Rui One Corp. v. City of Berkeley

• Decision Date: 16 June 2004
• Docket Number: No. 02-15762.,02-15762.
• Citation: 371 F.3d 1137
• Parties: RUI ONE CORPORATION, a Washington corporation, Plaintiff-Appellant, v. CITY OF BERKELEY, Defendant-Appellee, Hotel Employees & Restaurant Employees Union Local 2850, Defendant-Intervenor-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

371 F.3d 1137

RUI ONE CORPORATION, a Washington corporation, Plaintiff-Appellant, v. CITY OF BERKELEY, Defendant-Appellee Hotel Employees & Restaurant Employees Union Local 2850, Defendant-Intervenor-Appellee.

No. 02-15762.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 11, 2003.

Filed June 16, 2004.

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R. Zachary Wasserman, Wendel, Rosen, Black & Dean, LLP, Oakland, CA, for the plaintiff-appellant.

Manuela Albuquerque, City Attorney, Berkeley, CA, for the defendant-appellee.

Andrew J. Kahn, Davis, Cowell & Bowe, LLP, San Francisco, CA, for the defendant-intervenor-appellee.

Paul K. Sonn, Brennan Center for Justice, New York, NY, for the amici curiae.

Appeal from the United States District Court for the Northern District of California; Susan Yvonne Illston, District Judge, Presiding. D.C. No. CV-00-03878-SI.

Before GRABER, WARDLAW, and BYBEE, Circuit Judges.

Opinion by Judge Wardlaw; Dissent by Judge Bybee

WARDLAW, Circuit Judge:

As the cost of living skyrockets around the country, and in the San Francisco Bay Area in particular, the face of American poverty is changing dramatically. More and more frequently, full-time, minimum-wage workers are unable to support their families' basic needs. See Jim Newton, L.A.'s Growing Pay Gap Looms as Political Issue Poverty, L.A. Times, Sept. 7, 1999, at A1 ("Today's poverty icon is a working mother, toiling eight hours or more a day at a job that does not pay enough to cover the rent, clothe the baby or provide a life of even minimal comfort."). Recognizing the plight of its own working poor, the City of Berkeley, California, has joined dozens of other cities nationwide to help bridge the gap between federal and state laws setting the minimum wage — the real value of which has decreased over the past few decades — and the costs of modern urban living by enacting "living wage" ordinances. These ordinances require certain employers to pay their employees wages approximating the real cost of living in the locality, which is often significantly higher than the applicable state or federal minimum wage. Although these ordinances routinely exempt smaller or less profitable employers from their coverage, they do increase labor costs for affected employers.

We must decide whether Berkeley's Living Wage Ordinance, Berkeley Ordinance No. 6548-N.S. (2000) (creating Berkeley Municipal Code ch. 13.27), amended by Berkeley Ordinance No. 6583-N.S. (2000) ("Marina Amendment"), violates the Contract Clause of the United States Constitution, the Equal Protection Clause of the United States and California Constitutions, or the state and federal Due Process Clauses as an impermissible delegation of legislative power to unions. Reviewing the constitutionality of the local ordinance de novo, see 4805 Convoy, Inc. v. City of San Diego, 183 F.3d 1108, 1113 (9th Cir.1999), we hold that Berkeley's Living Wage Ordinance, as amended, survives these constitutional challenges. Accordingly, we affirm the decision of the district court denying RUI One Corporation's ("RUI") summary judgment motion and entering judgment in favor of the City of Berkeley.

I.

A. Minimum Wage Laws and Living Wage Ordinances

Minimum wage legislation was introduced into the American legal scene early in the twentieth century, as part of broader efforts to improve working conditions and regulate the employment of vulnerable groups (e.g., recent immigrants, women, and children). See generally William P. Quigley, `A Fair Day's Pay For a Fair Day's Work': Time to Raise and Index the Minimum Wage, 27 St. Mary's L.J. 513, 515-29 (1996); see also id. at 516 (noting California's 1913 minimum wage statute). Although the United States Supreme Court struck down some of the earliest minimum wage statutes under its now-defunct economic due process analysis e.g., Adkins v. Children's Hosp., 261 U.S. 525, 43 S.Ct. 394, 67 L.Ed. 785 (1923) (minimum wages for women and children in particular industries in Washington, D.C.), it eventually upheld their validity in West Coast Hotel Co. v. Parrish, 300 U.S. 379, 57 S.Ct. 578, 81 L.Ed. 703 (1937) (upholding State of Washington's women and minors minimum wage statute), a case now viewed as the death knell of heightened constitutional scrutiny for economic legislation.

The federal government joined in this growing effort, at first unsuccessfully with the National Industrial Recovery Act in 1933, but finally in 1938 with the enactment of the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 ("FLSA"). See Quigley, supra, at 521-29. The FLSA explicitly recognized that in setting national minimum wages in certain industries, it did not intend to usurp the power of states and municipalities to set higher minimum wages, or to set minimum wages in industries not targeted in the FLSA. See 29 U.S.C. § 218(a) ("No provision of this chapter or of any order thereunder shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter....").

Since its enactment, eleven states, including in this Circuit Alaska, California, Hawaii, Oregon, and Washington, have enacted minimum wage laws setting statewide wages above the federal minimum. See United States Dep't of Labor, Minimum Wage Laws in the States.¹ Like their federal counterpart, however, these statewide laws contain exemptions for certain industries. See id. n. 1. Of significance to the question before us, several of these state laws expressly contemplated further wage regulation by individual localities, including in California, whose state constitution grants municipalities broad legislative power. See Cal. Const. art. XI, § 7; Cal. Lab.Code § 1205(b) ("Nothing in this part shall be deemed to restrict the exercise of local police powers in a more stringent manner.").

In the 1960s, certain municipalities, including Baltimore, New York City, and Washington, D.C., began enacting minimum wage ordinances, often preceding statewide legislative action. See McMillen v. Browne, 14 N.Y.2d 326, 251 N.Y.S.2d 641, 200 N.E.2d 546 (1964) (upholding New York City ordinance); Mayor of Baltimore v. Sitnick, 254 Md. 303, 255 A.2d 376 (1969) (Baltimore); D.C.Code Ann. §§ 32-1001 to -1015. More recently, localities around the country, beginning with Baltimore in mid-1996, have begun refocusing their efforts to enact new ordinances, setting wages and employee benefits higher than either federal or state minimums. Localities in California joined this trend within a few years. Currently, such measures are in place in several counties, including Los Angeles, Ventura, and Marin, as well as a number of municipalities, including San Francisco, Pasadena, San Jose, Santa Cruz, Oakland, and, of course, Berkeley.

Unlike their state and federal counterparts, local wage ordinances tend to be more restrictive in scope; rather than setting citywide minimums applicable to all employers, public and private, most cities have chosen a piecemeal approach, targeting only recipients of city contracts or lessees or larger businesses with more employees and higher earnings. See Santa Monica, Calif., Adopts First `Living Wage' Law, Wall St. J., July 26, 2001, at B4 (noting that, unlike most cities, Santa Monica adopted an ordinance targeting certain private employers regardless of city contracts); see also Martha Groves, Backers of Failed `Living Wage' Vow to Press On, L.A. Times, Nov. 7, 2002, § 2, at 10 (Santa Monica's ordinance repealed in 2002 via voter initiative). These local ordinances also differ from their federal and state counterparts in that they mandate significantly higher wages and employee benefits from governed employers. See id. (noting that Santa Monica's measure would have required businesses to pay employees $10.50 an hour with health benefits or $12.25 without). Their proponents' goals are to allow covered full-time wage-earners to support a family residing in the locality at a subsistence level; it is for this reason that such ordinances are often referred to as "living wage ordinances," rather than "minimum wage ordinances." See ACORN Living Wage Resource Ctr., Setting a Living Wage Level.²

In part, this rising tide of state and local legislation has developed due to the decline in the real value of both federal and state minimum wages, which have not risen along with inflation or the cost of living. Compare United States Dep't of Labor, Chart of Minimum Wage Values in Constant Dollars³ (noting that if the 1968 minimum wage of $1.60 per hour had kept up with inflation, it would be worth approximately $8.00 per hour in 1996 dollars), with 29 U.S.C. § 206(a)(1) (current federal minimum wage is $5.15 per hour). States, too, have recently refocused their efforts on the working poor, e.g., Cal.Code Regs. tit. 8, § 11000(2) (raising California's minimum wage to $6.25 per hour in 2001, and to $6.75 per hour, effective January 1, 2002), but have not been able to bridge the gap between the realities of statewide legislation and the high cost of living in certain localities, see Heather Boushey et al., Hardships in America: The Real Story of Working Families 73 tbl. A4.1 (Econ. Policy Inst.2001) (estimating the annual subsistence cost of living in San Francisco as $38,431, or $18.47 per hour for full-time employees, and in Oakland as $31,848, or $15.31 per hour).⁴ It is against this backdrop that many localities in California and nationwide have enacted living wage ordinances.

B. The Berkeley Living Wage Ordinance

The City of Berkeley enacted its living wage ordinance on June 27, 2000. See Berkeley Ordinance No. 6548-N.S. (2000). The ordinance mandated minimum hourly wages and employee benefits for certain employers that received some form of financial benefit from the City (e.g., City contract awardees, lessees of City property, City financial aid recipients), and that meet specified...