On June 13, 2015, Los Angeles, California, became the latest city to increase its minimum wage. The Los Angeles minimum wage for large (i.e., with 26 or more employees), for-profit companies will increase annually beginning in July 2016, starting at $10.50 per hour and eventually reaching $15 per hour in 2020. Small businesses and nonprofits will follow a year behind, with increases beginning in July 2017 and continuing through 2021.

Nationwide Trend

In approving its minimum wage hike, Los Angeles became the fifth major city on the West Coast – behind Seattle, San Francisco, Oakland and Portland – to increase its minimum wage. In the rest of the country, other cities likewise have increased their minimum wage, including Chicago and Louisville. It also is widely expected that New York City will raise its minimum wage later this year or in early 2016.

Businesses Adapting

The minimum wage increases in Seattle and San Francisco offer a preview for how businesses in Los Angeles (and other cities that experience minimum wage hikes) can expect to react. Many businesses that run on thin profit margins, such as restaurants, may be forced to raise prices, trim staff or perhaps shut down altogether. Some companies also are looking for ways to replace their workforce with computers, robots or other technology. For example, many fast food and casual dining restaurants have begun replacing staff with touch screens for ordering.

Legal Challenges

Some groups have taken to the court system to fight back against the minimum wage hikes. In Seattle, a group of franchisors sued the city in federal court, alleging that franchises should be treated like small businesses rather than large ones. That case remains pending, but the court denied a request for a preliminary injunction, concluding that the group was unlikely to ultimately succeed on the merits. In Louisville, several trade groups sued the city to halt enforcement of its new minimum wage ordinance. However, the court ruled that the ordinance was enforceable, and the new minimum wage went into effect on July 1, 2015.