The Court of Appeals of Minnesota, the state’s intermediate appellate court, has upheld a minimum wage ordinance enacted by the City of Minneapolis in 2017, providing for a higher minimum wage than that provided by state law. Graco, Inc. v. City of Minneapolis, 2019 Minn. App. LEXIS 84 (Minn. Ct. App. Mar. 4, 2019).

Following its review of a socioeconomic study it commissioned in 2016 and a period of public comment, listening sessions and a survey, in June 2017 the Minneapolis City Council enacted that Municipal Minimum Wage Ordinance, providing for higher minimum wage rates for hours worked by employees within the City’s geographic boundaries. Currently under the Ordinance, the minimum wage for “large” employers (those with more than 100 employees) is $11.25 per hour, while the minimum wage for “small” employers (those with 100 or fewer employees) is $10.25 per hour. By contrast, the Minnesota Fair Labor Standards Act (MFLSA) establishes statewide minimum wage rates based on an employer’s annual gross volume of business. Currently under that Act, the minimum wage for large employers (those with an annual gross volume of sales or business of $500,000 or more) is $9.86 per hour, while the minimum wage for small employers (less than $500,000 in business) is $8.04.

In November 2017, Graco and others sued the City, asserting that the Ordinance is preempted by state law and should be enjoined. The district court denied the injunction and ultimately ruled that the Ordinance neither conflicts with, nor is preempted by, the MFLSA. The plaintiffs appealed and the Court of Appeals affirmed the lower court’s decision.

First, the Court of Appeals concluded that the MFLSA merely prohibits employers from paying less than the minimum wage established by the statute, rather than permitting them to pay the state minimum wage. The Court of Appeals added that the Minnesota legislature explicitly recognized the possibility of a local minimum wage in a 2015 statute defining “non-competitive work” and that to the extent the MFLSA was ambiguous as to whether it provided a minimum wage floor or ceiling, “well-established rules of statutory construction” required it to read that Act in alignment with other related statutes. In short, the Minneapolis Ordinance could not be voided based on an express preemption by state law.

The Court of Appeals then addressed the plaintiffs’ contention that the MFLSA impliedly preempted the Ordinance by entirely occupying the field of minimum wage regulation in Minnesota. Likewise rejecting this argument, the Court concluded that the “MFLSA does not expressly prohibit a municipality from setting higher minimum wages, and it does not give the [state] commissioner exclusive authority to safeguard the state minimum-wage rates; it merely permits the commissioner to do so.” Thus, despite the fact that the legislature had amended the MFLSA formula nine times since its enactment in 1973, and has set forth the procedures for establishing any future rate increases, the Court of Appeals was “not persuaded that this constitutes the all-encompassing regulations that Minnesota appellate courts have found to preempt local regulations.” Further rejecting the additional factors to be considered when analyzing a statute for implied preemption, the Court ultimately found that the Minneapolis ordinance does not conflict with, and is not preempted by, the MFLSA.

Therefore, the Minneapolis Ordinance and its higher minimum wage rates remain in effect, unless and until the Supreme Court of Minnesota concludes otherwise. To that end, we will continue to follow any further developments with respect to the Ordinance. If you have any question about this development or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.