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GARDERERetail IndustryAlertC L I E N T A L E R Twww.gardere.comCity of Chicago HikesWages of “Big Box”RetailersLARGE RETAILERS AND ON-PREMISE LESSEES FACEMANDATORY COMPLIANCE FOR $10 PER HOURMINIMUM WAGEOn July 25, 2006, the Chicago City Councilpassed a new ordinance requiring "big box"retailers to raise their minimum wages to $10per hour, plus $3 an hour worth of benefits.Smaller retailers remain subject to the stateminimum wage of $6.50 per hour.Under the new ordinance, all retailers occupyingmore than 90,000 square feet andaffiliated with companies grossing morethan $1 billion annually are subject to thisordinance. Additionally, those who leasespace within any retail store that meets therequirement will have to comply even if thecompany leasing space is independentlyowned and operated. Store space can beaggregated (to determine the 90,000 squarefeet) if the stores share a controlling ownershipinterest, warehouse, distribution facility,or management. However, stores linked onlyby common property management are notsubject to the ordinance. Finally, the definitionof large retailer includes companies providingservices on premises, including janitorialand security services. The ordinancedoes not define what is considered a retailestablishment.In passing the ordinance, Chicago's CityCouncil specifically stated that the companiesaffected by the ordinance "can afford toprovide better wages and pay a fair share oftheir employees' health costs while still operatingprofitably."The first wage increase to $9.25 per hour iseffective on July 1, 2007. It subsequentlyincreases 25 cents per hour on July 1, 2008,2009, 2010. On each July 1 thereafter, thewage shall be increased by the increase in thecost of living based on calculations utilizingthe Consumer Price Index 1 . Likewise, benefitrates shall be $1.50 per hour on July 1,2007 and increase in 50-cent incrementsA UGUST 9, 2006Gardere Wynne Sewell LLPA USTIN D ALLAS H OUSTON M EXICO C ITY

Retail IndustryAlerteach July 1 until it reaches $3 an hour onJuly 1, 2010. It likewise will increase eachJuly 1 by the increase in the cost of living.The ordinance also mandates that thesebenefits be given to all employees workingat least 30 hours per week.Although Chicago Mayor Richard M.Daley opposed the ordinance, he has notindicated whether he will veto the law.The Illinois Retail Merchants Associationpromises to challenge the new ordinancein court. Currently, it is believed the newordinance affects 35 stores in Chicago.This does not include the impact onthose who provide services inside the bigbox retailers. For now, companies thatprovide services and are located withinbig box stores in the City of Chicagoshould determine whether they are subjectto the new ordinance and begin planningfor implementation and compliance.Conclusion Despite the controversy, the Chicagoordinance passed by a vote of 35-14. It is likely that large citiesthroughout the United States may follow suit, raising wages forretail employees or, at the very least, keep an eye on the impact ofretail expansion in the City of Chicago as they decide whether toimplement similar laws.Interestingly, the Chicago ordinance was passed just 10 days beforethe U.S. Senate blocked a vote on August 3 on a bill that wouldhave raised the national minimum wage. An increase in the minimumwage will continue to be an important economic issue forall businesses, including the retail sector, to monitor at the federal,state and local levels.Gardere's Retail Industry Team will keep you up to date on thesematters.1The cost of living increase will be measured by the percentage increase as of September of the immediately precedingyear over the level as of the September of the previous year of the Consumer Price Index for All Items,Urban Wage Earner and Clerical Workers, Chicago Consolidated Metropolitan Statistical Area or successorindex.For more information about how this ordinance may affect large retailerscontact Carrie Hoffman at 214.999.4262 or choffman@gardere.com.This newsletter is not intended to give legal advice. Because the application ofany law or regulation depends entirely on the particular circumstances of thecase, please consult with a knowledgeable attorney before relying or acting onany information provided in this newsletter.Contents © 2006 Gardere Wynne Sewell LLP