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Paid Leave Rules And A Higher Minimum Wage Are Popular In Minneapolis - But Are They Legal?

Minnesota doesn't have a law explicitly preventing cities from enacting their own wage and benefit ordinances, but that doesn't mean it's clear that doing so is legal.

Paid Leave Rules And A Higher Minimum Wage Are Popular In Minneapolis - But Are They Legal?
The Minneapolis city clerk’s office will soon begin verifying signatures on a petition to put a $15 minimum wage charter amendment before the city’s voters this November. At the same time, the city is also preparing to implement a mandatory paid sick leave ordinance that the council passed in May.
 
Both would make Minneapolis the first local government in Minnesota to require higher pay and better workplace benefits than those set by the state government, though St. Paul isn’t far behind: its city council set to take up a paid leave ordinance by the end of summer.
 
All are part of a national movement by labor and social activists to push cities to do what state legislatures have been reluctant or unwilling to to — increase pay and benefits for the lowest paid workers.
 
Politically, such moves have been popular on the city level. But with each passage, backers are also faced with a critical question: Are they legal?
 
The power of the cities
Each state has different constitutional provisions and laws defining how authority is delegated to local governments. So far, 13 states have passed state “preemption” laws, aimed expressly at preventing locals from acting on their own on issues such as paid leave and minimum wages.
 
Minnesota is not one of those states. Even so, some in the state’s business community, including the Minnesota Business Partnership, which represents many of the state’s largest employers, have argued that Minnesota cities lack the legal authority to impose such laws and have threatened litigation to stop them from doing so.
 
“On top of this being a bad idea that makes it harder to do business in Minneapolis, the city council likely doesn’t actually have the power to pass this regulation,” Peter J. Nelson, an attorney and researcher for the conservative think tank Center of the American Experiment, wrote of the paid leave ordinance. “A very similar analysis applies to whether Minneapolis can raise the minimum wage to $15, another controversial issue.”
 
But backers of higher minimum wages have been touting their own legal analyses. Karen Marty, a former city attorney in Minnesota and Missouri, and Laura Huizar, a staff attorney for the National Employment Law Project, have co-authored a paper asserting that local governments like Minneapolis and St. Paul do have the authority to act on pay and benefits.
 
Their findings are based on court rulings regarding the state’s 107 “home rule” cities — municipalities that are given wide latitude under state law to govern themselves. “There is a strong case that municipalities like Minneapolis … have that power and that the Minnesota Supreme Court would have a good basis for upholding” a minimum wage charter amendment, Marty and Huizar wrote. “Moreover, the trend nationally has been to recognize that cities have the authority to adopt a local minimum wage unless the state Legislature has stepped in to expressly prohibit such a law.”
 
Two issues
Two related questions are in play when it comes to the ability of cities to pass their own sick leave and minimum wage rules. First, what powers are delegated to local governments by the state? Second, have actions by previous Legislatures created “implied preemption,” which argues that the state has “occupied the field” to such a degree that it has, in fact, preempted local governments from acting on certain issues, even if it doesn’t explicitly say so in state law.
 
In the opinion piece published in the Star Tribune last month, Nelson quotes from two court rulings to show how he thinks a future court would interpret the breadth of local powers. In Town of Lowell v. City of Crookston, the court wrote that “... in matters of municipal concern, home rule cities have all the legislative power possessed by the state, save as such power is expressly or impliedly withheld.”
 
While acknowledging that sounds pretty broad, Nelson points to the phrase “municipal concern” before quoting from another case. “If a matter presents a statewide problem,” the court wrote in Welsh v. Orono, “the implied necessary powers of a municipality to regulate are narrowly construed unless the Legislature has expressly provided otherwise.”
 
The Welsh case involved a city trying to block a homeowner from dredging the lake bottom to build a deck. Similarly, an earlier case involved an ordinance requiring a local boat license in addition to a state license. When another municipal government wanted electrical contractors to have a local license in addition to a state license, the court said no — the state had clearly covered the issue with its laws, and the license duplication would adversely affect contractors.
 
Each time the court found that the local regulations were beyond the authority of local governments because the state already regulated both, that it had occupied the field and that the local ordinances would have unreasonable adverse effects upon the general public of the state.
 
Nelson wrote that he sees parallels with the current efforts. “Paid sick leave is clearly a matter of statewide concern and, therefore, should not be subject to local regulations,” Nelson wrote.
 
In some cases, however, Minnesota courts have approved local regulatory ventures into areas already covered by state law. In one case, Richfield was allowed to impose Sunday liquor laws that were even stricter than the state’s already strict Blue Laws. Other cases allowed stricter local regulation of cigarette sales, disorderly conduct and prostitution. In the prostitution case, the court said Minneapolis should be able to have different penalties than the state because “prostitution is one of the vices which historically has been of peculiar concern to our large cities.”
 
Those rules were adopted under charter provisions designed to “protect the general welfare,” which courts have granted home rule cities broad powers to regulate. And backers of both the paid sick leave ordinance and the $15 minimum wage have asserted that they are benefiting the health and welfare of those who live and work in the city. For example, since it costs more to live in the city, there could be a legal rationale why the city should expand on the state minimum wage.
 
Marty and Huizar point to a case involving Duluth to argue that cities with general welfare clauses in their charters have broad discretion to regulate which “cannot be negated by the court unless it is clearly wrong, that is (a city’s) estimate of the general welfare should be followed unless it is plainly erroneous.”
 
Implied preemption?
The search for the existence of “implied preemption” in state law can be even more elusive. And in at least one case the court seemed to wish it didn’t have to do so. “The Legislature should manifest its preemptive intent in the clearest terms,” the court wrote in State v. Dailey. “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 enactments of future legislatures, we shall be increasingly constrained to hold that statutes and ordinances on the same subject are intended to be coexistent.”
 
To avoid confusion, state lawmakers tried to make their intent clear in 2015 by passing a preemption law regarding local wage and benefit rules. It didn't become law, but House Republicans brought up the bill again last month as a bargaining chip in talks with Democrats and Gov. Mark Dayton over a special legislative session.
 
Lacking a specific preemption, opponents of the local wage and benefit laws are left to argue that Minnesota has implied a preemption by “occupying the field,” that is, passing enough bills on the topics to make it clear that it considers them state-only topics.
 
But the case law is less than conclusive on the issue. In Power v. Nordstrom, the court described how local ordinances “must not be repugnant to, but in harmony with, the laws enacted by the Legislature for the government of the state. It cannot authorize what a statute forbids or forbid what a statute expressly permits but it may supplement a statute.”
 
In a 1966 case, the court reiterated a four-part test for deciding whether a subject area was off limits for local governments. What is the subject matter to be regulated? Has that subject matter been so fully covered by state law as to become solely a matter of state concern? Has the Legislature, in partially regulating the subject matter, indicated that it is a matter solely of state concern? And is the subject matter of such a nature that local regulation would have unreasonably adverse effects upon the general welfare?
 
Under that test, the court found that Richfield could have more strict Sunday Blue Laws than the state’s already restrictive laws because the city’s ordinance complimented state laws and found no unreasonably adverse effect on businesses in town.  
 
The court decision foreshadowed an argument made by opponents of local ordinances on pay and benefits — that such ordinances would present businesses with a patchwork of local and state regulations. “A multiplicity of paid sick leave requirements … would pose an unreasonable burden on businesses across the region,” Nelson wrote, a burden that could make them suspect under the four-part test.
 
And yet, in the Richfield case, the court didn’t find the potential of “spotty regulation” to be that unreasonable. “The varied types of ordinances and, in some places, their absence, in the different communities in the Twin Cities metropolitan area have resulted in very unequal or spotty regulation of Sunday sales in a small trade area,” the court wrote. “The result is that those stores located in areas without any regulation benefit anew as each other suburban community restricts the vendors in its own community.”
 
Wiggle Room
David Larson, a professor at Mitchell Hamline School of Law with expertise in employment and labor law, says that the fact that the lack of a specific prohibition on home rule cities acting on wages and benefits could create an opportunity for a judge. “There’s going to be wiggle room,” he said. “And when there’s wiggle room a judge can side with what’s in the political air.”
 
That may be an important factor given that leave and minimum wage ordinances are getting broad support in larger cities across the country. The minimum wage petition in Minneapolis attracted 20,000 signatures — more than three times what is needed for ballot placement.
 
“The confusion is that when legislation exists that addresses a particular concern but hasn’t expressly preempted the area, then the fallback position is this notion of implicit preemption,” Larson said. “As soon as you talk about implications and interpretations, then you’re turning authority over to the prevailing political position.”
 
Amendment or initiative?
The $15 per hour minimum wage campaign has also attempted to head off another legal question: whether Minneapolis residents can use the charter amendment process to impose the higher wage.
 
In the analysis presented by Marty and Huizar, they argue that the council only has the authority to stop it from going on the ballot if the proposed ordinance violates the state constitution or state law.
 
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But there is a difference between the council acting on an ordinance and residents using the charter amendment process to impose one. In Minneapolis, residents do not have specific power to initiate ordinances, only to change the structure of the government itself. In a 2005 case, for example, the appeals court ruled the city council was correct when it refused to put a medical marijuana charter amendment on the ballot. Such a measure was, as a lower court found, was “an initiative cloaked as a charter amendment” and “an attempt to circumvent Minneapolis’ bar on legislation by initiative.”
 
Marty and Huizar, however, argue that that case law is no longer applicable because the city amended the charter in 2013 to “simplify, clarify, remove inconsistencies and organize the charter in a logical way.” As part of that process, the city added language that said: “this charter’s mention of certain powers does not limit the city’s powers to those mentioned.”
 
Marty and Huizar also point to the 2014 charter amendment that changed how neighborhood restaurants in Minneapolis can sell beer and wine — altering a charter-invoked rule. “If a charter amendment can regulate a highly specific activity like liquor and wine sales through the regulation of local businesses, a charter amendment can surely address an issue like the minimum wage,” they wrote. And during a press briefing, backers of the minimum wage hike were careful to say the amendment was not an ordinance but a framework for a local minimum wage that will need to be fleshed out later by the council.
 
But Barry Clegg, the chair of the Minneapolis Charter Commission, doesn’t agree that the example of the recent charter amendment regarding alcohol at restaurants is an apt one. It was placed on the ballot not by petition, but rather by the charter commission and the city council. And while it may seem odd that a city’s fundamental law document would contain such specificity as how much food neighborhood restaurants should sell, it did — and the only way to change it was via a charter amendment.
 
Clegg, an attorney, said that even though he agrees with the underlying policy of the minimum wage increase, he thinks it is not an appropriate subject for a charter amendment — that it is, in fact, an initiative disguised as a charter amendment. And he doesn’t agree with the assertion by Marty and Huizar that the 2013 changes to the city charter opened the door to the amendment.
 
“Initiative and referendum is legal for charter cities to adopt,” Clegg said. “Minneapolis just has not done so.”
 
Since state law is specific as to how a city can create initiative and referendum processes, that is the sole way for it to happen. Therefore, the backers of $15 minimum wage could first use the petition process to have initiative and referendum powers placed in the charter via an election. Then, if successful, they could come back with a minimum wage initiative, Clegg said.
 
Clegg stressed that he is not speaking for the commission when he says that. The commission’s duty on the matter is simply to transfer the amendment to the city on July 13, a move that will trigger the verification of signatures and possible placement before the council for a vote on whether to put it on the ballot.
 
It is possible that a majority of the Minneapolis council would vote to block the minimum wage amendment, which could lead to another court test. But even if the council sends the matter to voters, a third party could intervene and ask a court to intercept the measure and keep it off the ballot.
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