Graco, Inc. v. City of Minneapolis
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Graco, Inc. v. City of Minneapolis
Opinion of the Court
This appeal concerns a City of Minneapolis ordinance regulating the minimum wage employers must pay their employees for time worked within the geographic boundaries of the city. Appellant Graco, Inc. sued respondent City of Minneapolis, seeking a declaratory judgment that the ordinance is preempted by state law and a permanent injunction against enforcement of the ordinance. After a court trial, the district court concluded that the ordinance is not preempted by state law, declared the ordinance valid and enforceable, and denied a permanent injunction.
We agree that the city's minimum-wage ordinance is not preempted by state law. Therefore, we affirm.
FACTS
MFLSA establishes the minimum-wage rates employers are required to pay their employees throughout the state of Minnesota.
The purpose of the Minnesota Fair Labor Standards Act is (1) to establish minimum wage and overtime compensation standards that maintain workers' health, efficiency, and general well-being; (2) to safeguard existing minimum wage and overtime compensation standards *266that maintain workers' health, efficiency, and general well-being against the unfair competition of wage and hour standards that do not; and (3) to sustain purchasing power and increase employment opportunities.
In February 2016, the Minneapolis City Council engaged the University of Minnesota's Roy Wilkins Center for Human Relations and Social Justice (RWC) to analyze the impact of a local minimum-wage increase. In October 2016, RWC completed its study and reported its findings to the city council. As a result of this report, the city council approved a community-engagement plan to gather community feedback through listening sessions, survey responses, and email comments. On June 30, 2017, the city enacted the Municipal Minimum Wage Ordinance (the Ordinance). The Ordinance currently requires "large businesses" to pay their employees at least $ 11.25 per hour and "small businesses" to pay their employees at least $ 10.25 per hour. Minneapolis, Minn. Code of Ordinances (MCO) § 40.390(a)(b)(2), (c)(1).
On November 10, 2017, Graco and others sued the city, seeking a declaratory judgment that the Ordinance is preempted by state law, and also seeking temporary and permanent injunctions to prohibit enforcement of the Ordinance. The district court denied the motion for a temporary injunction, finding that plaintiffs were unlikely to prevail on the merits and that the public and city would suffer greater harm than plaintiffs if the injunctions were *267granted. After a court trial, the district court denied Graco's claim for a declaratory judgment and Graco's motion to permanently enjoin enforcement of the Ordinance. The district court determined that the Ordinance does not conflict with, and is not impliedly preempted by, MFLSA. On April 5, 2018, the district court entered judgment on its second amended order. Graco appealed to this court and petitioned the supreme court for accelerated review, which the supreme court denied.
ISSUES
I. Does the Minneapolis Municipal Minimum Wage Ordinance impermissibly conflict with the Minnesota Fair Labor Standards Act?
II. Does the Minnesota Fair Labor Standards Act impliedly preempt the Minneapolis Municipal Minimum Wage Ordinance?
ANALYSIS
The City of Minneapolis is a home-rule-charter city. As such, the city has, in municipal matters, "all the legislative power possessed by the legislature of the state, save as such power is expressly or impliedly withheld." Bolen v. Glass ,
When evaluating whether state law preempts a municipal ordinance, we consider whether: (1) "the legislature expressly declared that state law shall prevail over" the ordinance (express preemption), (2) the ordinance "conflicts with state law" (conflict preemption), and (3) "the [l]egislature has comprehensively addressed the subject matter such that state law now occupies the field" (implied preemption). Bicking v. City of Minneapolis ,
I. Conflict Preemption
Graco argues that the Ordinance conflicts with MFLSA because the Ordinance forbids what MFLSA expressly permits and adds requirements absent from MFLSA. Graco's conflict-preemption claim rests squarely on the premise that MFLSA sets both a floor and a ceiling, thereby prohibiting municipalities from establishing a wage rate in excess of the state minimum wage. We are not persuaded.
In Mangold Midwest Co. v. Village of Richfield , the supreme court considered whether a municipal ordinance that prohibited businesses, except those with four or fewer employees, from selling groceries on Sunday impermissibly conflicted with a state law prohibiting the sale of groceries on Sunday.
Because the state law in Mangold prohibited particular acts, the supreme court focused on the second principle: whether the municipal ordinance permitted conduct prohibited under state law. See id. at 817-19. The court rejected the argument that the ordinance permitted what state law prohibited, concluding that the ordinance did not "specifically authorize" any grocery sales on Sunday. Id. at 818-19. Rather, the court deemed the ordinance a "complementary regulation which simply fails to make sales of groceries by certain establishments an additional offense under the ordinance." Id. at 819. Ultimately, the Mangold court concluded that the statute and ordinance were not irreconcilable because "the ordinance does not permit, authorize, or encourage violation of the statute." Id. at 819.
To apply the Mangold principles, we must first determine whether MFLSA prohibits or permits particular acts. Graco contends that MFLSA "expressly authorizes employers to pay the minimum wage rates set forth in the [statute]." We disagree. MFLSA provides that employers "must pay each employee at least " the minimum wage.
Because MFLSA prohibits certain conduct, the second Mangold conflict-preemption principle is relevant to our analysis. Our inquiry under the second principle is easily resolved because it is undisputed that the Ordinance does not permit employers to pay lower wage rates than required by MFLSA. Thus, the Ordinance does not permit what MFLSA forbids, and is not in conflict in that respect.
Graco and the dissent focus on the third Mangold principle, contending that MFLSA expressly authorizes an employer to pay the minimum wage designated by statute, and the Ordinance forbids this by requiring that employers pay a higher minimum wage. As explained above, we disagree with Graco's characterization of MFLSA. MFLSA mandates that employers "must pay each employee wages at a rate of at least" the rate set by state law.
*269expressly requires employers to pay at least the minimum-wage rates set forth in its provisions.
In 2015, the Minnesota Legislature explicitly acknowledged the potential for a local minimum-wage law. The legislature defined "noncompetitive employment" as "paid work: (1) that is performed on a full-time or part-time basis, including self-employment, for which the person is compensated at a rate that is less than the higher rate specified in [federal law] or the rate specified in the applicable state or local minimum wage law ." 2015 1st Spec. Sess. Minn. Laws ch. 1, art. 2, § 16, at 1646 (emphasis added) (codified at Minn. Stat. § 268A.01, subd. 15 (2018) ). If MFLSA prohibited more stringent local minimum-wage laws, it could not be reconciled with this statute. To the extent MFLSA is ambiguous with respect to whether it provides a floor or a ceiling, well-established rules of statutory construction require us to read it in pari materia with related statutes. See State v. Thonesavanh ,
At best, an argument can be made that MFLSA impliedly permits employers to pay employees the legislatively set minimum wage. But the third Mangold conflict-preemption principle requires conduct that is expressly permitted by statute. Implied statutory permission is insufficient to invalidate the Ordinance under conflict preemption. See Bicking ,
Graco also argues that the Ordinance conflicts with MFLSA on the ground that the Ordinance places additional requirements on employers not present in MFLSA. It is not clear whether this argument is materially different from Graco's argument that the Ordinance prohibits what MFLSA permits. Graco cites Bicking for the proposition that an ordinance necessarily conflicts with state law if the ordinance "adds a requirement that is absent from the statute."
Finally, and perhaps most significantly, under the first Mangold principle, a conflict exists only if the Ordinance and MFLSA are irreconcilable. See id. at 816. Two laws are not irreconcilable if "the ordinance does not permit, authorize, or encourage violation of the statute." Id. at 819. As enacted, the Ordinance does not permit, authorize, or encourage violation of the statute because an employer that complies with the Ordinance necessarily complies with MFLSA. As its statement of purpose indicates, MFLSA sets a floor for minimum-wage rates, not a ceiling. See
Graco argues that Minnesota appellate courts have found conflict where state law set a floor but not a ceiling, citing Bd. of Supervisors v. ValAdCo ,
In Northwest Residence , a corporation applied to the City of Brooklyn Center for a special-use permit to convert a fourplex into a residential facility for mentally ill adults.
In Mangold , the supreme court explained that an ordinance "must not be repugnant to" and must be "in harmony with" state statutes.
II. Implied Preemption
Graco next argues that MFLSA impliedly preempts the Ordinance by occupying the field of minimum-wage regulation. Implied preemption "occurs when the Legislature has comprehensively addressed the subject matter such that state law now occupies the field." Jennissen ,
(1) What is the "subject matter" which is to be regulated? (2) Has the subject matter been so fully covered by state law as to have become solely a matter of state concern? (3) Has the legislature in partially regulating the subject matter indicated that it is a matter solely of state concern? (4) Is the subject matter itself of such a nature that local regulation would have unreasonably adverse effects upon the general populace of the state?
We agree with the parties that the subject matter to be regulated is minimum wages for workers. With respect to the second Mangold factor, Graco argues that the subject matter of minimum wages is so fully covered by MFLSA that it has become solely a matter of state concern. Specifically, Graco contends that the legislature's "extensive regulation of the minimum wage" demonstrates that MFLSA completely occupies the field.
Understanding what is and is not in MFLSA is critical when considering this factor, and to the preemption analysis as a whole. See Jennissen ,
In 2014, the legislature established a formula tied to inflation for future minimum-wage rate increases, but permitted the commissioner of labor and industry to *272restrict scheduled minimum-wage increases if economic indicators showed "the potential for a substantial downturn in the state's economy." 2014 Minn. Laws ch. 166, § 2, at 231-32. Furthermore, MFLSA permits the commissioner to "adopt rules, including definitions of terms, to carry out the purposes of sections 177.21 to 177.44, to prevent the circumvention or evasion of those sections, and to safeguard the minimum wage and overtime rates established by sections 177.24 and 177.25."
Graco contends that the legislature's history of regulating the subject of minimum-wage rates demonstrates that it is solely a matter of state concern. In support, Graco relies on this court's statement in a recent decision that, generally, "the legislature's extensive regulation of a subject is evidence that the matter has become one solely of state concern." Jennissen v. City of Bloomington ,
As in its conflict-preemption argument, Graco cites ValAdCo and Northwest Residence in support of its implied-preemption argument. But these cases are once again distinguishable from the matter at hand. In ValAdCo , this court emphasized the comprehensive, detailed, and project-specific nature of the Minnesota Pollution Control Act's permitting scheme and the disruption that would ensue if individual townships were free to establish their own standards.
In Northwest Residence , state law granted "exclusive" authority to the commissioner of public health to set license standards.
Although the legislature has indeed amended the state minimum-wage formulas nine times and set forth procedures by which to calculate future rates, we are not persuaded that this constitutes the type of all-encompassing regulations that Minnesota appellate courts have found to preempt local regulations. See Nordmarken ,
The third Mangold factor contemplates the intent of the legislature. In its order, the district court analyzed two pieces of legislation, both of which indicate that the legislature did not intend MFLSA to impliedly preempt municipal regulation of minimum wages. First, the district court discussed a 2017 special session bill that would have expressly prohibited any "ordinance, local resolution, or local policy requiring an employer to pay an employee a wage higher than the applicable state minimum wage rate." S.F. 3, 2017 1st Spec. Sess., art. 22, § 1, subd. 2(a). The bill was vetoed by the governor. The district court reasoned that the legislature's failed attempt to expressly preempt municipal regulation of minimum-wage rates indicates that MFLSA does not evince an intent to preclude local regulation. Second, the district court analyzed Minn. Stat. § 268A.01, subd. 15(1), which, as discussed above, specifically refers to "local minimum wage law." The district court reasoned that the legislature's recognition that municipalities may enact their own minimum-wage requirements, albeit in a different statute, indicates that the legislature did not intend its partial regulation of minimum wages to prevent a municipality from enacting its own minimum-wage regulations.
Graco argues that the failed 2017 bill and Minn. Stat. § 268A.01, subd. 15, are irrelevant to the implied-preemption analysis. It is unclear how much weight should be given to a failed express-preemption bill and a separate statute mentioning a "local minimum wage law" when determining whether MFLSA occupies the field of minimum-wage regulation. Although these two pieces of legislation may not have a strong bearing on our analysis in this case, they provide at least some insight into the legislature's intent.
In any event, the question before us is whether the legislature, in adopting provisions relating to minimum-wage rates, has evinced an intent to fully occupy the field. In grappling with a similar question, the supreme court stated:
We are averse ... to hold that the legislature contemplates its own regulation to exclude municipal regulation, without most clear manifestation of such intent. It is imperative, if we are to give faithful effect to legislative intent, that the legislature should manifest its preemptive intent in the clearest terms. We can be spared the sometimes elusive search for such intent if it is declared by express terms in the statute. And where that is not done in the enactments of future legislatures, we shall be increasingly constrained to hold that statutes and ordinances on the same subject are intended to be coexistent.
State v. Dailey ,
Under the fourth Mangold implied-preemption factor, the question is whether minimum-wage regulation is of such a nature that local regulation will have "unreasonably adverse effects upon the general populace of the state."
Graco ignores significant record evidence of the beneficial effects of the Ordinance for those who work in the city and their families. The record includes studies, data, and public input as well as a review of minimum-wage ordinances in other jurisdictions undertaken prior to enactment of the Ordinance. Input from Minneapolis workers regarding their difficulties supporting themselves and their families, especially with the high cost of living in Minneapolis, together with RWC modeling on the effect of minimum-wage laws on income and food security, support the district court's determination that the Ordinance will not have an unreasonably adverse effect on the general populace.
Graco argues that local regulation of minimum-wage rates will result in a "patchwork" of regulation that will be detrimental to the state as a whole. But the supreme court has not found the existence of "a checkerboard of conflicting regulations" to be dispositive. See G.E.M. of St. Louis, Inc. v. City of Bloomington ,
Applying the Mangold factors for implied preemption, we conclude that the legislature did not intend to solely control the field of minimum-wage regulation, and the factors weigh against preemption. Thus, the district court correctly concluded that MFLSA does not impliedly preempt the Ordinance.
DECISION
The Ordinance does not conflict with MFLSA, and MFLSA does not impliedly preempt the Ordinance. Thus, the Ordinance is a valid exercise of the City of Minneapolis's legislative power, and the district court did not err in declaring the Ordinance valid and enforceable.
Dissenting, Johnson, Judge
A "large employer" is defined as "an enterprise whose annual gross volume of sales made or business done is not less than $ 500,000," exclusive of excise taxes and subject to MFLSA.
Unlike MFLSA, the Ordinance differentiates between large and small employers based not on total revenue, but on number of employees. A "large business" is defined as "all employers that employ more than one hundred (100) employees," and a "small business" is defined as "all employers that employ one hundred (100) or fewer employees." MCO § 40.330.
We reiterate that no party argues that express preemption applies, i.e., that the statute expressly bars local governments from establishing a local minimum wage.
Dissenting Opinion
Under well-established caselaw, a municipal ordinance conflicts with, and thus is preempted by, a state statute if "the ordinance forbids what the statute expressly permits." Mangold Midwest Co. v. Village of Richfield ,
A.
In Minnesota, there are three doctrines by which it may be determined that a state statute preempts a municipal ordinance: (1) express preemption, which applies if "the legislature expressly declared that state law shall prevail" over municipal ordinances, (2) conflict preemption, which applies if a municipal ordinance "conflicts with state law," and (3) field preemption, which applies if "the Legislature has comprehensively addressed the subject matter such that state law now occupies the field." Bicking v. City of Minneapolis ,
Under the second doctrine, conflict preemption, a municipal ordinance is in conflict with a state statute in three circumstances: "A conflict exists between state law and a municipal regulation [1] when the law and the regulation 'contain express or implied terms that are irreconcilable with each other,' [2] when 'the ordinance permits what the statute forbids,' or [3] when 'the ordinance forbids what the statute expressly permits.' "
(a) As a general rule, conflicts which would render an ordinance invalid exist only when both the ordinance and the statute contain express or implied terms that are irreconcilable with each other.
(b) More specifically, it has been said that conflict exists where the ordinance permits what the statute forbids. Power v. Nordstrom ,150 Minn. 228 ,184 N.W. 967 ,18 A.L.R. 733 .
(c) Conversely, a conflict exists where the ordinance forbids what the statute expressly permits. Power v. Nordstrom , supra . A part of the holding of that case was that an ordinance requiring the closing of movie theatres on Sunday was not inconsistent with the state Sunday closing statute since the latter, while not specifically forbidding theatres to open, did not expressly permit them to either.
The third part of the three-part conflict-preemption test, which is based on the third Mangold principle, is satisfied in this case. The analysis is simple and straightforward. The City's minimum-wage ordinance provides, "Large businesses shall pay a wage of no less than the hourly rates set forth herein," and "[o]n July 1, 2018, the hourly wage shall be eleven dollars and twenty-five cents ($ 11.25)." Minneapolis, Minn., Code of Ordinances (MCO) § 40.390(b)(2) (2018). By requiring a large business to pay an hourly wage of no less than $ 11.25, the City's ordinance forbids a large business from paying an hourly wage of $ 11.24 or less. Meanwhile, the state statute provides that "every large employer must pay each employee wages at a rate of at least ... the rate established under paragraph (f)," which presently is $ 9.86.
It appears that only one other state court has addressed the precise issue that is presented in this appeal, and that court concluded that a local minimum-wage ordinance conflicted with a state minimum-wage statute. In Kentucky Restaurant Ass'n v. Louisville & Jefferson County Metro Gov't ,
B.
The majority opinion applies the third part of the three-part conflict-preemption test in a manner that is inconsistent with the applicable supreme court caselaw.
As an initial matter, it is important to emphasize that the three-part conflict-preemption test is stated in the disjunctive because the three parts are separated by the word "or." See Bicking ,
To the extent that the majority opinion focuses on the third part of the three-part test, it reasons that Graco cannot prevail because the state minimum-wage statute "is a prohibitive statute rather than a permissive one." Supra at 268. The majority opinion elaborates by stating that the state statute "does not permit an employer to pay the minimum wage, but rather prohibits an employer from paying less than the minimum wage." Supra at 268. This reasoning is unpersuasive because there is no practical difference between a statement that an employer may pay a wage of at least the minimum wage, a statement that an employer must pay a wage of at least the minimum wage, and a statement that an employer must not pay a wage below the minimum wage. There are various ways of using language to express state law, and the third part of the three-part conflict-preemption test does not require that any particular type of language or any "magic words" be used in the expression of what state law permits.
Indeed, the majority's reasoning is inconsistent with the applicable supreme court caselaw, which focuses on the practical effect of a state statute, without regard for the nature of the language used in the statute. For example, in Lewis ex rel. Quinn v. Ford Motor Co. ,
The majority opinion makes a partial concession by stating, "At best, an argument can be made that MFLSA impliedly permits employers to pay employees the legislatively set minimum wage." Supra at 269 (emphasis added). A supreme court opinion illustrates that the state minimum-wage statute does more than impliedly permit wages that are lower than the City's minimum wages. In Power v. Nordstrom ,
There can be no conflict between a statute and an ordinance where there is no statute covering the subject-matter of the ordinance. Such is the case here. The statute is silent upon the subject of the exhibition of motion pictures on Sundays. It does not prohibit their exhibition. Neither does it expressly permit it as it does the playing of baseball on Sunday between certain hours. By refraining from legislating on the subject and by authorizing villages not only to regulate the business, but to refuse to grant licenses and so prevent such exhibitions, the Legislature has treated the whole matter as one properly within the domain of the police power of villages.
Even if the majority were correct that permissive language is required, the City's ordinance still would be in conflict with the state statute to the extent that the two laws provide different minimum wages for new employees who are younger than 20 years old. The state statute provides that, "during the first 90 consecutive days of employment, an employer may pay an employee under the age of 20 years a wage" that is lower than the generally applicable minimum wage.
The majority opinion also affirms the district court because the state statute does not "expressly free an employer from local minimum-wage regulation." Supra at 269. This reasoning echoes the district court's statement that "no conflict exists where local regulations impose additional restrictions above the state restrictions, as long as the State has not indicated that local governments should not regulate in that area ." (Emphasis added.) Both of these statements are erroneous because the conflict-preemption test is not concerned with whether the state has expressly *279stated that a municipal ordinance is preempted. That is the central concept of the doctrine of express preemption, which operates if " 'the legislature has expressly declared that state law shall prevail over municipal regulation.' " Jennissen v. City of Bloomington ,
The majority opinion also reasons that the City's minimum-wage ordinance is not in conflict with the state minimum-wage statute because a different state statute alludes to the possibility of a municipal minimum-wage ordinance. Supra at 269. The other state statute is a definitional statute that defines the term "noncompetitive employment," as that term is used in section 268A.07, which governs federally subsidized vocational-rehabilitation programs for disabled persons by referring to the wage rate "specified in the applicable state or local minimum wage law." See Minn. Stat. § 268A.01, subd. 15. The other state statute apparently is intended to conform to federal law, which defines the term "competitive integrated employment" using similar language. See
C.
The district court also erred to the extent that it expressed an additional reason for upholding the City's ordinance, a reason that has not been adopted by the majority opinion. The district court stated that there is no conflict in this case because "the ordinance is merely additional and complementary to or in aid and furtherance of the statute." In support of this reasoning, the district court cited Mangold 's fourth principle, not the third principle, which is the legal basis of Graco's primary argument. See Mangold ,
D.
In light of the fact that Minnesota's minimum wages are higher than the federal minimum wage of $ 7.25, see
The primary reason is that a federal statute expressly allows states to set minimum wages that are higher than the federal *280minimum wage. See
A secondary reason is that the relationship between the federal government and the states is fundamentally different from the relationship between a state and the municipalities within the state. "A municipality is merely a department of the state, a political subdivision created as a convenient agency for the exercise of such governmental powers as may be entrusted to it." Monaghan v. Armatage ,
In sum, I would conclude that the City's minimum-wage ordinance is in conflict with the state minimum-wage statute and, thus, is preempted by it. For that reason, I would reverse the judgment of the district court.
The same analysis leads to the same result with respect to small businesses and small employers. The City's minimum-wage ordinance provides that small businesses shall pay a wage of no less than $ 10.25, thereby forbidding a small business from paying an hourly wage of $ 10.24 or less. MCO § 40.390(c)(1). The state minimum-wage statute provides that "every small employer must pay each employee at a rate of at least ... the rate established under paragraph (f)," which presently is $ 8.04, thereby expressly permitting a small employer to pay an hourly wage of $ 8.04 or more.
Conflicts also may arise from the fact that the two laws draw different distinctions between large and small businesses and large and small employers. For example, the City's ordinance defines "large business" to mean an employer with more than 100 employees, MCO § 40.330, while the state statute defines "large employer" to mean "an enterprise" with annual gross sales of $ 500,000 or more,
The applicable state statute provided, "It is a defense to a complaint or action brought under this chapter that the person bringing the complaint or action suffers from a disability which in the circumstances poses a serious threat to the health or safety of the disabled person or others."
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