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01/19/2018

By: Max Mlinar

On December 11, 2017, the Hennepin County District Court denied a motion by the Minnesota Board of Commerce seeking to prevent the new minimum wage ordinance from taking effect. As a result of the denial, the ordinance went into effect on January 1, 2018, as planned, but litigation continues behind the scenes in appeal courts.

The ordinance, originally passed by the Minneapolis City Council on June 30, 2017, amends Title 2, Chapter 40 of the Minneapolis Code of Ordinances to raise the minimum wage to $15 per hour for large employers by July 1, 2022. On January 1, this gradual increase began with large employers being required to pay employees a minimum wage of $10 per hour and the next increase rising to $11.25 on July 1 later this year. For the specific increases and to determine whether an employer is considered a “large” employer, see: http://minimumwage.minneapolismn.gov/.

By way of background, on November 10, 2017, the Minnesota Chamber of Commerce sued the City of Minneapolis alleging that the Minneapolis ordinance preempts State Law and impermissibly extends its reach beyond the city’s borders. The aspect of the ordinance fueling the most debate is the portion that dictates the minimum wage requirement applies to “all time worked within the geographic boundaries of the city,” meaning that employees who do not work in Minneapolis also qualify for the higher minimum wage if they work two or more hours per week within the city. This means, for example, a construction worker based out of Blaine who does two pickups of specialty materials in Minneapolis per week would qualify because he performs an employment-related stop within the city if his time adds up to over two hours per week, which it likely would. As it currently stands, the ordinance benefits a large number of workers beyond the city limits.

If this situation sounds familiar, it is because the issues of preemption and extraterritoriality were also raised in a different challenge by the Minnesota Board of Commerce against the Minneapolis Sick and Safe Time Ordinance. That ordinance entitled workers to one hour of sick and safe time for every 30 hours worked. However, where the Sick and Safe Time ordinance was limited by court decision to application on businesses based in Minneapolis, the minimum wage ordinance was held up in its totality. While an appeal may be taken up by court of appeals, for now, minimum wage has increased as scheduled beginning with the jump to $10 per hour for “large” employers (100 or more employees) and will rise as scheduled to $11.25 on July 1.

Since their post-Depression era adoption, minimum wage statutes have sought to ensure workers a livable wage. With roughly 248,000 hourly workers making the Minnesota minimum wage (Department of Labor and Industry), the term “livable wage” has to carry its weight for people supporting themselves which is why 29 other states have taken it upon themselves to adopt higher minimum wages than the Federal statute. The historical legacy of the law is a protection of workers against employers who would otherwise suppress wages to maximize profit. To guarantee the new minimum wage is honored by employers, the City of Minneapolis sought extraterritoriality for the new minimum wage ordinance to keep employers from simply moving their physical locations outside city limits and remotely sending their workforce into the city. This tactic, not dissimilar from large corporations moving assets to shelters in Ireland to avoid US corporate taxes, essentially renders the legislation toothless against businesses and void of any real positive change for workers.

Commenting against the extraterritoriality nature of the ordinance, Doug Loon, President of Plaintiff Minnesota Chamber of Commerce stated: “The Minneapolis city government unfortunately has strayed into public policy that has always been left to federal and state authorities.” On the contrary, this is a preemption case, of which the doctrine governs the power between states and their cities and there have been many preemption cases throughout Minnesota’s legislative history. While Mangold Midwest Co. v. Village of Richfield determined in 1966 that municipalities possess only such powers “as are expressly conferred by statute”, Minneapolis is treated differently because it is a home rule charter city as opposed to a code city. In 2002, Nordmarken v. City of Richfield determined that charter cities “enjoy as to local matters all the powers of the state, except when those powers have been expressly withheld.” This means that Minneapolis has the regulatory authority to raise its minimum wage unless the Minnesota State Legislature shows explicit intent to strip Minneapolis of that authority. As a result, Republicans have their eyes set on a preemption bill in the February 2018 legislative session that would change this precedent and block the minimum wage increase.

It is too early to know what the consequences of raising the minimum wage to $15 will be. Debate and research continue to differ widely on what the ramifications of a $15 minimum wage would be on employment levels at the national level (Minnesota’s 3.1% unemployment in October 2017 is the state’s lowest since 2000), but in any case it will widen the public conception of employee rights and what a minimum wage is meant to accomplish. Automation looms in multiple industries, and if a large sector of workers can only find employment when wages are suppressed to the point that they’re cheaper than automation, that may prove income-boosting ordinances to be an inadequate solution. The Republican preemption bill that would circumvent the Court’s ruling in favor of the City of Minneapolis will likely be opposed vigorously and publicly by workers throughout the metro area and will amplify the conversation about minimum wage.