2007: business bracing for minimum wage hikes.

FOR Selwyn Yosslowitz, co-owner of Marmalade Cafe in Los Angeles, the new year rings in a major hit to his bottom line: a 75-cent hike in the state's minimum wage to $7.50 an hour.

With this increase, Yosslowitz is considering cutting back hours for some of his employees.

"We're going to make cost-cutting moves like this before we ever consider passing on the increased costs to our customers," Yosslowitz said.

Marmalade Cafe is on the front lines of the annual onslaught of new laws that affect employers at the start of each year. This year, by far the biggest one is the minimum wage hike, the first of two agreed to last year by Gov. Arnold Schwarzenegger and the state Legislature. The second increase, to $8 an hour, kicks in Jan. 1, 2008.

In keeping with the trend since Schwarzenegger took office, however, there aren't many other laws broadly impacting employers that take effect this week.

"With the governor pledging to veto job-killing bills, we've been able to stop almost all these bills from becoming law," said Vince Sollitto, spokesman for the California Chamber of Commerce.

Two other major laws did get through, though: Assembly Bill 32, a greenhouse gas emissions reduction mandate, and Senate Bill 1613, a ban on cell phone use in most vehicles, including commercial trucks and fleet vehicles. But they won't kick in until mid-2008 at the earliest.

Instead, employers in specific industries are facing targeted new laws this week. Among these is AB 881, a requirement that all roofers--even sole proprietors--carry workers' compensation insurance. "This is really aimed at the underground economy, but it will hit husband-and-wife teams hard, and some of those are our members," said Michael Shaw, assistant state director of the California chapter of the National Federation of Independent Business.

Another law, SB 1759, requires more stringent background checks for certain health care workers, while yet another, AB 409, allows authorities greater latitude to suspend licenses for cosmetologist, barbers and manicurists to protect public health and safety.

Even the ubiquitous car wash industry is in the state's crosshairs with the passage of SB 1468, a one-year extension of a previous law that regulated the hiring and payment of car wash workers. That previous law was set to expire last week.

And probably the most far-reaching of these industry-specific laws for consumers is AB 2987, which opens local cable markets to competition. This law was pushed by AT&T Corp. and Verizon Communications Inc., which have been trying to break local cable monopolies. The law also takes much of the decision-making on cable franchises out of the hands of local governments by allowing any cable operator to seek a single statewide permit.

Business assistance

Some new laws are expected to help employers in certain industries. These include SB 1428, which allows payroll services to administer unemployment tax filings for entertainment companies. Another law, AB 573, reduces liability for design firms in contracts with local governments, making it clear that these firms are not responsible for mistakes made by those not in their employ.

This law is being welcomed by at least one local architectural firm.

"Until now, we've been reluctant to pursue many local government contracts because we're not comfortable with this liability. Now, we'll go after more of these contracts," said Pam Touschner, partner with Santa Monica-based WWCOT and president of the California chapter of the American Institute of Architects.

On the federal level, President George Bush last month signed a major tax break that extends for another year the federal deduction for research and development projects at manufacturing companies. Those deductions had been scheduled to end Jan. 1.

Many of the broader changes taking effect this week are in the area of wage and employment law, with the minimum wage at the forefront.

While employers have faced minimum wage increases before, the one in AB 1835 is the largest dollar increase and nearly the biggest percentage increase since 1988, so its impact is likely to be more widespread than most previous jumps.

"This is going to cost us $4,000 to $5,000 more per month, and that's not including the ripple effect of raising wages for employees making just above the minimum wage," Yosslowitz said. "With past minimum wage hikes, we've cut hours worked; instead of three dishwashers on a shift, maybe we can make do with two. You might see something similar this time around, especially because it's such a large jump."

Other firms are likely to increase prices for their customers, including Tony P's Dockside Grill in Marina del Rey, where owner Tony Palermo said that the law will impact about 50 of his 90 employees, mostly waiters and bus boys receiving tips.

California is one of seven states that do not have a minimum wage exception for tipped employees. In most other states, tipped workers can be paid much lower than the minimum wage because they can make up the difference.

"It's ironic, but our tipped employees typically make $20 an hour or $25 an hour, yet they are the ones who will see the most direct impact from this," Palermo said.

However, he did say that some kitchen workers who are now making slightly more than the current $6.75 minimum wage will see their pay go up. This is known in the industry as the "escalator effect," where a wage increase at the bottom puts pressure on employers to pay workers up the chain more.

Palermo said that he intends to pass as much of the increased cost as he can to customers. "If I increase 50 cents here or 50 cents there on the menu prices, hopefully I can recover the cost," he said. "Everything is going to cost more money for people to go out and eat."

Other laws

The jump in the minimum wage may have the most dramatic impact on employers, but other laws will make life more complex. One such law, SB 1441, adds sexual orientation to the categories of prohibited discrimination for companies that receive state funds.

Another law, AB 2095, limits sexual harassment training to supervisors located in California. It also permits reporting of overtime hours on the same payroll date as the hours are paid.

One new law employers are watching closely is AB 2068, which allows employees to continue to pre-designate physician groups of their own choosing for treatment of on-the-job injuries.

"This could allow some employees to choose medical groups connected to plaintiff attorney firms," said Shaw, of the independent business federation. "And that could drive workers' compensation costs back up again. We'll have to see how this works out in practice."