Alaskans backed a measure to raise the minimum wage and establish sick leave. Now employers are trying to make it work.

Dec. 25—In the weeks after Ballot Measure 1 passed by a hefty margin, many Alaska employers are beginning to understand its impacts.

The measure, effective July 1, will raise the minimum wage and establish the state’s first sick leave requirement. It will prohibit employers from holding mandatory meetings about political or religious issues.

The changes will likely affect every employer in Alaska, at the very least requiring new workplace policies and training for managers, said Mike O’Brien, an attorney with Davis Wright Tremaine who is advising businesses about the measure’s impact, along with other attorneys.

The vast majority of Alaska employers already pay above the minimum wage, especially after the pandemic caused labor shortages, O’Brien said.

But fewer businesses provide sick leave. Many business owners say they anticipate higher expenses from that portion of the measure. They’re grappling with ways to avoid passing the costs onto customers or thinning employee hours, they say.

Brock Wilson, research assistant professor of economics at the Institute of Social and Economic Research at University of Alaska Anchorage, said studies indicate the measure could lead to reduced worker hours in the short-term, as businesses respond to higher costs.

Prices for customers could rise for businesses with lots of minimum-wage workers, such as restaurants where tips are combined with pay, Wilson said.

But the measure will have clear benefits for employees, such as higher pay for some, reduced turnover in the long run, and lower rates of worker illness, he said.

Mark Robokoff, owner of AK Bark pet supply store in Anchorage, was part of a coalition of small businesses that supported the measure. He said he believes the measure will improve the Alaska economy — more people will have more money to spend at local businesses because more people will be better-paid.

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“It doesn’t work until everyone does it,” he said. “Then we all get more money to help us pay for our employees.”

Questions about sick leave

The sick-leave requirements are generating most of the questions from businesses, people familiar with the measure say.

The measure increases the hourly minimum wage to $13 in July, $14 a year later, and $15 in July 2027. Increases after that will be tied to inflation.

The minimum wage will bump to $11.91 an hour on Jan. 1, from $11.73 under existing law.

Under the measure, nearly all employees in Alaska will receive at least one hour of sick leave for every 30 hours worked.

Larger employers will have a higher sick-leave requirement. Employers with 15 workers and more must allow workers to accrue a minimum of 56 hours annually. Employers with less than 15 workers must allow them to accrue 40 hours annually.

Businesses can exceed those levels if they choose. They can also combine sick leave with paid time off, as some already do, as long as employers meet the sick leave minimum.

Under the initiative, areas covered by sick leave are broad. They include physical and mental issues, plus support for matters involving domestic violence, sexual assault or stalking. Workers can take sick days to support ailing relatives or someone “whose close association is the equivalent of a family relationship,” according to the measure.

The Wage and Hour section at the state labor department plans to post information about the measure on its website early next year, addressing frequently asked questions, said Jeremy Applegate, chief of the section.

Applegate spoke at an educational event about the measure, held early this month by the Anchorage Chamber of Commerce. Many businesses attended.

The agency will write the regulations for the ballot measure. It will look to clarify questions, such as how to measure employment at a company with annual numbers that bounce around the 15-worker threshold. Draft regulations are expected to be available for public comment in March.

Trying to figure it out

The measure was funded primarily by the Fairness Project, a Washington, D.C.-based organization that has worked on several ballot measures in other states to raise minimum wages or guarantee paid time off. The group spent about $2.6 million on the campaign, about 25 times more than opponents such as The Alaska Chamber and other organizations.

Celeste Hodge Growden, president of Alaska Black Caucus, said she voted for the measure because everyone deserves a decent wage.

But she’s grown concerned about the sick leave requirement, which will add costs for the caucus.

“Now, I’m like, ‘Oh shoot, what did I do?’ ” she said.

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Growden said she doesn’t want to reduce programs. And cutting worker hours could lead to turnover, she said. One solution may be finding more volunteers.

“I just want to support our employees, and so I have to make good business decisions to make this happen,” she said.

Josh Howes, president of Premier Alaska Tours, which shuttles tourists in motor coaches, said the measure is positive for many workers in Alaska because it sets a better baseline wage.

His business and many others in tourism already pay well above the minimum wage, he said.

Premier employs about 800 people, mostly seasonal employees.

Expanding the company’s sick-leave to include those seasonal employees could add close to $500,000 in annual expenses, he said. Tracking leave time will add administrative duties and costs, too.

The extra expenses can’t quickly be passed on to consumers, if that’s even possible, he said. Contracts in the industry are often locked in for two years.

How will Premier Alaska absorb the changes?

“That’s what we have to figure out,” he said. “We’ll have to find ways to save money to cover that expense.”

‘The impact will be dramatic’

Laile Fairbairn, president of Locally Grown Restaurants, which manages four Anchorage restaurants including Snow City Cafe, said the company will need to expand its sick leave to 56 hours, from 40 hours, for an employee’s first year.

The minimum wage will also need to rise for the servers, baristas and other staff that also receive tips.

“The impact will be dramatic, and the numbers are really challenging,” she said. “We offer extensive benefits, like 401(k), health insurance and paid time off. We’ll have to look at all our benefits and see what makes the most sense in light of the changes.”

Fairbairn said Alaskans clearly supported the new employee benefits. It’s up to businesses like hers to figure out how to implement them, she said.

But the higher costs can’t entirely be passed onto customers, she said.

The restaurant group, with about 300 employees, will look for ways to operate more efficiently, she said.

But Fairbairn said she worries the changes could be “crippling” for smaller businesses with few employees and less flexibility to find savings, she said. Those extra costs will come atop already thin profit margins in the restaurant industry, often around 3-4%, she said.

“We’ll all have to tighten our belts,” Fairbairn said.

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Goldie’s Coffee Roasters, which operates a coffee hut off the Old Seward Highway near 76th Avenue, has six part-time employees.

Owners Jenna Frederic and Kristen Redfield said they pay their staff more than the minimum wage so that won’t immediately be an issue.

But the sick leave requirement will add costs for the business starting this summer, they said.

They’re letting customers know that in June they will end the loyalty program for a discounted or free cup of coffee, Redfield said.

“This will help us avoid raising everyone’s coffee prices,” Redfield said.

The owners, who are sisters, said they want to continue operating while supporting employees and customers.

“We’re just adapting,” Jenna Frederic said. “It’s part of being a small business owner. We’ve been in business for 11 years, and every year we have to make adjustments.”

Derrick Green, who owns Waffles and Whatnot restaurant at 500 Muldoon Rd. and was an early supporter of the measure, said his employees already make more than $15 an hour and receive paid sick leave.

He does that by reducing his pay, he said.

“I am literally the least-compensated member of the staff,” he said.

When he takes care of the workers, they take care of everything else, he said.

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