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Opinion: Preparing for the Ravages of Minimum Wage

Tips to manage a likely pay-increase mandate

WEST DES MOINES, Iowa -- Convenience-store retailers have maintained a keen eye on projected wage rules. Several states are eyeing a $15 minimum wage, and these looming changes can have a significant impact on the industry. In addition, wage and hour lawsuits have been on the rise over the past several years.

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Most retailers are concerned about the ripple effect these wage changes will have on a business that is tied to razor-thin margins. The $15-an-hour proposal set in motion a whirlwind of emotions and discussion, and could potentially negatively affect both large and small retailers due to the added cost they’ll absorb.

Some retailers fear it will lower the number of employees they can hire, or worse, force them to demote or let go of workers. It could potentially inhibit the quality of benefits provided to employees, such as vacation accruals, health benefits, retirement plans and/or bonus eligibility. All of which lead to dissatisfied employees and a negative workplace culture. Most importantly, it could jeopardize the ability for some businesses to continue making a profit, ultimately causing them to completely close their doors.

Recently, some retailers (Wawa, Sheetz, Cumberland Farms, etc.) have started implementing robust pay plans for their workforces. It will be interesting to see how these new structures play out for these particular retailers, as every retailer has a unique business model that provides or denies certain options.

Business models can (and must) be tweaked to adjust to economic and legislative changes. Just think of what your company went through to adjust to the Affordable Care Act mandating health insurance for your workforce. The industry adjusted with some heartache and additional cumbersome reporting.

It’s important for employers to implement proactive measures to safeguard their business from wage and hour litigation. Lawsuits typically involve unpaid work that includes overtime, failure to provide meal/rest break and/or off-the-clock work. Retailers would be wise to engage their legal counsel to evaluate the best ways to comply with recent Fair Labor Standards Act (FLSA) standards.

Insurance typically excludes coverage for back pay awarded for wage and hour violations. However, coverage may be available for defense costs if you have an Employment Related Practices Liability Insurance (EPLI) policy. With increased wage and hour litigation, along with other employment-related liability (harassment, discrimination and wrongful termination), it would be wise to evaluate the best coverage options with your insurance professional.

Top performing retailers will continue to focus on ways to survive these challenges. They can, and should, lean on their legal and insurance specialists to make sure their investment is protected from a catastrophic event, while leadership should focus on operational improvements to drive employee efficiency and reduce loss.

Time will tell how operators will address this potential minimum-wage increase and overcome any heartburn or issues that may come with it.


Eric Bolduc is vice president of property and casualty for Holmes Murphy, West Des Moines, Iowa. Contact him at ebolduc@holmesmurphy.com.

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