people to put 13 food on the table for their families. 14 Whether it's the worker, whether it's the 15 franchise owner, the small-business owner, this 16 comes down to the ability of people to provide for 17 their families, and politics has no place here. 18 So would you talk to me about the nature. 19 I know we have other witnesses who can talk 20 about franchises, but, that particular point, can 21 you speak to that? 22 ANGELO AMADOR: Yes, I think it's naive. 23 And, again, the main problem with these wage 24 boards starts from its inception. 25 There are no representative from the 1 restaurant industry, there are no representative 2 from what they even define as "fast-food," to be 3 able to explain these things to them. 4 And then they didn't want to listen 5 afterwards. 6 When they do their analysis, and the looking 7 of the profits, the looking of the profits of the 8 companies -- of the main company, the franchisor, 9 they may or may not have restaurants in New York. 10 12 percent is the average now for a lot of 11 these companies of corporate-owned restaurants. 12 It would have been smarter, and more 13 accurate, to look at the profits of the actual 14 restaurants that are being affected. 15 The profit margin in some of these 16 restaurants is 1 or 2 percent. 17 So where they're talking about billions of 18 dollars, and they make this assumption as well as, 19 where they state, Well, it's okay, because if they 20 cannot afford it, somehow, somebody's going to write 21 a big check from Oak Brook or from Seattle or from 22 Denver. 23 That's not going to happen. That's not how 24 the system works. 25 There are many different business models. 1 There are some restaurant chains that are 2 100 percent corporate-owned. 3 But it seems that the ones that they are 4 targeting are usually -- are mostly owned, at the 5 rate of 90-something percent for Burger King, for 6 example, by individuals. I mean, only one or two. 7 94 percent of the businesses being impacted 8 by this recommendation are small businesses in 9 New York State. Those are the people that are being 10 put at a competitive disadvantage. 11 SENATOR MARTINS: Thank you. 12 Any questions? 13 SENATOR MURPHY: Yeah. 14 I'd just like to thank you for coming here 15 tonight -- Angelo and Melissa, this afternoon. 16 But, you made a great point. 17 The profit margin is razor-thin. And people 18 might pass by your restaurant and say, Wow, it's 19 doing great. 20 They don't know the gray hair that's going on 21 at home, and putting food on your kids' tables, and 22 things like that, and the risk that has gone into 23 allowing that to happen. 24 Like you said, a lot of it, we want to 25 encourage people to come to New York. 1 Entrepreneurship is great. It gives them 2 freedom it. Allows them to grow. 3 That's what we're trying to encourage here. 4 Having a seat at the table, and allowing all 5 the rules, and knowing what you're getting involved 6 in, is crucial to establishing a successful 7 business. 8 And that's what America is all about, is 9 being able to come here and have the land of 10 opportunity and be able to do this. 11 And when you want to create more rules and 12 regulations, and keep stamping down on 13 small-business owners, because that's what runs 14 America, that's what runs New York State, is the 15 small-business owners. It's not the big 16 conglomerates. 17 And that's what we need to look into and take 18 care of, to be quite honest with you, is the 19 small-business owners. 20 But, to your point, the profit margin is 21 razor-, razor-thin. 22 You know, if you have one or two consecutive, 23 or three bad months, you're done. 24 Trying to make that up is tenfold, not just 25 having another good month the following month. 1 So, you know, people don't understand the 2 stress that, you know, business owners go under, the 3 gray hair that they get. The -- you know, to -- 4 there's a lot that goes into it. 5 And I just appreciate you coming here and 6 testifying today. 7 ANGELO AMADOR: Thank you. 8 SENATOR MARTINS: Thank you, Senator. 9 MELISSA FLEISCHUT: Just to make the 10 Committee aware, I did want you to know, that when 11 I testified before the wage board in Albany, one of 12 the recommendations that we asked for from the wage 13 board, was to consider exempting out franchisees, if 14 they were really trying to go after corporate 15 companies and large profit-making companies. 16 First of all, that's debatable. 17 But, you know, if that's who they were really 18 targeting, that they would consider opting out and 19 leaving the franchisees out of the definition. 20 Obviously, they didn't listen, but that's 21 what we tried to do. 22 SENATOR MARTINS: Thank you. 23 Senator Seward. 24 SENATOR SEWARD: Yes, very briefly, 25 I appreciate your testimony here on behalf of the 1 restaurant association, both from the state level 2 and the national perspective you're giving us. 3 You know, I think the -- just of our first 4 two panels here today is very startling, in terms of 5 a contrast. Almost "The Tale of Two Cities." 6 The tale of two wage boards. 7 In terms of the 2009 wage board, was a broad 8 spectrum of representation on the wage board. 9 People who are directly involved in those industries 10 had a say at the table and were part of the 11 decision-making process. 12 The 2015 fast-food wage board that we're 13 discussing today, this process, you know, no 14 industry representation, very little transparency, 15 in terms of having information out, in terms of how 16 they are reaching their decisions and making their 17 recommendations. 18 And it is a stark contrast that we've seen 19 already here today, based on our testimony that 20 we've heard. 21 My question is this, and part of my concern 22 here, and perhaps Mr. Amador could best answer this, 23 you know, from the national perspective, in terms 24 of: If, in fact, this process -- this flawed 25 process is carried out to its expected conclusion, 1 the impact that that will have in terms of the image 2 of New York State, in terms of being a good place to 3 invest, in terms of fast-food restaurants, going 4 forward. 5 If you could speak to that, in terms of the 6 image that that will protect -- or, will project, 7 rather, across the country. 8 Because, it's always a concern, that if we 9 make our state less attractive, that will impact the 10 opportunities that workers have here if there's no 11 investment in new business here. 12 And, secondly, if this expected 13 recommendation is followed through, in terms of what 14 we could expect in terms of changes in the industry, 15 in terms of, rather than going into -- 16 And I'm on the road a lot in my nine county 17 districts. I frequent a lot of fast-food 18 restaurants because of my schedule. 19 -- rather than walking in and dealing with a 20 person, I'm told that you can walk in and I'll have 21 to punch, you know, on a pad, making -- placing an 22 order that way, costing someone a job. 23 And that could number into thousands here in 24 New York. 25 So, if you could speak to those points, and 1 potential problems that we're seeing, because of the 2 flawed process that we've seen with this wage board. 3 And, if their recommendations are fully carried out, 4 what that would mean in the industry. 5 ANGELO AMADOR: Thank you. 6 Yes, I'll be happy to. 7 On the first one, on the message, I think 8 it's very clear, you know, when New York says 9 they're open for business, with this decision, you 10 know, it clearly shows that it's not open for all 11 businesses. It's open for some businesses. 12 And it sends the message to companies that 13 follow the model, you know, of creating a playbook 14 that is usual in other places, that they're not 15 welcome. Their business and their business model is 16 not welcome in New York State. 17 Again, because this is creating a competitive 18 disadvantage towards these kind of businesses. 19 And it actually ties in with, what do we 20 expect? 21 The preliminary economic analysis, that 22 I included as part of the record in my testimony, 23 shows that there will be an increase in prices. 24 And one thing that is seldomly discussed is, 25 when fast-food restaurants raise prices, you know, 1 it usually impacts the people lower in the economic 2 ladder than others, you know, so it's going to have 3 an impact on them. 4 Number two: It's going to have an impact on 5 employment. 6 A large majority of them says they're going 7 to have to do more with less -- less of a workforce. 8 Automation is something that is coming. It 9 will probably come faster to New York State than 10 other states because of this. 11 And, again, you know, this is something that, 12 my first job, you know, was as a janitor. But then 13 I worked in the food-service industry, and I'm very 14 thankful for that. It taught me a lot of things 15 that I was able to carry through my career. 16 We should have those first steps in the 17 ladder, to be able to move up. 18 A lot of those are going to go away, 19 overtaken by automation, technology, and others, 20 because the investment; otherwise, you cannot do it. 21 But even more striking from the preliminary 22 report and the surveys that we did is, 27 percent of 23 the restaurants surveyed said, you know, they're 24 going to have to close. They will not be able to 25 manage it. 1 There are restaurants having a profit margin 2 of 7, 8 percent. There are some that have a profit 3 margin of 1 or 2 percent. 4 Those that are on the edge, and they're 5 barely making it, they are going to have to close. 6 So, the impact, it's not just one thing. You 7 know, it's what it triggers down the road, in less 8 jobs, in more automation, and a number of other 9 things. 10 Sure, some people will benefit. 11 One of the things that strikes me from the 12 report, is ignoring the fact that, while some people 13 will benefit, that person that was making $14 an 14 hour is making 15, people will be hurt by it. 15 The CBO (the Congressional Budget Office), 16 when they looked at 10.10, they didn't look at 15, 17 and they didn't look at 15 on one sector of the 18 industry only, and what impact it would have on that 19 industry. 20 They looked at 10.10 nationwide, and they 21 said about a million jobs could be lost if we go to 22 10.10. 23 For -- then this board of three individuals, 24 none of which with an economic background, to say, 25 Hey, you know, we've looked at all these studies, 1 and we concluded no one will be hurt. This is going 2 to be great for everybody. This is even going to be 3 great for the companies. 4 That's actually in their own report. 5 It's outrageous when all economists -- 6 Democrats, Republicans, Liberal -- will say, there 7 is an impact. 8 The question is, whether you want to deal 9 with that impact or not. 10 And I think, for this industry, the message 11 that is sent, which is a negative one, "We do not 12 want you here," is clearly the message they're 13 saying, "We do not welcome you here." 14 And then the next one is: People will lose 15 their jobs because of this. 16 There's no other way to go about it. 17 If something costs more, you buy less of it. 18 That is just basic economics. 19 So even, you know, if they didn't have an 20 economist, they didn't have a member of our 21 industry, but anybody else would have been able to 22 even explain those basics if they were willing to 23 listen, which, in my experience, they're clearly 24 not. 25 SENATOR MARTINS: Thank you. 1 SENATOR MURPHY: Economics 101. 2 ANGELO AMADOR: 101. Pre-econ. 3 SENATOR MARTINS: A question for Melissa. 4 You know, if you have two -- let's say, two 5 ice cream shops, side by side. 6 MELISSA FLEISCHUT: Okay. 7 SENATOR MARTINS: Let's say one of them is a 8 franchise, and the other one is not. 9 If this were to go forward, and if the 10 commissioner issues an order imposing the 11 requirements or recommendations of the wage board, 12 one of those ice cream shops is going to have a 13 significant disadvantage to the other. 14 Now, they're both individually owned, whether 15 it's a franchise or whether it was owned by somebody 16 and founded by them themselves, but one of them's 17 going to pay their workers, literally, twice as 18 much, or almost twice as much, as the other. 19 And if we understand business, your expenses, 20 especially in food, it's labor, food, and then your 21 administrative expenses to oversee, insurance and 22 the like. 23 One of those pieces goes up that much, what 24 does that do in terms of just fairness in the 25 industry? 1 These are two people who own two businesses, 2 side by side, except one of them happens to have the 3 name of, you know, a national franchise or 4 multi-state franchise on it, but it's still owned by 5 that individual. 6 What's the effect? 7 MELISSA FLEISCHUT: Well, I think it's 8 interesting, in our conversations around the state 9 with our members, what they have talked about and 10 what they have said is, both ice cream-parlor owners 11 are scared, and they're scared for different 12 reasons. 13 So, the franchisee is concerned that he is 14 not going to be able to continue to make money off 15 of his business the way he used to, that he's not 16 going to be able to hire people the way he used to 17 and bring jobs into his community and support his 18 community locally the way he used to. 19 The independent ice cream-parlor owner next 20 door is afraid that his people are going to walk 21 across the street and go work for the other 22 ice cream parlor. 23 So that's going to be increased pressure on 24 them to raise prices, and to raise wages as well, 25 and compete for those dollars. 1 Now, the franchisee is going to tell you, I'm 2 not going to be able to hire anybody else, because 3 my wages are going to be so expensive, that I'm not 4 going to be providing jobs like I used to be, so 5 that they're not going to have a great opportunity. 6 So maybe, you know, it's going to impact both 7 ice cream-parlor owners, I think, significantly. 8 And the labor market is going to be very, 9 very difficult for the restaurant industry to find 10 qualified people willing to work throughout the 11 industry in all these positions. 12 If franchisees end up going automation, as 13 we're starting to see already in the airports and 14 some of the chain restaurants, I mean, if they move 15 towards the tablet situation, where you can order 16 through your tablet and you don't need to have a 17 person present, taking your order, there is going to 18 be an elimination of jobs in that sector. 19 And how that plays out for the rest of the 20 industry is going to be fascinating. 21 Not good, but fascinating. 22 SENATOR MARTINS: No, no, and the clarity, 23 and of the point that Senator Marchione made 24 earlier, you know, if you own a business that has 25 multiple franchises, more than thirty, and you're 1 selling -- you're making sandwiches and selling them 2 across the counter. 3 I mean, you can walk into a 7-eleven today 4 and, if you want, get something to eat while you 5 pick up, you know, a pack of gum. 6 You can pick up a sandwich. You can pre-pay 7 for food across a counter. 8 The breadth and scope of what we're talking, 9 we keep talking about McDonald's and, you know, 10 those types of fast-food restaurants, but where does 11 it end? 12 You know, does it include Stewart's? 13 Doesn't include 7-Eleven? 14 Does it include things that we do not 15 traditionally think of as a fast-food franchise, but 16 does meet the definition, as broadly as they have 17 placed it here, which can lead to some very 18 difficult, very difficult, results. 19 Can you speak to that? 20 MELISSA FLEISCHUT: Well, I would bet that 21 there are restaurants owners in all of your 22 districts that would talk to you about how the 23 definition of a "restaurant," and what that means, 24 has expanded greatly. 25 So competition in the marketplace is fierce. 1 Families are busy, and they tend to grab food 2 when they can, on the run, between practices and 3 ballet and everything else going on these days. 4 We certainly understand that, and, we're not 5 against competition. We don't, you know, worry 6 about the expansion of the restaurant industry in 7 terms of more people coming in. 8 We welcome it, if they're able under the 9 owner's regulations that they face. 10 But, I think the problem that we're seeing is 11 that this is going to make it significantly 12 difficult for them to continue to operate in that 13 environment. 14 And, this definition is extremely broad, and 15 does bring in what we would consider to be food 16 prepared -- you know, places that are preparing food 17 for sure. 18 So I don't know that the line even that they 19 gave us, with the, you know, Well, we think these 20 people are in, and we think these people are out, 21 I mean, I don't think that was particularly clear to 22 us either, from the restaurant association's 23 standpoint, as to why some of those people were in 24 and why some of those people were out. 25 And, creating this new definition that has 1 never previously existed has to have unintended 2 consequences. 3 From our perspective, in reading the 4 definition, it brought in a whole group of people 5 that maybe they didn't intend to include, but 6 I would argue they they're in. 7 SENATOR MARTINS: And that's why we have a 8 legislative process, and that's why we have 9 hearings, and that's why we have discussions, and 10 that's why we have the kind of transparency and 11 oversight that prevents that from happening, as I am 12 afraid, you know, this may lead to. 13 So, I thank you both for your testimony. 14 I appreciate it, very helpful. 15 Thank you. 16 ANGELO AMADOR: Thank you very much. 17 SENATOR MARTINS: You know, I'm going to go 18 slightly out of order for our next witness. 19 We have a witness here who is an owner of an 20 ice cream shop. He owns a Ben & Jerry's in 21 Saratoga Springs, Mr. Pat Pipino. 22 Mr. Pipino, if you could join us. I know 23 that you have a perspective on this, and I know you 24 have a place you need to get to, and I wanted to 25 accommodate you as best as possible. And, my 1 colleague here to my left would be remiss if we 2 didn't call you and allow you to get going. 3 So, thank you for being here, sir. 4 PATRICK PIPINO: Thank you. 5 Mr. Chairman, members of the Committee, thank 6 you. 7 Thank you for this opportunity to speak. 8 I am truly honored to be here. 9 I have a prepared statement that I want to 10 read, but I'd like to go off script for just a 11 couple of moments, so that I can put a -- kind of a 12 human face on this, because I think it's very 13 important to see where I've come from, and my 14 relationship with this legislation. 15 I've grown up in New York State my whole 16 life. I was raised in Cohoes and Troy by a single 17 mom who worked two to three jobs at a time in the 18 hospitality industry as a cook, which is not always 19 easy to be a line cook as a female. 20 My mom is a wonderful person and tough as 21 nails. 22 She raised the three of us. We grew up in 23 very humble beginnings, which is a polite way of 24 saying we were dirt-poor. 25 So I empathize, truly, with some of the 1 people that would be positively impacted by this 2 potential legislation. 3 I love the hospitality industry. It's always 4 been in my blood. 5 I started washing dishes at the Purple Pub 6 when I was 12. I followed my mom to work at the 7 Purple Pub. I got a huge promotion to the pot sink 8 after that. 9 And moved on to making pizzas, working in 10 restaurants. 11 And then, ultimately, pursuing my degree, 12 I did my two-year degree in restaurant management at 13 SUNY Morrisville; so, New York State-educated as 14 well. 15 My four-year degree in hotel reserve 16 management at RIT. Was nice enough to get an NRA 17 scholarship to help pay for that. 18 So, thank you, Angelo. 19 I then went and got an MBA at SUNY Albany 20 because I wanted to open my own business. 21 As one of the previous speakers had said, 22 I wanted to be the master of my own destiny. 23 Since then, I have had two terms as chairman 24 of the Saratoga County Convention and Tourism 25 Bureau. 1 I've been on the Ben & Jerry's Global 2 Franchise Advisory Council for two terms as well. 3 So, I have seen the hospitality industry from 4 a variety of viewpoints. It's one that I care about 5 very deeply. 6 And I love this state. I care about 7 New York State. 8 I understand that, you know, this hearing is 9 not about the $15 an hour. 10 How I would love to discuss how dreadful 11 that's going to be in many different businesses. 12 SENATOR MARTINS: We'll bring you back. 13 PATRICK PIPINO: Yeah, well, all right. 14 [Laughter.] 15 PATRICK PIPINO: Today is about the process. 16 It was interesting hearing the perspective 17 from the previous speakers because they hit on so 18 many great points. 19 And hearing your "ice cream" example, I found 20 particularly illuminating. 21 One of my fellow franchisees once approached 22 Ben from Ben & Jerry's and said, Ben, I didn't get 23 in this business to make a lot of money, and so far 24 I've been successful. 25 Another favorite one that I've heard, because 1 I still to this day work in restaurants, when a 2 friend from my past days says, Hey, can you bartend? 3 Can you cook? 4 And I ran into Ms. Marchione at a function, 5 and she's, like, What you are doing here? 6 I still do so. 7 But one of the running gags is, How do you 8 make a small fortune in the restaurant business? 9 You start with a large fortune. 10 So, it's a very, very, very dear issue to my 11 heart. 12 So, as I said, my name is Patrick Pipino. 13 I'm the owner of Ben & Jerry's in Saratoga. 14 Thank you for allowing me to testify at this 15 hearing. 16 In my opinion, the recent report and 17 recommendations issued by the fast-food wage board 18 are severely flawed. 19 I -- actually, I have called 20 Senator Marchione's office to see if this 21 would impact me, because it doesn't define 22 "ice cream-parlors." 23 Are they fast-food workers? 24 Are they not fast-food workers? 25 Someone before me said that it was a very 1 broad definition. 2 I would say it's a very vague definition. 3 There's a distinct difference in those two 4 words. 5 I couldn't glean whether it was 30 franchises 6 countrywide, or statewide, because that, too, has an 7 impact. 8 Is ice cream even fast-food? 9 And when we do our sales tax, we have a 10 classification code. I don't think that 11 classification code even applies. 12 That said, this is not just about me. 13 This is all of my fellow restaurateurs, that, 14 you know, there's a belief out there that we are 15 fat-cats that live high on the hog. 16 And to anyone that says that, I would be more 17 than happy to share my wage data with them. 18 You know, when I bought the business back in 19 '96, after working my way up as a manager while 20 pursuing my MBA, I paid myself, and this is kind of 21 illuminating, $15 an hour, because that was all the 22 financial model could support. 23 And the previous speaker talked about, you 24 know, razor-thin margins. 25 Franchisees, we get the benefit of a national 1 name behind us. And I love selling Ben & Jerry's. 2 You know, we are a national company. 3 The downside is, we pay franchise fees, we 4 pay combination ad fees; all kinds of fees that the 5 mom-and-pop that's next to us doesn't have to pay. 6 To then hit us with yet another, by doubling 7 our wage costs. 8 Senator, you had said it first: You've got 9 your labor. You pay your cost-to-goods, or, your 10 food costs or liquor costs. And then you pay your 11 general administrative, which is rent, insurance, 12 and other things. 13 By overnight, by executive fiat, with the 14 stroke of a pen, our financial model can go to pot, 15 and I will be completely disincentivized because our 16 model doesn't support doubling our wages. 17 If our current wage structure, which is about 18 21 percent to 24 percent, doubles to 48 or 50, 19 I will either be out of business, or I will -- the 20 margins will be so thin, I can make more money 21 working elsewhere and I will leave the business. 22 I'm a single-unit franchise owner. I'm not a 23 fat-cat. 24 I'm not Starbucks. 25 I'm not corporate McDonald's. 1 And there's another element that needs to be 2 discussed: Different franchises have different 3 structures. 4 Starbucks are all corporate-owned. 5 I have friends that own McDonald's 6 franchises. They don't own 30 of them, or 50, or 7 80. They're either single or a couple of units. 8 That's very, very important. 9 Senator Murphy, you discussed how we're the 10 50th-ranked for business in the United States. 11 That, too, is illuminating. 12 I love this state, I want to stay here. 13 But I can't tell you how many of my friends 14 speak all the time about how they can't wait to get 15 out of New York State, or they were so glad they got 16 out of New York State, because they've been killed 17 with regulations, killed with taxes, and killed, for 18 lack of a better word, by the perception of the 19 three men in a room. That decisions are made by 20 three men in a room. 21 There's no transparency. 22 And, yet, when I see Governor Cuomo's ad, 23 saying, you know, We're all for business. We want 24 to bring business back; well, when I see things like 25 this, it makes me question how sincere that 1 statement is. 2 Is he paying merely a lip-service to wanting 3 business to come into New York State and to help the 4 small-business owner, or is he not? 5 The fast-food wage board was not comprised of 6 anyone from the fast-food industry. 7 It's difficult for me to understand how the 8 wage board members can impose such requirements on 9 an industry where they have no experience. 10 I would not to go a doctor that had no 11 experience. I would not let him tell me what was 12 wrong with me. 13 The fast-food wage board didn't receive any 14 testimony from business owners or employers or 15 associations that represent our business interests 16 and the interests of the employees. 17 The vast majority of witnesses that testified 18 at the fast-food wage board hearings were employees 19 solely from one sector. 20 I understand workers who cannot afford to 21 make ends meet for their family definitely deserve a 22 seat at the table. 23 My mother was one of those people. 24 I absolutely appreciate the stakeholder 25 element of this. 1 But owners deserve a stake -- a seat at the 2 table as well. We are stakeholders. 3 The State is a stalk holder. 4 And it's wonderful that we are now talking 5 about technology, and wanting to bring these 6 high-paying, good-paying jobs into New York State, 7 but, there is a whole other element of business out 8 there that I'm involved in. 9 I question whether the law allowing for the 10 convening of the wage board does not also require 11 the wage board to have someone from the industry 12 being -- as representing our interests. 13 I question that deeply. 14 Initially, my experience with members of the 15 Legislature leads me to believe that this branch of 16 government is the one that should be making this 17 decision. 18 I try not to talk bad about any governor or 19 any president, regardless of party, but I can't help 20 but think that this is the governor trying to do an 21 end-around, to use the football colloquialism. 22 The Legislature should be making this 23 decision, because it's the Legislature that has the 24 finger on the pulse of the employees and the 25 business owners and the various stakeholders that 1 make up our great state. 2 In summary: 3 I believe the process undertaken by the 4 fast-food wage board has been significantly flawed. 5 I would urge the commissioner of labor to 6 defer to the members of the Legislature when making 7 a decision this important that's going to impact 8 this many people. 9 I would also hope that they look at the 10 long-term economics of this. 11 One of the arguments that I've made on 12 Facebook or Twitter, and I know, it's almost ironic, 13 because Ben & Jerry's is usually all about, you 14 know, social movements and things, but I see both 15 sides of that as well. 16 While I may be a Ben & Jerry's franchisee, at 17 the end of the day, I need to put food on the table, 18 and I need to make the numbers work. And if it 19 doesn't pencil, you know, we can't take on further 20 debt. 21 I always love how states and the government 22 can just take on more debt to solve a cash crunch. 23 We don't get that option. 24 Our option is, go out of business. 25 SENATOR MARTINS: And lay off all your 1 workers. 2 PATRICK PIPINO: And lay off all our workers. 3 Which -- and that's another -- I don't 4 want -- I know this is about the process, and it's a 5 flawed process, but 95 percent of my staff are 6 between the ages of 15 and 19 years old. 7 They're going to -- if this goes through and 8 we are a part of this law, I haven't found out 9 whether we are or not, they're going to make the 10 same amount of money as a 15-year-old, that 19 years 11 ago I made by taking all the risk, working all the 12 hours, and putting this up for them. 13 And, Senator Murphy, when you talk about the 14 gray hairs, and whatnot, I can tell you about nights 15 where I threw up, or where I started crying, as a 16 grown man. 17 My wife's, like, What are you worried about? 18 I'm, like, I'm worried about whether we can 19 feed the girls. 20 You know, thank God my wife is a teacher. 21 And there's another favorite joke of, What is 22 entrepreneurship? Entrepreneurship is being married 23 to someone that has benefits. 24 [Laughter.] 25 PATRICK PIPINO: With that, I'd just like to 1 thank all of you for convening this Committee, and 2 for allowing me to speak. 3 Thank you. 4 SENATOR MARTINS: Thank you very much. 5 I know we have a few questions. 6 I am going to defer, first, to my colleague, 7 Senator Marchione. 8 SENATOR MARCHIONE: Thank you, Chairman. 9 Pat, thank you so much for being here. 10 You know, yes, you have a franchise; but, 11 yes, you own only one Ben & Jerry's. 12 And I am certain that it's very difficult for 13 you to get out of Saratoga Springs during this time 14 to be here with us, taking time from your business 15 and your family. 16 And I just want you to know how much 17 I appreciate that. 18 PATRICK PIPINO: The pleasure really is mine. 19 SENATOR MURPHY: Thank you. 20 You know, I met Pat many, many years ago in a 21 previous position, two or three previous positions 22 for me, ago. And I met Pat as a community member, 23 when I was bringing in some ice cream for clerks of 24 the board, way back in the '90s. 25 SENATOR SEWARD: New York State town clerks. 1 SENATOR MURPHY: A long, long time ago. 2 And I called Pat, and he came for free, and 3 he helped our group. 4 That's the community-minded local business. 5 That's not -- and there's nothing wrong with 6 being a franchisee who owns thirty. 7 There's nothing wrong with success in our 8 country. 9 That we make it look like, if you're very 10 successful, we need to take much more from you. 11 There's nothing wrong with that, so I don't 12 mean -- I'm not saying that in this regard. 13 But Pat is a businessman in Saratoga Springs 14 who is so community-minded, such a part of the 15 community, and, a small-business owner that should 16 not, if he is in this situation, should not be being 17 put into this situation. 18 No one should be being put into this 19 situation of the haves and the have-nots. 20 And I'm grateful for you to be here, Pat, and 21 for you sharing your perspective on what it is to 22 own a franchise, but only own one. 23 Thank you, Pat. 24 SENATOR MARTINS: Thank you, Senator. 25 So I have a question for you. 1 PATRICK PIPINO: Shoot. 2 SENATOR MARTINS: Absolutely. 3 Well, first of all, I'll make a point. 4 If you have a question as to whether or not 5 you're in? You're in. 6 PATRICK PIPINO: Oh, super! 7 SENATOR MARTINS: Yeah. 8 But let's look at this, going back to my 9 example from before. 10 If you are a franchise that is covered under 11 this -- these recommended decisions, you're going to 12 have to pay your employees on this scale that was 13 recommended, depending on whatever the commissioner 14 decides. 15 If you disenfranchise from Ben & Jerry's, and 16 decide to open -- 17 PATRICK PIPINO: I can't. 18 SENATOR MARTINS: I understand. 19 -- but let's say -- 20 PATRICK PIPINO: There there's a covenant not 21 to compete that's part of our franchise agreement. 22 SENATOR MARTINS: I understand, but, 23 Mr. Pipino, I'm just suggesting that, if you did, 24 you can just simply get around the requirements of 25 this order simply by saying, You know what? I am no 1 longer Ben & Jerry's. I am going to be, you know, 2 Pat's Ice Cream, and, now, you no longer have to 3 follow that order. 4 It's inconceivable to me that an order that 5 deals with issues of this magnitude, that have to do 6 with the viability of businesses, but, also, deal 7 with people's lives on a basic level, can be simply 8 ignored by simply changing the name of your 9 business. 10 It's impossible to think that that is good 11 public policy in this state, and it's impossible to 12 consider that. 13 And, frankly, I appreciate the perspective 14 that you bring here. 15 For me, it's always been about fairness for 16 everybody. 17 And as you said before, if you go out of 18 business, your employees also go home, and so that's 19 not the answer. 20 I really do appreciate your testimony here 21 today. 22 PATRICK PIPINO: Thank you, sir. 23 SENATOR MURPHY: Well, now that you have some 24 more gray hair, after realizing that, listen, being 25 a business owner, I feel your pain. 1 I own and operate two businesses, and, you 2 know, these things are -- like I said in my opening 3 statement, the economic impact on this is 4 devastating, and to New York State with regards to 5 people staying here and being able to, you know, 6 afford to just live here, nonetheless run a 7 business. 8 So, I feel your pain. I -- that's why I'm 9 here, to listen to you. 10 And this was about transparency, about having 11 some skin in the game, and about listening to 12 business owners, and allowing their voices to be 13 heard at the table. 14 And I believe that was not done. 15 PATRICK PIPINO: Great. 16 Thank you, sir. 17 SENATOR MARTINS: Mr. Pipino, thank you very 18 much. 19 PATRICK PIPINO: Thank you. 20 SENATOR MURPHY: Thank you, Pat. 21 SENATOR MARTINS: Next up we have 22 Mr. Jeff Hanscom, who's the director of state 23 government relations and public policy for the 24 International Franchise Association. 25 Good afternoon. 1 JEFF HANSCOM: Afternoon, at this point. 2 Chairman Martins, members of the Committee, 3 thank you very much, not only for calling this 4 hearing, but thank you for inviting us to speak 5 here. We certainly appreciate it, an invitation 6 that we did not actually receive from earlier wage 7 boards, but -- or from the wage board, I should say. 8 Just a little bit of background about the 9 International Franchise Association. 10 We're the largest and oldest organization of 11 our type in the world. 12 We represent approximately 780,000 franchise 13 establishments supporting nearly 9 million jobs and 14 $890 billion in economic output here in the U.S. 15 That represents approximately 3 percent of 16 the U.S. GDP on any given year. 17 Franchise business in New York State, 18 specifically, is an enormous contributor, both in 19 workforce and economic impact. 20 873 brands have at least one location in 21 New York, representing over 15,000 franchise 22 establishments across the state. 23 Of those 15,000, over 8,000, "8,000," are 24 involved in the restaurant and food sector. 25 According to the data that is provided to the 1 federal trade commission, the organization charged 2 with regulating the franchise industry at the 3 national level, franchise businesses in the food and 4 restaurant sector in New York, prior to this wage 5 board, had projected a 4 1/2 percent growth rate in 6 New York, which is despite the rules and regulations 7 that are already in place. 8 A 4 1/2 percent growth rate, which is 9 actually far above the national-average projected 10 growth rate within the franchise industry of 11 2.3 percent. 12 So here in New York we are already -- we were 13 on the right track, 4 1/2 percent, which, I guess, 14 it is almost double the national growth rate within 15 the franchise-restaurant industry. 16 The vast majority of quick-service 17 restaurants, or, fast-food restaurants, and other 18 businesses operating within the franchise business 19 model, are owned and operated by local business 20 owners and the franchisees. 21 I'll say that again: They are owned and 22 operated by the local business owners. 23 These local business owners pay fees, pay 24 royalties; they pay for the ability to open that 25 franchise establishment. That does not come free. 1 Someone does not enter into the idea of opening a 2 national-brand fast-food restaurant on a whim. 3 It's a significant time and financial 4 decision that goes into deciding whether you want to 5 open a national-recognized quick-service restaurant 6 versus a mom-and-pop restaurant. 7 These local franchisees are legally separated 8 from their franchise, or, "parents." 9 The franchisees are responsible for the 10 hiring, the firing, the paying of wages, the 11 providing of benefits; not the parent -- not the 12 franchisor companies. 13 And I mention this because it stands in stark 14 contrast to the stated rationale, and I should say, 15 this stated rationale, for the calling of this wage 16 board, which I believe was mentioned in prior 17 testimony, was called from the top, from 18 Governor Cuomo, was directed. 19 And in an editorial -- an op-ed piece that he 20 penned for "The New York Times" earlier this summer, 21 Governor Cuomo repeatedly cited the CEO -- high CEO 22 salaries and enormous profits at various franchisor 23 corporate headquarters as the reason for convening 24 this wage board and examining the wages within this 25 industry. 1 That, in and of itself, demonstrates a 2 staggering lack of a knowledge and understanding 3 about how the franchise industry works. 4 The idea that simply because a franchisor, a 5 corporation, is making money, or a CEO is making a 6 certain salary, somehow translates that that money 7 goes down the chain to the local franchisee who owns 8 the Ben & Jerry's, who owns the Subway, is simply 9 not true. 10 It's actually the exact opposite of what 11 happens. 12 And, again, it's just a profound lack of 13 understanding from the top, down. 14 While we would certainly object to an 15 increase in the state minimum wage that targets only 16 a single portion of a single economic sector as 17 ill-advised policy that significantly interferes 18 with market forces, we believe applying the new 19 minimum wage only to businesses that are affiliated 20 with a nationwide brand is taking a step beyond the 21 limits of what state governments may permissibly 22 regulate under the U.S. Constitution and the 23 commerce clause, which I believe Mr. Amador from the 24 National Restaurant Association touched on, and kind 25 of passed the baton to me. 1 So I'll touch a little bit on our 2 commerce-clause concerns with -- as they pertain to 3 the wage board. 4 This differential minimum-wage requirement, 5 or potential differential minimum-wage requirement, 6 based solely on whether a small-business affiliates 7 with an interstate franchise network, is tantamount 8 to a tariff on interstate commerce. 9 The wage board's recommendation to increase 10 the minimum wage to whatever number it may be; in 11 this case, $15, is the same, in substance, from the 12 view of the franchisee, if, rather than mandating 13 the payment of an additional money; $4, in this 14 case, per employee-hour worked, it makes the 15 franchisee pay a $4 tax. 16 Requiring a small business to pay a tax or a 17 fee based on its affiliation with an out-of-state 18 entity and interstate-business network is, to quote 19 the U.S. Supreme Court, "an example of a law 20 discriminating against interstate commerce." 21 "Tariffs and laws having the same effect 22 as -- as a tariff," the Court continued, "to have 23 long been recognized as a violation of the commerce 24 law." 25 So simply putting one business at a 1 competitive disadvantage, because of its affiliation 2 with an out-of-state network, has been held to be a 3 violation of the U.S. Constitution. 4 Such a wage increase is not only 5 discriminate -- discriminatory in its explicit 6 intent, but also in its effect. 7 By allowing, strictly, local companies to pay 8 a lower rage -- lower wage rate than similar small 9 businesses with interstate ties, the State of 10 New York will be engaging in the preservation of 11 local industry by protecting it from the rigors of 12 interstate competition; i.e., benefiting the 13 mom-and-pop establishment at the expense of a 14 business that has chosen to become affiliated with a 15 national brand. 16 And the Court described -- the Supreme Court 17 describes that as "the hallmark of the economic 18 protectionism that the commerce clause prohibits." 19 Constitutional concerns aside, there's ample 20 evidence that a dramatic increase in minimum wage 21 will have a significant and lasting negative impact 22 on the quick-service restaurant industry in 23 New York, as well as the consumers. 24 Various surveys have projected 86 percent of 25 owners were at least somewhat likely to raise their 1 product prices in response to this type of an 2 increase. 3 83 percent of those owners also indicated 4 they could reduce or would reduce employee hours in 5 response to this type of an increase. 6 Perhaps most impactful, upwards of 43 percent 7 of owners surveyed in New York said that they would 8 at least -- are somewhat likely to close their 9 business, based on the potential doubling, or almost 10 doubling, of required minimum wage. 11 If even a fraction of those restaurants were 12 to close due to an increased minimum wage, it would 13 very likely eclipse the number of new locations 14 slated to open in New York, which, again, would 15 completely roll back that "4 1/2 percent" growth 16 figure that I mentioned in the beginning. 17 The International Franchise Association 18 originally recommended to the wage board, which we 19 did submit written comments, to return -- to refrain 20 from increasing the wage for simply one section of 21 workers within one economic section. 22 However, that was clearly, or potentially, 23 not heeded. 24 We believe the arbitrary and discriminatory 25 wage increase is constitutionally dubious and a 1 clear violation of the commerce clause -- clause's 2 regulation of interstate commerce. 3 We also believe that such an action, by 4 confusing franchise small-business owners with their 5 corporate parent franchise owners, threatens to 6 increase the cost on businesses that can simply 7 cannot bear them. 8 When the competitors will continue to pay 9 lower mandatory wages, it will simply shut the 10 doors. 11 It will have a real impact on employment and 12 economic growth in New York by eliminating jobs and 13 eviscerating plans to expand additional units. 14 We strongly urge the board to maintain wages 15 equal for quick-service restaurants; and, instead, 16 allow the minimum-wage increase already passed by 17 this Legislature to continue to take effect. 18 The fast-food wage board did not consist, and 19 it has been repeatedly mentioned, did not consist of 20 a single representative, "a single representative," 21 from the quick-service restaurant industry. 22 The International Franchise Association, in 23 our discussions with various municipalities and 24 states across the country, has repeatedly stated, 25 and repeatedly asked: We are not seeking special 1 treatment. We're only seeking the same treatment. 2 Thank you very much for having me, and 3 I would be happy to answer any questions. 4 SENATOR MARTINS: Thank you. 5 Thank you very much. 6 You know, I've always found Governor Cuomo to 7 be a bright guy. 8 And, you know, when he penned that op-ed, 9 that you referenced earlier, this summer, and he 10 included the salaries of CEOs for these national 11 corporations, I have to assume that he, as well as 12 all of us, knew full well that that wasn't the gauge 13 by which this was going to be decided; yet, there it 14 was. 15 And so, you know, that's been part of the 16 trouble, at least for me personally, in following 17 this process, is that there's a lot stuff out there 18 that simply isn't part of the discussion, shouldn't 19 be part of the discussion, because it's not true. 20 Yet, you have people in positions of 21 authority that are pushing that angle forward, when, 22 in reality, as we've seen here today, and we will 23 continue to see here from testimony today, 24 franchisees are small businesses who live in our 25 local communities, whose kids go to school with our 1 kids, and who go to mass with us on Sundays. 2 They are the same people who own other small 3 businesses, and they shouldn't be treated 4 differently. 5 And so, the more we can say that, and the 6 more we can question why a very bright individual 7 decided to pen an op-ed, let alone the paper publish 8 it, by the way, when they all knew full well that it 9 simply wasn't true, is remarkable. 10 JEFF HANSCOM: I -- obviously, we couldn't 11 agree more, as an association. 12 And I think it speaks to what Mr. Amador 13 referenced earlier, that this whole process has gone 14 off the rails from an economic examination of wages, 15 and has gone down the road of a 16 politically-motivated and politically-founded 17 examination, or, investigation, if you would want to 18 call it that. 19 I don't think there's any question that 20 "The New York Times" or Governor Cuomo did not 21 understand what they were writing or what they were 22 publishing. 23 I think they knew, and Governor Cuomo knew, 24 full well, that that argument appeals to people's 25 emotional side, but has no basis on the actual 1 business relationship or the paying of wages within 2 this specific industry. 3 SENATOR MARTINS: Any questions? 4 SENATOR MARCHIONE: Just a comment. 5 I think what, you know, I'm hearing today, 6 really, the concern that you hear is that businesses 7 are going to close. They're not going to be able to 8 keep their doors open. Or, they're going to change 9 to computerized, you know, kiosk systems, which 10 people will tell you, millenniums today prefer to 11 deal with machines than people anyway. 12 There are really serious concerns. 13 The bottom line, through this process, is 14 we're going to lose jobs. And those people who may 15 have been making $10 an hour, or $11 an hour, are 16 not going to be employed. And people who owned 17 franchises and are supporting their families are not 18 going to be there. 19 And, for this decision to be made without 20 listening to the industry is absurd. 21 Absolutely absurd. 22 I appreciate, you know, you reinforcing what 23 the other speakers have been saying, but we're not 24 the only ones listening. 25 I mean -- 1 JEFF HANSCOM: We certainly couldn't agree 2 more. 3 And I think it's -- it's important to point 4 out, again, Mr. Amador referenced it in his 5 testimony a couple of years ago, when the CBO 6 (the Congressional Budget Office) looked at 7 10.10 across the country, and estimates a range, 8 anywhere from 500,000 to a million jobs would be 9 lost. 10 And if you extrapolate 10.10 and go to a 11 potential minimum wage that's 50 percent higher than 12 that, I don't have a degree in economics, but 13 I don't think I need one to say that I think numbers 14 will be worse. 15 SENATOR MARCHIONE: And I think those are 16 always concerns that have to be addressed with what 17 we're doing. We just can't, let's guess at this, 18 let's take this decision and make it, and watch 19 people lose their jobs. 20 We deserve better in New York. 21 JEFF HANSCOM: I completely agree. 22 And it doesn't seem that those concerns or 23 those numbers were actually seriously looked at. 24 And, also, obviously, there is already a 25 statutorily-mandated increase of minimum wage that 1 is underway. 2 To not wait to see that through to the end, 3 to see what kind of impact that may have, before 4 arbitrarily jumping so much higher within -- to one 5 industry, seems irresponsible. 6 SENATOR MARCHIONE: And, I mean, we're 7 doing -- we're talking process today, but, of course 8 my thoughts always go, What about the person who's 9 not making minimum wage, where do they go? 10 JEFF HANSCOM: Well, that's a valid question. 11 Someone who may have been in a position for a 12 number of years and they've worked their way up 13 to -- 14 SENATOR MARCHIONE: $16 an hour. 15 JEFF HANSCOM: Sure. 16 And then the 19-year-old, or the 15-year-old, 17 serving ice cream for the summer, all of a sudden, 18 they're at that number. So then you automatically 19 compress, because the person who's been there for a 20 number of years and has worked their way up to 16, 21 Well, if the person -- if the 15-year-old coming in 22 for the summer is at 15, well, then I should 23 certainly be at 22. 24 Or, where does it go? 25 So, certainly, considerations that don't seem 1 to have been taken into consideration. 2 SENATOR MARCHIONE: Thank you. 3 SENATOR MURPHY: First of all, thank you for 4 being here. 5 To piggy-back off of Senator Marchione's 6 little exploit is that, you're going to have -- 7 I have a few of my friends that own franchises, and 8 they're debating whether to stay in New York or go. 9 And if they do stay, people don't realize 10 that you have to pay a, I don't want to say a 11 royalty fee, but you have to pay the franchisor, you 12 know, a certain fee. 13 And if they do stay, they're going have to 14 upgrade, so it's going to be another cost just to 15 get the technology up to speed. 16 So there's so many ramifications to this 17 decision here, that I believe that should have just 18 been vetted a lot more with people, again, and I'll 19 say it over and over, that have skin in the game, so 20 to speak. 21 And I know they're extremely worried about 22 what's going to happen here, to the point where 23 they're actually looking to go to Connecticut. 24 JEFF HANSCOM: Absolutely. 25 SENATOR MURPHY: And that's only six miles 1 across. 2 And so this is to what Senator Marchione was 3 say, losing jobs. 4 And, you know, it's about economic 5 development, it's about making, you know, America 6 great again, and now making New York State open for 7 business. 8 And this is what we want to do. 9 We've got to give the people the tools to do 10 it here. 11 JEFF HANSCOM: Absolutely. 12 And it's interesting that you point that out. 13 And nowhere throughout this process, and, 14 obviously, we've followed it very closely, did we 15 see any sort of examination in which -- 16 Obviously, would have been nice to have some 17 of the folks here today to answer some of these 18 questions. 19 -- never did we see any examination or 20 recognition to the facts that opening a franchise is 21 not free. 22 It's not simply a choice of, What sign do 23 I want to hang on the door? 24 There are exceedingly high costs, and ongoing 25 costs, that franchisees bear that non-franchised 1 businesses do not. 2 And that never seemed to make its way into 3 the conversation. 4 Simply, it appeared to be that it was thought 5 of: It's just simply a matter of, well, which sign 6 do I want to hang on the door? And because the 7 franchisor parent company in some far away state is, 8 that CEO is making a lot of money because I chose to 9 hang that sign on the door, me, as the local 10 business owner, I, somehow, innately have the 11 ability to pay my folks much more. 12 And that's simply a profound misunderstanding 13 and miscategorization of how the industry works. 14 SENATOR MARTINS: Mr. Hanscom, are you 15 familiar with the Fight for 15? 16 JEFF HANSCOM: Yes, I am. 17 I am, yes. 18 SENATOR MARTINS: And that Fight for 15 19 effort seems to be awfully similar to the ultimate 20 recommendations that were made by this wage board, 21 wouldn't you agree? 22 JEFF HANSCOM: "Awfully similar" would be 23 stating it lightly. 24 I would say, yes. I would say almost 25 parallel. 1 SENATOR MARTINS: Yeah, why don't you tell us 2 what your understanding is, and tell us a little bit 3 about this Fight for 15; who's behind it, and why 4 it's important to us. 5 JEFF HANSCOM: It's funded wholly by the 6 Service Employees International, or, "SEIU." 7 And I think, Senator Martins, you alluded to 8 it earlier: We're talking about an organization 9 that has spent tens of millions of dollars over the 10 course of the last couple of years making this 11 movement, pushing this movement. 12 And you saw protests in New York City earlier 13 this year, folks that were bussed in for these 14 protests. 15 Coincidently enough, these protests were part 16 of the Fight for 15, orchestrated by the SEIU. 17 We -- we were -- you were able to ascertain 18 that some of these folks who were not, obviously, 19 local to either Manhattan, or even the state of 20 New York, at some of these demonstrations earlier 21 this year that were taking place. 22 And the vast majority of those folks who were 23 out there protesting don't work in the quick-service 24 restaurant industry. 25 They were asked on camera, whether or not 1 they worked in the quick-service restaurant 2 industry. And they don't. They were bussed in. 3 So, to think that this is a locally -- a 4 local organic movement specific to one state, to one 5 town, is simply not true. 6 SENATOR MARTINS: Well, look, I would just 7 like to ask the question, and that's why there were 8 invitations extended to this hearing. 9 I just want to ask the question, and I would 10 like somebody to answer a very simple question: 11 If this group spent that much money to 12 promote a national policy to bring $15 wages to 13 fast-food workers, and we placed one of their 14 officers, their secretary/treasurer as a member of 15 this wage board, how do we not ask the question as 16 to what the influence was of this person and this 17 group on this effort, since the recommendations, 18 literally, mirror the efforts of this nationwide 19 effort, and the spending of, I've heard, over 20 $30 million over the last 2 years, to promote this 21 effort? 22 Someone's got to answer that question. 23 And, frankly, the people of New York deserve 24 to know from the Governor, from the commissioner, 25 and from members of that wage board, how much that 1 influenced their decision. 2 JEFF HANSCOM: We couldn't agree more with 3 that statement. 4 SENATOR MARTINS: Thank you. 5 JEFF HANSCOM: Thank you, Senator Martins. 6 SENATOR MURPHY: Thank you. 7 JEFF HANSCOM: Thank you all very much, 8 appreciate it. 9 SENATOR MARCHIONE: Thank you. 10 SENATOR MARTINS: Next up we have 11 Mr. Ken Pokalsky, who's the vice president of the 12 Business Council for the state of New York. 13 Ken, how are you? 14 KENNETH POKALSKY: Good afternoon. 15 I'm well, thank you. 16 Thanks for the invitation. 17 Mr. Chairman, Senator, Senator Marchione, 18 I appreciate the opportunity to be here on behalf of 19 the Business Council today. 20 The Business Council followed closely the 21 proceedings of the fast-food wage board. 22 We did testify at the June 22nd hearing here 23 in Albany; and, yes, I was heckled and booed. 24 But what we're really interested in, we 25 represent a number of businesses who would be 1 affected by this proposal; but, also, as we're 2 seeing today, our concern that this proposal would 3 lead to a far broader proposal that would affect a 4 significant number of additional businesses. 5 So this is an issue of real concern to us. 6 And, again, I'm not -- you didn't invite us 7 to talk about the outcome of the $15 recommendation, 8 but we are prepared to talk about a few issues of 9 concern to us, about how this process unfolded. 10 And I'm going to summarize most of this, 11 because some of these points have already been hit 12 on by previous witnesses. 13 First and foremost, the composition of the 14 wage board. 15 Section 655 of the Labor Law is pretty clear. 16 It says, "To the extent practicable, the 17 employer reps on a wage board" -- there has to be 18 employer reps -- "are to be drawn from 19 recommendations from the industry." 20 Since this wage board was wholly 21 discretionary, there's no timetable in statute, or 22 there's nothing driving this, other than the desire 23 to have the wage board, we think it was 100 percent 24 practicable to reach out to the industry and get 25 their recommendations, and have an industry rep as 1 one of the three, or one of the six -- there's 2 supposed to be equal number -- from the fast-food 3 industry. 4 And we've seen no evidence of that. 5 Obviously, the gentleman representing 6 business on the wage board is not from the industry. 7 From what I could tell, from what you heard 8 from other witnesses, he certainly was not 9 recommended by the industry affected by this. 10 Now, I can certainly imagine, with the makeup 11 of the board, its recommendations would have ended 12 up 2-to-1 had a fast-food nominee been on the board. 13 But I do think the wage board's deliberations 14 would have been far better informed, and I think 15 they would have looked at issues, I think, more 16 carefully, some of the issues I'm going to raise 17 next, if they had someone with familiarity with the 18 industry on the board. 19 So I do think the absence of an industry rep 20 was material to the outcome of this board. 21 Second, again, the process, and what the law 22 requires of this process, Section 650 of the 23 Labor Law says that these wage boards have to 24 consider whether its recommendations would 25 substantially curtail opportunities for employment 1 or earning power. 2 In other words, it has to look at the 3 economic effect of its recommendations. 4 And to do this in a meaningful way, the wage 5 board would have had to consider the finances of the 6 actual establishments that would be affected. 7 And as you've heard earlier, most of the 8 commentary, and most -- and to the extent that the 9 economics were reflected in the wage board's final 10 report, they talked about the corporate parents. 11 There was very little evidence presented or 12 discussed, that I saw, and the wage board's 13 recommendations or report didn't reflect any 14 consideration of the finances, and the financial 15 capability, of the small-business franchisees who 16 would actually be paying the elevated wages. 17 At one point, the wage board's final report 18 noted that some store owners cited low profit 19 margins. 20 But then the report, you know, really 21 dismissed those concerns, saying, Well, you can make 22 up that by the benefits of being associated with a 23 large corporate parent. 24 And without a more thorough consideration of 25 the operating costs and profits of the vast majority 1 of the fast-food establishments, which are 2 franchisees -- franchisees-owned, we don't see how 3 it would be possible for the wage board to make 4 meaningful conclusions about the impact of this 5 proposal on job opportunities. 6 Third, the wage board was impaneled to 7 recommend -- make recommendations on wages for 8 workers that prepare food and serve customers in the 9 fast-food sector. 10 Its recommendations, though, included wage 11 increases for cleaning, routine maintenance, 12 delivery, and security positions at fast-food 13 restaurants. 14 So, the recommendations go well beyond what 15 the charge to the board was. 16 Moreover, we have a number of concerns about 17 this broadening of scope. 18 It certainly belies the assertion that this 19 recommendation won't have adverse impacts, because 20 they -- at the wage board hearings, the wage board 21 members said, We're concerned that if we increase 22 wages for these types of positions that occur at 23 fast-food establishments, the owners would simply 24 contract out those jobs to lower-paid employees. 25 So I think it's pretty obvious, they 1 recognized that this would have an effect on 2 employment. 3 So that's concern number one. 4 Concern number two: It's unclear to us how 5 this would -- who, exactly, this would apply to. 6 And if these cleaning functions or routine 7 maintenance functions are performed by a third party 8 under contract, does this wage order apply to the 9 employees of the third-party contractor, to the 10 establishment owner? 11 We don't know. We haven't seen the wage 12 board or itself. 13 But, the recommendations of the wage board 14 raises a lot of concerns about how a business is 15 supposed to comply with this once it's in final 16 form. 17 But the biggest concern here is that, what 18 they recommended goes well beyond what they were 19 asked to do. 20 Fourth, again, referring to Labor Law, it 21 says -- Labor Law, Section 654, says, the wage 22 board's supposed to consider wages paid in the state 23 "for work of like or comparable character." 24 And, I don't know the extent to which they 25 did that. 1 I know they received some testimony. 2 And, by the way, as a procedural flaw here, 3 we know, if you paid -- if you watched the hearings, 4 and they were all televised, you could hear what was 5 presented orally. 6 I don't know of any mechanism by which 7 written comments were made public. 8 I've looked on their website. Written 9 comments are not posted. 10 So, to the extent which they would -- to the 11 extent to which the wage board received additional 12 testimony on these economic effects, or what have 13 you, we don't know. 14 I think, in the most regulatory settings in 15 New York State that I've involved with, you do see 16 all of the testimonies submitted, you know, posted 17 online. It's readily accessible. 18 But the wage board referred to a professor 19 from Columbia who offered evidence, that said, "The 20 work and skill required for fast-food jobs warrants 21 a substantial increase in minimum wage." 22 I would love to know what that report 23 actually said. 24 So I'd note that other reports cited by 25 various witnesses were significantly 1 mischaracterized in the wage board setting. 2 But, regardless of what this one professor's 3 study said, this really is a -- sort of a 4 comparative-worth approach, where a third party 5 comes in and says, "This is what we think is the 6 inherent value of a job," dismissing what the labor 7 market, you know, defines the true value of a job to 8 be. 9 That's always been a concern to us. 10 There's been numerous comparative-worth 11 legislative proposals considered in New York State, 12 and the Business Council's a longstanding opponent 13 of that approach. 14 Fifth, the "applicability" threshold that's 15 been raised earlier, the report says, it's going to 16 apply to establishments that are part of a franchise 17 operation with 30 or more locations nationwide, as 18 I read it. 19 The report said the wage board "gave careful 20 consideration to how smaller chains might be 21 affected by our recommendations," but really 22 provided no evidence of what was considered and what 23 those conclusions were. 24 I mean, it just strikes me as an arbitrary 25 threshold, above which you're going to pay more, and 1 below which you would be exempt. 2 So that's a real concern. We don't know how 3 they got there. 4 We do think it's an arbitrary outcome. 5 And, last, an issue that Senator Marchione 6 mentioned earlier, Mr. Pipino mentioned as well, 7 it's a little unclear as to who's going to be in and 8 out. 9 We've reached out to a number of our member 10 companies, and there's -- again, we haven't seen the 11 final wage order, the extent to which it goes into 12 details on who's in or who's out. 13 We've heard many circumstances, where, a 14 larger establishment; a large retail store, for 15 example, will have, what we'll consider, a fast-food 16 operation co-locator. 17 Sometimes that fast-food operation is owned 18 by a franchise separately. 19 A lot of times there -- that's, the franchise 20 holder, is the large retail establishment. 21 The people who work at the fast-food 22 operation are interchangeable with other people at 23 the store. They're an employee of the larger 24 company. When I need an additional cashier there, 25 the person changes from a green shirt to a red 1 shirt, and that's where they work. 2 This is going to raise some significant 3 compliance obligations -- or, compliance challenges 4 to the employer. 5 It is -- it has also been raised, there's 6 many settings now, where, and, as a matter of fact, 7 I think most grocery chains, have a place where you 8 can buy food -- prepared food, limited service. You 9 pay before you get it. 10 That's this wage board's definition of 11 "fast-food operations." 12 Are they in, or are they out? 13 I don't think they meant that, but that's 14 what the wage order seems to imply. 15 And there's any number of permutations. 16 We spoke with, we have private universities 17 in our membership. And universities, increasingly, 18 have, you know, more -- you don't just have the 19 cafeteria anymore. You have more, you know, eating 20 opportunities, eating choices, including franchised 21 operations. 22 We've heard from universities, where the 23 university's the franchise holder. Most of the 24 workers are -- their job is a part of their 25 work-study agreement. 1 Question: Are they in, or are they out? 2 So there's, you know, a hundred of these 3 permutations of how food delivery is structured 4 within an establishment. 5 We don't know how this wage -- the final 6 order is going to affect them. 7 We think there's going to be a lot of gray 8 area, and a lot of companies -- employers, at the 9 end of the day, aren't going to know, are they in or 10 are they out? And they're not going to know what to 11 do in response to this. 12 So those are some of the procedural issues we 13 had regarding the process. 14 Like I said, we were involved. We watched 15 all of them. We commented on the final wage report 16 and the extra 15-day period. 17 These were some of the issues that we raised, 18 and it remains to be seen whether the final wage 19 order reflects any of them. 20 So, appreciate the opportunity, and would be 21 happy to answer any questions that you have. 22 SENATOR MARTINS: Ken, thank you very much. 23 You know, you're spot on. 24 My daughter just started her first year in 25 college, just a few weeks ago, and -- 1 KENNETH POKALSKY: Mine too. 2 SENATOR MARTINS: Congratulations. 3 -- and you go to these -- to the university, 4 and, certainly, it wasn't like when I went to 5 school. You do have all of these different 6 franchises, but you also have, intermixed in there, 7 small shops that, almost a food court, with various 8 selections. 9 KENNETH POKALSKY: Yes. 10 SENATOR MARTINS: All of them -- all of these 11 people working there are employees of the 12 university. They don't work for the individual 13 shops. They're interchangeable. 14 So who gets paid what? 15 You go on the thruway, you stop at a rest 16 stop. After -- on the thruway you have various 17 shops inside that particular rest stop. 18 You can have McDonald's, you can have, you 19 know, really, anything. We all know who's there. 20 They're all employees of management company for that 21 rest stop. They don't work for the individual 22 franchise, and so they're interchangeable. 23 Who gets paid the additional wage? Who 24 doesn't get paid for the additional wage? Who keeps 25 track of that? 1 These are all things that are meaningful. 2 And if we had gone -- or, if the Governor had 3 chosen to come through a legislative process, we 4 would have had the opportunity to properly vet those 5 issues, and ask though questions, and ask the 6 questions that came up throughout the day. 7 But he didn't. 8 KENNETH POKALSKY: Right. 9 SENATOR MARTINS: And so -- and so we're back 10 to square one. 11 And I would love to have had the opportunity, 12 obviously, to have had them here to ask them 13 directly, to clarify it, because there should be no 14 question marks. 15 The business owners of this state, the 16 citizens of this state, have an absolute right to 17 wake up tomorrow and know exactly where they stand 18 on this issue. 19 And the fact that they can't, and the fact 20 that they now have to worry about whether or not 21 someone's going to knock on their door and affect 22 them in a very negative way, is disturbing. 23 So, I appreciate the testimony. 24 I certainly appreciate the perspective. 25 Thanks for being here. 1 KENNETH POKALSKY: We spoke with employers 2 who, at a food-service establishment, have both, you 3 know, takeout and sit-down at the same place. 4 Same employees, same counter, do both things. 5 They meet the definition sometimes, including 6 maybe for one customer, of the fast-food server in 7 this wage order. And the next customer, they're 8 serving at the table. 9 I'm not quite sure how an employer like that 10 complies with this order. 11 So there's are any number of circumstances 12 like that. 13 And, so, it will be interesting to see if 14 they -- you know, how much gray area is left, and 15 how people actually would be able to comply with 16 that. 17 SENATOR MARTINS: But that goes to a basic 18 point. 19 We talk about process, and we talk about 20 appointments and who was sitting on the board, but 21 at the crux of this discussion is the definition of 22 this particular occupation, and how it was arrived 23 at, and the validity of that definition, because, if 24 the definition is improper, then any recommendation 25 that derives from that definition is improper as 1 well. 2 And so, you know, this is why this is so 3 important. 4 The opportunity to get into the details, a 5 granular review, and say, Wait a minute, this 6 doesn't work. 7 And we could talk about the sound bites and 8 play the politics and have press conferences, and 9 maybe even invite the Vice President of the 10 United States in to have his press conference. 11 But, at the end of the day, these questions 12 have to be answered, and I hope we have an 13 opportunity to do it. 14 I thank you for your testimony. 15 KENNETH POKALSKY: Thank you. 16 SENATOR MARCHIONE: Thank you. 17 SENATOR MURPHY: Quick question. 18 You had -- first of all, thank you for all 19 you do for the Business Counsel in New York State. 20 I appreciate all of your efforts. I'm there 21 with you on that. 22 Were you ever -- was the Business Council 23 ever asked to sit at the table, with the wage board? 24 SENATOR MARCHIONE: No. 25 SENATOR MURPHY: No? 1 Okay. That's all I need to know. 2 KENNETH POKALSKY: No. 3 SENATOR MURPHY: No. 4 Secondly, you mentioned that the testimony, 5 questions that you had maybe submitted, was never 6 put online for anybody, any of your questions 7 answered. Correct? 8 KENNETH POKALSKY: Yeah, my point is that, 9 people refer to you. They have a -- someone would 10 testify and say, I have a study that shows A, B, 11 and C. They would say that. 12 And I've looked, and the ones that I could 13 find, I've read. And, oftentimes, the way they were 14 characterized is very inaccurate. 15 So I would like to see if there's any actual 16 evidence supporting what they assert. 17 And my only point is that, in other settings, 18 when people submit written testimony, that gets 19 posted online. 20 This -- written testimony submitted here was 21 not. 22 SENATOR MURPHY: It was not. 23 So my point is, is that, if you do business 24 in New York State, and you need to do a "DEIS," 25 which is a draft environmental impact statement, and 1 you want to try and get your business going, you 2 held the public hearing, and all of those questions 3 in the public hearing have to be answered, in order 4 to come to the outcome of the "FEIS," which is the 5 final environment impact statement. 6 Something as important as this, questions 7 that are being asked, weren't even given an answer. 8 WILLIAM POMPA: Yeah, the procedure's quite 9 different. 10 Thank you. 11 KENNETH POKALSKY: You're welcome. 12 SENATOR MARTINS: Thanks, Ken. 13 Next we have Mr. William Pompa. 14 Mr. Pompa is the owner of Mr. Subb 15 restaurants. 16 Sir, how are you? 17 WILLIAM POMPA: I'm great. And you? 18 SENATOR MARTINS: I'm doing well. 19 We have never met, but I have heard of you, 20 so, looking forward to your testimony. 21 WILLIAM POMPA: I have given you my little 22 written remarks, but, you know, after listening to 23 everybody today, talking, I realize that this is 24 even a bigger mess than I originally thought it was. 25 I've been in the business for 44 years. 1 That's how you get gray hair. 2 [Laughter.] 3 WILLIAM POMPA: You know, this whole thing 4 that's going on with our government, starting with 5 the President, you know, making their own laws, and 6 now the Governor's trying to do the same thing, this 7 is extremely disturbing to me as, you know, both a 8 citizen of this country, as a resident of this 9 state. 10 And I'm so thankful that you're having this 11 hearing because, I just don't like what's happening. 12 You know, we shouldn't even be here today 13 talking about this, because you guys should be 14 deciding the minimum wage the proper way. 15 SENATOR MARTINS: I appreciate that. 16 WILLIAM POMPA: You know, as I mentioned, 17 I've done this. I've been an owner for 39 years, 18 worked in this business for 44. I started working 19 for minimum wage when it was $1.85 an hour. 20 I have seen the minimum wage raised up time 21 and time and time again, and, where are we? 22 We still have -- we still have the problems 23 with people, you know, struggling with low incomes. 24 We try to do our job as business owners. We 25 try to create opportunities. We encourage people to 1 take on more responsibility, make some more money. 2 And I have some good examples of some 3 employees who, you know, started -- well, myself 4 included, I started at minimum wage, and, you know, 5 now I own the company. 6 I have managers, same thing. They started 7 working, you know, 16-, 17-year-old kid, minimum 8 wage. 9 My manager at Colonie Center has been with me 10 almost 20 years now. Even, I remember when her 11 daughter was born. Now the daughter has a child, 12 and she's a grandmother. And, you know, she's made 13 a good life for herself because she -- you know, she 14 worked at it. 15 Nobody gave her a raise. She worked. 16 We, you know -- we have a nice bonus program. 17 Her store does very well. 18 In the fourth quarter, she always makes -- 19 you know, probably makes about a $2,000 bonus just 20 in that quarter. 21 But she works, and she's done it by working. 22 And what's missing in our society, and all 23 this -- the nonsense, where you have the op-ed page, 24 and -- because McDonald's are making all of this 25 money. 1 You know, most franchisees, most little 2 businesses, they're single franchisees. 3 I had some experience at becoming a 4 franchisor. I actually tried to go in that 5 direction, and it didn't work out for me. 6 Part of the reason is, is that a lot of the 7 franchisees think they can buy a franchise and 8 they're going to get rich, and they forget they have 9 to work. 10 They have the royalty fees to worry about. 11 They have advertising fees to worry about. 12 You know, they -- and most of these little 13 businesses are going to have a tough time. 14 You know, if we do get this increase to 15, 15 and, technically, my business is exempt because 16 I don't -- I have 18 stores, but, how is it going to 17 be exempt? I'm not going to be able to get any 18 employees. 19 You know, we've always tried to be 20 competitive in our wages. 21 One -- one -- a few years back, I actually 22 did this little experiment. 23 I challenged my employees at all my stores, 24 we called it a "big-raise challenge," and I gave 25 them specific goals, to figure out how much more 1 sales we would need to do to -- so everybody could 2 have a dollar-an-hour raise. 3 And, guess what? They all got their 4 dollar-an-hour raise. 5 Unfortunately, as time has progressed, you 6 know, we've always tried to pay more than minimum. 7 And this last jump, we're stuck at -- well, for two 8 reasons: 9 You know, there is a minimum-wage tax credit 10 for students, so if you pay somebody more than 11 minimum wage, you lose that tax credit. 12 And that's just not smart business-sense. 13 And I shouldn't really tell you this, but 14 this does bother me. 15 If we have somebody we hire at, you know, 16 8.75, so we can get the minimum-wage tax credit, the 17 minute we give them a raise, the more than 8.75 an 18 hour, we lose that credit. 19 Okay? 20 And the credit is significant. 21 I believe the credit for this year is $1.31 22 an hour. 23 Okay? 24 So if I give somebody a quarter-an-hour 25 raise, I lose the benefit of that tax credit. 1 And that's like the dumbest thing I've ever 2 seen. 3 And, you know, it really kills me because our 4 system is based on, we want people to progress, we 5 want people to stick with it. 6 We don't want to have turnover. 7 We don't want to have people -- you know, 8 constantly rehiring people. 9 All we want to do is have stability, 10 everybody make some money, everybody happy, and 11 things run smoothly. 12 And for the most part, I've been pretty 13 fortunate in my life to do that. 14 And I'm very blessed to have a real good 15 management team. 16 One of my district managers has been with me 17 36 years. 18 Okay? 19 And I'll tell you -- 20 SENATOR MARTINS: That says a lot about you, 21 and about the structure of your business, that you 22 have people who have stayed with you that long. 23 WILLIAM POMPA: And my corporate staff that 24 I have, of the youngest, 10 years, 20 years. Like, 25 six or seven total people that have been with me, 1 from anywhere from twenty. And then I have some 2 managers around twenty. 3 And one of the nice things about that, it has 4 enabled me, for the past few winters, to spend my 5 winter in Florida. And I can still work out of 6 Florida, with, you know, today's technology and the 7 computers and Internet, and all that stuff. 8 But it also has given me an opportunity to 9 see what life is like in another state. 10 And I'll tell you, if I could pack up all my 11 stores and move, I would, because it's just a 12 totally different thing. 13 And what's shocking is, every other person 14 I meet in Florida, Where are you from? 15 New York. 16 New York. 17 New York. 18 It is just mind-boggling how many people have 19 left the state. 20 And a lot of it is because of -- well, you 21 know, some of the nonsense stuff. 22 Even like the wine in grocery stores. 23 You know, in Florida, you go to the grocery 24 store, you can go to drug store, you know, there's 25 wine. There's no big deal. 1 But here we've got to be so restrictive, and 2 do -- it's -- 3 SENATOR MARTINS: I do appreciate that. 4 WILLIAM POMPA: You know, I'm sorry to get 5 off the subject. 6 SENATOR MARTINS: No, no, no, not at all. 7 But you know what? You raised a great point, 8 and that is: 9 Sometimes our own policies, and things that 10 we should be reevaluating our ourselves, like the 11 minimum-wage tax credit. 12 You know, for God's sake. 13 You're given a significant disincentive from 14 giving people a raise. 15 Well, that's because of a policy that we 16 have. 17 If we want to help people on the lower end of 18 the wage structure, why are we providing 19 disincentives to businesses to give people raises? 20 So, that's a positive thing. 21 And, frankly, I can tell you, we're going 22 look into it, because -- 23 WILLIAM POMPA: Yeah, you know, I may have 24 hurt myself telling you that, but -- 25 SENATOR MARTINS: No, no. 1 WILLIAM POMPA: -- it is wrong. 2 SENATOR MARTINS: No, what you've done is, 3 you've actually helped your employees, and you've 4 helped, probably, countless employees out there, 5 because if we have a program in place that 6 specifically pigeon-holes people to minimum wage, 7 and doesn't allow employers to give them even a 8 minimal increase, it's wrong. 9 And so we have the opportunity to go back and 10 take a look at that. 11 So I appreciate you bringing that up. 12 Thank you. 13 WILLIAM POMPA: I wish you would, because, 14 I've been trying to figure out how I can work around 15 it. 16 We've talked about, Well, maybe we tell 17 people we hire you at 8.75. And then after you work 18 so many hours, then we'll kind of retroactively give 19 you -- you know, maybe we'll split the difference. 20 We'll take half the credit, we'll give you the 21 other. 22 You know, that kind of stuff. 23 SENATOR MARTINS: Yeah, but -- 24 WILLIAM POMPA: But you shouldn't have to do 25 that. 1 SENATOR MURPHY: You shouldn't have to be 2 that creative. 3 SENATOR MARTINS: Well, Mr. Pompa, I really 4 appreciate you being here today. 5 Thank you very much for your testimony. 6 Thanks for your interest. 7 I know it doesn't affect your business 8 directly, but you're coming out on behalf of the 9 industry as a whole. 10 I appreciate it. 11 WILLIAM POMPA: But I -- you know, I've been 12 involved with -- unfortunately I've involved, you 13 know, we've had people from the Business Council, 14 The Restaurant Association, and this kind of stuff. 15 And I've gotten so frustrated that I have 16 quit everybody, because I felt that nothing's being 17 done about this kind of stuff. 18 SENATOR MARTINS: Just promise me you don't 19 quit New York. 20 All right? 21 WILLIAM POMPA: Okay. 22 SENATOR MARTINS: Got it. 23 WILLIAM POMPA: I really -- and thank you for 24 inviting me here, because this has been so 25 frustrating. It really has. 1 SENATOR MARTINS: We'll get through it 2 together. 3 But I appreciate you being here. 4 WILLIAM POMPA: And, you know, if you do have 5 another hearing about the impact of minimum wage, 6 and all that, I'd be happy to do that, because we 7 would have to do a big wage -- a price increase, 8 20 percent, to cover this cost, you know. 9 SENATOR MARTINS: Thank you. 10 Thank you very much. 11 With that, I want to thank everyone for being 12 here today. 13 I want to thank everyone who testified. 14 And I want to thank everyone who took the 15 time to come here and address a very important 16 issue, and an issue that we're going to have to deal 17 with, certainly, over the next few months, and 18 I expect that we'll be dealing with as we enter into 19 new legislative session. 20 So, to everyone, thank you very much for 21 being here. 22 I do expect that we will hold other hearings 23 on this particular topic, as things develop. 24 And, stay tuned. 25 Thank you very much. 1 Have a great day. 2 3 (Whereupon, at approximately 1:07 p.m., 4 the public hearing held before the New York State 5 Senate Standing Committee on Codes, and the Senate 6 Standing Committee on Finance, concluded, and 7 adjourned.) 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25