Local tobacco retailers and smoke lounges are warily eyeing the rollout by Los Angeles City Attorney Mike Feuer of tougher enforcement standards aimed at preventing sales of tobacco products to minors and protecting workers from secondhand smoke.

At the request of the City Council, Feuer last month proposed eliminating warning notices to retailers for the first violation of selling tobacco products to minors. Instead, the city will now move directly to 30-day suspensions of tobacco retail permits for a first violation, escalating quickly to 90- and 120-day suspensions for second and third violations, respectively.

“In a review of cities and counties with strong retailer licensing laws, it was determined that the city of Los Angeles was the only jurisdiction that issued a warning letter upon a first violation,” Feuer’s office said in written responses to questions posed by the Business Journal. “The city’s ordinance has been in effect for over 15 years – retailers have had sufficient time to understand that it is illegal to sell tobacco to children and will no longer be given a warning.”

That has unsettled some tobacco product retailers, who said they already do their best to not sell to minors.

“We’ve always taken enforcement of the tobacco laws very seriously,” said Paul Sobel, owner of Farmers Market Newsstand in L.A.’s Fairfax District. “Now, we will have to reinforce the training for employees, since even the slightest slip-up can prove very costly.”

Feuer’s office has also recommended toughening sanctions for sellers of tobacco products that allow customers to smoke inside the stores. State law generally bans smoking in enclosed places of employment.

Taz Ahmadi, co-owner of the V-Cut Cigar Lounge in Hollywood, said he sees this crackdown forcing some cigar lounge operators to spend money either improving ventilation systems or setting up outside smoking patios.

“It will be some short-term pain,” Ahmadi said. “But in the long run, I think it will improve the image of cigar lounges and make us a less tempting target for future regulations.”

Workers’ Comp Changes

Many large employers and businesses in industries with high injury risks could be in for sticker shock when they see their next workers’ compensation policy renewal. That’s because an obscure state agency has proposed changes to a key portion of the formula insurers use to calculate premiums.

The California Workers’ Compensation Insurance Rating Bureau has proposed changing the “experience modification” rating system to bring it more in line with those of other states. The experience modification, or “x-mod” for short, is a measure of a specific employer’s claim history over the previous three years.

Essentially, it’s a way to factor in whether an employer has had more or fewer workers’ comp claims than average for a given industry. It’s only applied to about 120,000 firms, all of which are either among the state’s largest employers or smaller firms in injury-prone industries, such as roofing.

The x-mod system now mostly measures the dollar amounts of claims against a company rather than the number of claims, meaning a firm with several smaller claims will likely have a lower – less-expensive – x-mod rating than one with one or two very large claims.

The bureau is proposing to flip that, so an employer that gets hit with an occasional large claim (say over $100,000 in total cost) would see their x-mod rating go down, while an employer who gets hit with several smaller claims would see their x-mod rise.

“We want to give more weight to claims frequency,” said Dave Bellusci, the bureau’s executive vice president and chief actuary. “Employers with small claims will do worse; but those hit by one big claim will do better.”

One workers’ compensation insurance broker who has been tracking this proposed change said he expects premiums could rise as much as 30 percent for employers hit with bunches of small claims.

“It’s going to be one of these stealth things,” said Scott Hauge, a Bay Area insurance broker who also heads Small Business California, a coalition of small businesses. “Some employers will see sudden jumps in their premiums and wonder why.”

If approved by the state insurance commissioner, the change is slated to go into effect in 2017.

County Contracts

Last year, the Los Angeles County Small Business Commission recommended that the Board of Supervisors adopt a goal of having 25 percent of all county contracts go to small businesses. The current small-business set-aside rate is less than 2 percent of the $6.6 billion in contracts and purchasing agreements the county dispenses annually.

Last week, the board approved a motion by Supervisor Mark Ridley-Thomas to have county officials study how to implement a 25 percent small-business set-aside for county contracts and purchasing agreements as well as a 3 percent set-aside for disabled veteran-owned businesses.

The proposal is expected to come back to the board for approval later this year.

Staff reporter Howard Fine can be reached at [email protected] or (323) 549-5225, ext. 227.