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Graco, Inc. v. City of Minneapolis

Court of Appeals of Minnesota

March 4, 2019

Graco, Inc., Appellant,
v.
City of Minneapolis, Respondent.

          Hennepin County District Court File No. 27-CV-17-17198

          Christopher K. Larus, George B. Ashenmacher, Robins Kaplan LLP, Minneapolis, Minnesota (for appellant)

          Susan L. Segal, Minneapolis City Attorney, Sara J. Lathrop, Sarah C.S. McLaren, Assistant City Attorneys, Minneapolis, Minnesota (for respondent)

          Susan L. Naughton, League of Minnesota Cities, St. Paul, Minnesota (for amicus curiae League of Minnesota Cities)

          Bruce D. Nestor, De León & Nestor, LLC, Minneapolis, Minnesota; and Laura Huizar (pro hac vice), Washington, District of Columbia (for amici curiae Centro de Trabajadores Unidos en la Lucha, 15 Now Minnesota, and National Employment Law Project)

          Considered and decided by Worke, Presiding Judge; Johnson, Judge; and Bjorkman, Judge.

         SYLLABUS

         A municipal ordinance does not conflict with, and is not impliedly preempted by, the Minnesota Fair Labor Standards Act (MFLSA), Minn. Stat. §§ 177.21-.35 (2018), merely by setting a higher minimum wage than that required by state law.

          OPINION

          WORKE, JUDGE

         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. Minn. Stat. § 177.24. It includes the following statement of purpose:

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 that 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.

         Minn. Stat. § 177.22. Since its enactment in 1973, the minimum-wage rate for employees has been amended nine times, with each amendment increasing the minimum wage in some way. See 2014 Minn. Laws ch. 166, § 2, at 231-32; 2005 Minn. Laws ch. 44, § 1, at 322-23; 1997 2nd Spec. Sess. Minn. Laws ch. 1, § 1, at 5-6; 1990 Minn. Laws ch. 418, § 2, at 827-28; 1987 Minn. Laws ch. 324, § 1, at 1922; 1984 Minn. Laws ch. 628, art. 4, § 1, at 1666; 1979 Minn. Laws ch. 281, § 2, at 618; 1977 Minn. Laws ch. 183, § 1, at 301; 1976 Minn. Laws ch. 165, § 1, at 495. In its current version, MFLSA provides formulas for calculating rates for small and large employers and requires employers to pay wages at least those rates. Minn. Stat. § 177.24, subd. 1(a)-(b).[1] MFLSA currently requires large employers to pay their employees at least $9.50 per hour plus a percentage based on inflation, while small employers are required to pay their employees at least $7.75 per hour plus a percentage based on inflation. Id., subd. 1(b)(1)-(2), (f). As of January 1, 2019, the statutory formulas result in a minimum wage of $9.86 per hour for large employers and $8.04 per hour for small employers. See Minn. Dep't of Labor & Indus., Minnesota's Minimum Wage Laws (2019), https://www.dli.mn.gov/sites/default/files/pdf/minimum_wage.pdf.

         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).[2] The Ordinance applies to time worked within the geographic boundaries of Minneapolis. MCO § 40.370.

         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 granted. 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, 755 N.W.2d 1, 4-5 (Minn. 2008) (quotation omitted). Despite this broad power to legislate in regard to municipal affairs, "state law may limit the power of a city to act in a particular area." City of Morris v. Sax Invs., Inc., 749 N.W.2d 1, 6 (Minn. 2008). "Cities have no power to regulate in a manner that conflicts with state law or invades subjects that have been preempted by state law." Jennissen v. City of Bloomington, 913 N.W.2d 456, 459 (Minn. 2018).

         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, 891 N.W.2d 304, 313 n.8 (Minn. 2017). The parties agree that express preemption is inapplicable in this case. Graco contends that the Ordinance impermissibly conflicts with MFLSA and that MFLSA impliedly preempts the Ordinance. Whether state law preempts a municipal ordinance is a question of law, which we review de novo. Id. at 312.

         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. 143 N.W.2d 813, 818 (Minn. 1966). The supreme court identified four "general principles" that guide conflict-preemption analysis. Id. at 816-17. First, "[a]s 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." Id. at 816. Second, "it has been said that conflict exists where the ordinance permits what the statute forbids." Id. Third, "a conflict exists where the ordinance forbids what the statute expressly permits." Id. at 816. And finally, "[i]t is generally said that no conflict exists where the ordinance, though different, is merely additional and complementary to or in aid and furtherance of the statute." Id. at 817.

         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. Minn. Stat. § 177.24, subd. 1(b) (emphasis added). Thus, MFLSA is a prohibitive statute rather than a permissive one; it prohibits an employer from paying less than the legislatively set minimum wage. Nothing in MFLSA "specifically authorizes" an employer to pay no more than the statutory minimum wage. See Mangold, 143 N.W.2d at 818-19 (noting ordinance that failed to prohibit small businesses from selling groceries on Sunday contained no "specific authorization" of Sunday sales). The stated purposes of MFLSA, including "to establish minimum wage and overtime compensation standards that maintain workers' health, efficiency, and general well-being," Minn. Stat. § 177.22, demonstrate that the statute does not permit an employer to pay the minimum wage, but rather prohibits an employer from paying less than 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, ...


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