UPDATE: The City Council at its regularly scheduled meeting held on June 26, 2018 decided to not move forward with an amendment to leasing guidelines for city-owned property that would have forced restaurant owners and other food-service operators to enter into labor peace agreements, citing concerns about possible legal and economic challenges. For more on this story, click here.
Family-run restaurants may find it more challenging to serve Santa Monicans if the City Council pushes forward with a requirement that anyone renting space from City Hall enter into labor peace agreements with their employees.
Restauranteurs feel the new requirement for leases on city-owned property, the intent of which is to minimize the likelihood of labor conflicts that could disrupt rent payments to the city, will provide another hurdle for their operations. High rents, low profit margins and living-wage requirements already make it challenging for smaller restaurants without corporate backing to survive.
In total, the city manages 101 properties, including the concession buildings on the beach. Of the 101 properties, 27 are leased or licensed to businesses that are food-service operators or have a component of food service as part of their operation. In downtown, those businesses include Caffé Bella, which serves paninis and gelato inside of a Third Street Promenade pavilion, along with French-inspired Monsieur Marcel, as well as Parking Structure 6 tenant Espresso Cielo, and the Main Library's Bookmark Cafe.
As a group, the city tenants employ a range of full- and part-time positions totaling approximately 600 employees annually, which includes additional part-time, seasonal staff hired by businesses on the pier and beach during peak season. Based on the state and city's classification of small business (25 or fewer employees), the majority of the city tenants would qualify as small businesses. Specifically, of the 27 food-service tenants, approximately eight tenants employ more than 25 full- and part-time employees, according to a city staff report.
In terms of revenues, the city collected approximately $7.6 million in rent in fiscal year 2016-17. Of the $7.6 million, approximately $4.5 million (59 percent) was generated by the city tenants serving food and drinks.
"A city mandated contract with a labor union … would effectively create an insurmountable barrier to entry for local, independent restaurant operators who would others compete to rent the desirable city-owned premises on the pier, the promenade, the beach and throughout the city," said West Hooker-Poletti, owner of Café Bella and parent restaurant Locanda del Lago, a staple in downtown.
Hooker-Poletti is the current president of the Santa Monica Chamber of Commerce, which is calling on its members to urge the council to drop the labor peace agreement requirement under consideration for adoption this summer.
"The mandate would likely limit the pool of tenants willing to rent these locations to mainly chains and larger national brands," Hooker-Poletti said. "It would also pave the way for large operators … to take over the management of almost all brands in destination anchors such as the pier and other city properties, similar to what has occurred in airports around the country."
UNITE HERE Local 11, the union representing hospitality and restaurant workers throughout Southern California, declined to comment for this article. Representatives from the union have held demonstrations outside of at least one local restaurant leasing space from the city.
For nearly 15 years, the city has required new leases on city-owned properties on the pier and in downtown to include provisions that minimize the likelihood of labor conflicts that could disrupt payments to the city. The City Council in August of 2016 asked city staff to investigate expanding that requirement to food-service operators after a similar action was taken at LAX.
The council is expected to take up the issue once again at its June 26 meeting. No specific ordinance has been proposed by staff.
Councilmembers could consider several options, including creating an exemption for small businesses with 25 or fewer employees or eliminating the agreements altogether.
The original labor-peace provisions prohibit all city tenants from engaging in practices that impede their employees' ability to organize and contract with a union for the purpose of obtaining higher wages and enhanced benefits.
Those opposed to the labor peace mandate believe workers are already protected and afforded to the right to organize under the National Labor Relations Act. Labor peace agreements go one step further in protecting the city by preventing lockouts by employers and strikes and picketing by employees.
Given the added administrative and legal costs associated with drafting and monitoring labor peace agreements, Downtown Santa Monica, Inc. advocated for a labor peace agreement template that restaurants could use. This would control costs associated with drafting and negotiating individual agreements as well as provide some level of predictability to restaurant owners.
The DTSM, Inc. board's official position in support of labor peace agreements also includes a direction to city officials to conduct a robust informational campaign so that business owners and others fully understand the issue. If the council moves forward with the requirement, the DTSM, Inc. board will examine the proposed ordinance and could consider supporting it or offer modifications.
The city has not experienced any work stoppages at city-owned properties and the impact of a required labor peace agreement on rental income and small businesses is "unknown and unpredictable," according to a city staff report.