August 22, 2017 -- Client Alert
Riverside to Become its Own Index
In 2018, the Department of Labor (“DOL”) will introduce a revised geographic area sample for the Consumer Price Index (“CPI”). Among the changes, Riverside, CA, will become its own index. Thus, the current Los Angeles-Riverside-Orange County statistical area will split into two separate statistical areas: the Los Angeles-Long Beach-Anaheim area and the new Riverside-San Bernardino-Ontario area. Any employers negotiating agreements with CPI increases or having existing agreements that carry into 2018 and beyond should note this change and plan for the geographic area sample changes starting on January 1, 2018.
The CPI and Geographic Areas
The CPI is a measure for the average costs of consumer goods and services and is used to identify changes in the cost of living. The CPI geographic area sample is an index of CPI data for specific geographic areas. The geographic areas, called Core-Based Statistical Areas (“CBSAs”), are designated for survey based upon economic and social integration to an urban core. Economic surveys subsequently generate unique CPI data for each CBSA listed in the geographic area sample. The CPI geographic area sample was historically updated every ten years, following the most recent decennial census. The current CPI geographic area sample, however, has not been updated since 1998.
Impact on Employers
The changes to the CPI geographic area sample may impact labor agreements that use CPI for cost of living increases. Many labor agreements contain escalation clauses that provide for wage increases related to increases in the CPI. The separation of Riverside from the current Los Angeles-Riverside-Orange County geographic area will result in different CPI data for the greater Los Angeles and Riverside regions. Thus, employers negotiating agreements with CPI increases or having old language in existing contracts should anticipate the impact of these changes in 2018 and moving forward.
For further information, please contact Colin J. Tanner or Pam K. Lee from Aleshire & Wynder, LLP’s Labor and Employment Practice Group at (949) 223-1170.
Disclaimer: Aleshire & Wynder, LLP legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Please seek legal advice before acting or relying upon any information in this communication.