The Minnesota Supreme Court, the state’s highest 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, 2020 Minn. App. LEXIS 12 (Minn. Jan. 20, 2020).

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. As of January 1, 2020, the minimum wage for “large” employers under the Ordinance (those with more than 100 employees) is $12.25 per hour, while the minimum wage for “small” employers (those with 100 or fewer employees) is $11.00 per hour. By contrast, under the Minnesota Fair Labor Standards Act (MFLSA), the current minimum wage for large employers (those with an annual gross volume of sales or business of $500,000 or more) is $10.00 per hour, while the minimum wage for small employers (less than $500,000 in business) is $8.15.

In November 2017, Graco and others sued the City, asserting that the Ordinance is preempted by state law and should be enjoined. The state 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 Minnesota Court of Appeals affirmed the lower court’s decision. A detailed discussion of the appellate court decision may be found here: Minnesota Appeals Court Upholds Minneapolis Minimum Wage Ordinance.

The plaintiffs then appealed to the Minnesota Supreme Court, which likewise upheld the Minneapolis Minimum Wage Ordinance. First, because the specific language of the MFLSA requires only that employers pay “at least” the minimum wage established by the state statute, the statute clearly contemplates that a higher hourly rate is permissible, noted the Supreme Court. Thus, as the Ordinance mandates such a higher minimum, added the Court, it “does not forbid what the MFLSA permits but instead complements the statute” and therefore is not expressly preempted by the statute. As the Court concluded:

[T]he statute prohibits employers from paying wages less than the statutory minimum-wage rate; it does not set a cap on the hourly rate that employers can pay. If employers comply with the ordinance, which requires minimum-wage rates above the state minimum-wage rates, employers comply with the MFLSA. And if employers can comply with both the municipal regulation and the state statute, the provisions are not irreconcilable, and therefore no conflict exists.

The Supreme Court then addressed, and rejected, the plaintiff’s contention that that the MFLSA impliedly preempts the Ordinance by entirely occupying the field of minimum wage regulation in Minnesota. To determine if express preemption exists, Minnesota courts consider four issues:

(1) What is the “subject matter” . . . 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?

As to the first three issues, the Supreme Court reiterated the fact that the MFLSA only sets a “minimum” wage of “at least” an established hourly amount, not a required or maximum hourly rate. Moreover, while state law permits the labor commissioner to adopt rules to protect minimum wage and overtime rates, it does not invest exclusive authority in that office. As to the fourth issue, the Court rejected the plaintiff’s contention that a “patchwork” of local minimum wage ordinances would unduly burden employers, noting that it “previously [had] held that while varied local regulation may be restrictive to businesses, it does not arise to the level of an unreasonably adverse effect on the state.” Moreover, the Court added, if the legislature concludes that such a burden is too onerous on employers, “the problem can be corrected by a clear expression of the legislative will” (i.e. by enacting a local wage preemption law).

Therefore, the Minneapolis Minimum Wage Ordinance and its higher minimum wage rates are now part of settled law, and affected employers need to ensure that they comply with these higher rates.

If you have any question about the Ordinance or any other wage and hour issues, please contact the Jackson Lewis attorney(s) with whom you regularly work.