Employment Law Daily LA’s $15.37 wage for workers at large hotels not preempted by NLRA
Friday, August 26, 2016

LA’s $15.37 wage for workers at large hotels not preempted by NLRA

By Dave Strausfeld, J.D. Hotel associations could not block enforcement of an ordinance passed by the Los Angeles city council that raised the minimum wage of workers at large hotels to $15.37 per hour, held the Ninth Circuit, rejecting claims that the ordinance was preempted by the NLRA. Minimum labor standards, such as minimum wages, are not preempted by the Act. By providing a basic minimum wage and paid time off, the ordinance altered the "backdrop" of negotiations, but not the mechanics of collective bargaining, so Machinists preemption does not apply. Therefore, the district court did not abuse its discretion in denying a motion for a preliminary injunction brought by a hotel industry group challenging the wage measure (American Hotel and Lodging Association v. City of Los Angeles, August 23, 2016, Pregerson, H.). Wage hike for hotel workers. On October 1, 2014, the Los Angeles city council adopted the Citywide Hotel Worker Minimum Wage Ordinance, which increased the minimum wage to $15.37 per hour for workers at select hotels—specifically, hotels citywide with more than 150 rooms and some smaller hotels near the Los Angeles International airport. The ordinance also requires covered hotels to offer full-time employees a certain amount of compensated time off and uncompensated sick leave. The city council determined that these select hotels were in a better position than others to absorb the cost of paying a living wage without layoffs. A hardship waiver allows those hotels whose viability might be threatened by the ordinance to postpone implementation for one year, and an opt-out provision permits hotel workers covered by a collective bargaining agreement to waive the requirements of the ordinance. A few months after the ordinance was adopted, two hotel associations went to court arguing that the NLRA preempted the ordinance because it interfered with labor–management relations. Preemption argument. While the NLRA contains no express preemption provision, the Supreme Court has recognized two implicit preemption mandates: Garmon preemption and Machinists preemption. Under Machinists preemption, at issue here, states may not restrict a "weapon of self-help" such as a strike or lockout. Congress left these self-help tools unregulated to allow tactical bargaining decisions "to be controlled by the free play of economic forces." Rejecting the hotels’ argument under Machinists, the Ninth Circuit found that while minimum wages and other minimum labor standards "do technically interfere with labor–management relations," they nevertheless are not preempted because they do not "regulate the mechanics of labor dispute resolution." Rather, these standards merely provide the "backdrop" for negotiations. The distinction between minimum labor standards and laws that intrude into the process of collective bargaining was highlighted in Fort Halifax Packing Co. v. Coyne. There, the Supreme Court was faced with a Maine law that required employers to provide a one-time severance payment to employees affected by plant closures, unless the employment contract dealt with severance pay. When the employer argued that the law was preempted because it intruded into the collective bargaining process, the Court disagreed, underscoring that employers and employees come to the bargaining table with rights under state law that form a "backdrop" for their negotiations. For instance, absent a CBA, state common law generally permits an employer to run the workplace as it wishes, and "[t]he employer enjoys this authority without having to bargain for it." In other words, because minimum labor standards merely "set the stage" for labor–management engagement, they are not subject to Machinists preemption. "It is no surprise, then," the appeals court noted, that state minimum benefit protections have repeatedly survived Machinists preemption challenges, "because they do not alter the process of collective bargaining." As the LA hotel worker wage ordinance altered "the backdrop of negotiations, not the mechanics of collective bargaining," it was not preempted by the NLRA. Bragdon distinguishable. The hotels argued that the Ninth Circuit should follow its own 1995 decision in Chamber of Commerce v. Bragdon, which struck down a county ordinance requiring employers to pay "prevailing wages" on large private construction projects, on the basis that the ordinance interfered with collective bargaining. But this decision was distinguishable, the appeals court said. The prevailing wages in Bragdon were defined as the per diem wages set by the state for public works projects, which in turn were based on the wages in local CBAs, effectively forcing nonunion employers to pay what amounted to a union wage. Thus Bragdon was inapposite. Opt-out provision. Finally, the hotels contended the ordinance’s opt-out provision, which allows hotel workers covered by a CBA to waive the ordinance’s requirements if the waiver is set forth in clear and unambiguous terms, independently warranted preemption. Rejecting the hotels’ arguments, the appeals court quoted the Supreme Court’s statement in Livadas v. Bradshaw that the NLRA "cast[s] no shadow on the validity of these familiar and narrowly drawn opt-out provisions." In sum, the Los Angeles hotel worker wage ordinance was "no different" from other minimum labor standards the appeals court had "consistently held" do not implicate Machinists preemption. Therefore, the district court did not abuse its discretion in denying the hotels’ motion for a preliminary injunction barring enforcement.

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