Am. Hotel & Lodging Ass'n v. City of L.A.

• Citation: 834 F.3d 958
• Decision Date: 23 August 2016
• Docket Number: No. 15–55909,15–55909
• Parties: American Hotel and Lodging Association; Asian American Hotel Owners Association, Plaintiffs–Appellants, v. City of Los Angeles, Defendant–Appellee, and Unite Here Local 11, Intervenor–Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

834 F.3d 958

American Hotel and Lodging Association; Asian American Hotel Owners Association, Plaintiffs–Appellants,

v. City of Los Angeles, Defendant–Appellee,andUnite Here Local 11, Intervenor–Defendant–Appellee.

No. 15–55909

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 1, 2016 Pasadena, California

August 23, 2016

Michael Starr (argued) and Katherine Healy Marques, Holland & Knight LLP, New York, New York; Kristina S. Azlin and John A. Canale, Holland & Knight LLP, Los Angeles, California; for Plaintiffs–Appellants.

Sara Ugaz (argued), Ronald S. Whitaker, Thomas H. Peters, and James P. Clark, Deputy City Attorneys; Michael N. Feuer, City Attorney; Office of the Los Angeles City Attorney, Los Angeles, California; for Defendant–Appellee.

Paul L. More (argued), Yuval Miller, Andrew J. Kahn, and Richard G. McCracken ; Davis, Cowell & Bowe, LLP, San Francisco, California; for Intervenor–Defendant–Appellee.

H. Christopher Bartolomucci and D. Zachary Hudson, Bancroft PLLC, Washington, D.C., for Amici Curiae Chamber of Commerce of the United States of America and Coalition for a Democratic Workplace.

Before: Harry Pregerson, Kim McLane Wardlaw, and Andrew D. Hurwitz, Circuit Judges.

OPINION

Opinion by Judge Pregerson

, Senior Circuit Judge:

The American Hotel & Lodging Association and Asian American Hotel Owners Association (“the Hotels”) appeal the denial of their motion to preliminarily enjoin the City of Los Angeles (“the City”) from enforcing the Citywide Hotel Worker Minimum Wage Ordinance (“the Wage Ordinance”). The Hotels argue that the entire Wage Ordinance is preempted by federal labor law, referred to as Machinists

preemption, because the Ordinance interferes with labor-management relations. The Hotels also argue that the opt-out provision for collective bargaining agreements is independently preempted.

The district court concluded that preemption was inapplicable and denied the Hotels' motion for preliminary injunctive relief. We have jurisdiction pursuant to 28 U.S.C. § 1291

. We affirm.

I. Background

At issue in this case is the Citywide Hotel Worker Minimum Wage Ordinance (“the Wage Ordinance”), adopted by the Los Angeles City Council on October 1, 2014. The Wage Ordinance provides, among other provisions, an increased minimum wage for workers at select hotels—large hotels citywide with more than 150 rooms and some smaller hotels near the Los Angeles International airport (“LAX”) that are already covered by another wage ordinance. An opt-out provision allows hotels covered by a collective bargaining agreement to waive the requirements of the Ordinance, and a hardship waiver allows those hotels whose viability might be threatened by the Ordinance to postpone implementation for one year.

A. Earlier Wage–Related Ordinances

The Wage Ordinance and its specific provisions follow a long history of minimum-wage ordinances that have been adopted by the City of Los Angeles (“the City”) and subsequently contested by employers.

In 1997, the City adopted one of the country's first “living wage” ordinances (“Airport LWO”), mandating increased minimum wages and compensated time off for airport workers and certain contract employees working near LAX. See L.A. Admin. Code §§ 10.37 et seq. The Airport LWO contains a heightened minimum wage (a total cash minimum wage of $15.37 per hour as of 2013) and an opt-out for workers covered by collective bargaining agreements. In 2012, an LAX contractor sued the City, asserting that the Airport LWO was preempted by federal law, including the Railway Labor Act. The district court rejected the plaintiff's preemption theory and granted summary judgment for the City, Calop Bus. Sys., Inc. v. City of Los Angeles , 984 F.Supp.2d 981 (C.D. Cal. 2013)

, and we affirmed, Calop Bus. Sys., Inc. v. City of Los Angeles , 614 Fed.Appx. 867, 870 (9th Cir. 2015) (“The Act does not preempt state and local laws that, like the [Airport] LWO, impose minimum substantive requirements while permitting employers and unions to bargain around them.”).

In 2006 and 2007, the City adopted two ordinances to regulate wages at hotels near LAX. The City had determined that hotel customers—believing that workers already received a portion of the “service charges” added to their bills—reduced or eliminated tips to hotel workers. In 2006, the City adopted the Hotel Service Charge Reform Ordinance (“Service Charge Ordinance”), Ordinance No. 178084, which required hotels to pass along service charges to the employees who rendered the actual services.

In 2007, the City passed the Airport Hospitality Enhancement Zone Ordinance (“AHEZ Ordinance”), Ordinance No. 178432, to provide a living wage for employees of hotels with 50 or more rooms in the LAX area. The AHEZ Ordinance contains a heightened minimum wage (a total cash minimum wage of $12.28 per hour as of 2014), provides an opt-out for hotels covered by a collective bargaining agreement, and contains a hardship waiver for hotel employers. In 2008, the AHEZ Ordinance was challenged by an airport hotel, which argued that the ordinance was preempted by the National Labor Relations Act (“NLRA”). The district court disagreed, noting that “the employer will have the opportunity to negotiate a collective bargaining agreement whose rates could be higher or lower than the living wage.” Fortuna Enters., L.P. v. City of Los Angeles , 673 F.Supp.2d 1000, 1010 (C.D. Cal. 2008)

. The subsequent appeal was voluntarily dismissed.

B. The Present Wage Ordinance

Finding that the AHEZ Ordinance “has resulted in higher pay and real benefits for low-income families, and the hotels around LAX have thrived,” the City sought to extend the benefits of increased minimum wages to large hotels citywide. Before reaching a decision, the City received input from economists and consultants; the public; advocacy organizations such as the Los Angeles Alliance for a New Economy (“LAANE”); and Appellee-in-Intervention, UNITE HERE Local 11 (“Local 11”).¹ Based on this input, the City Council passed the Wage Ordinance on October 1, 2014, extending a “fair wage” of $15.37 to hotels with 150 or more rooms, which the Council determined were in a better position to absorb the cost of paying a living wage without layoffs.² The Wage Ordinance also replaces the 2007 AHEZ Ordinance governing hotels with 50 or more rooms close to LAX.

The official purpose of the Wage Ordinance is to promote “an employment environment that protects government resources,” and “the health, safety and welfare of thousands of hotel workers by ensuring they receive decent compensation for the work they perform.” Indeed, Los Angeles hotel workers are among the lowest paid in the nation. To achieve these goals, the final ordinance includes the following provisions:

• Minimum Wage : Minimum wages of $15.37 per hour for workers at covered hotels (exclusive of gratuities, service charge distributions, and bonuses), with staggered implementation (beginning first for hotels with 300 rooms or more and subsequently for hotels with 150 or more);

• Compensated Time and Sick Leave : 96 hours of compensated time off and an additional 80 hours of uncompensated sick leave for full-time hotel workers;

• Service–Charge Pass–Through : A requirement that service charges be distributed to the non-supervisory workers who provide the service to the customer;

• Enforcement : A private cause of action for back pay, attorneys' fees, and treble damages for willful violations;

• Exemption for Collective Bargaining Agreements : An opt-out for workers covered by a bona fide, non-expired collective bargaining agreement, if the waiver is set forth in that agreement in clear and unambiguous terms. (No exemptions are available for terms unilaterally implemented by the parties.)

• One–Year Hardship Waiver : A one-year waiver available to employers if necessary to avoid bankruptcy, shutdown, reduction in workforce by more than 20 percent, or reduction in workers' total hours by more than 30 percent.

Many of these provisions are identical to those in previous City ordinances that have been upheld by the courts.³

C. Procedural History

On December 16, 2014, a few months after the Wage Ordinance was adopted, American Hotel & Lodging Association and Asian American Hotel Owners Association (“the Hotels”) sued the City,⁴ arguing that “[u]nder the guise of an ordinance purporting to require that a ‘fair wage’ be paid to hotel workers, the City has constructed ... an insidious mechanism that improperly aids the Hotel Workers' Union ... in its efforts to organize employees.” On January 26, 2015, the Hotels filed a motion for preliminary injunction, arguing that the Wage Ordinance is preempted by federal labor law (so-called Machinists

preemption) because it interferes with labor-management relations. On May 13, 2015, District Court Judge André Birotte, Jr., denied the Hotels' motion for a preliminary injunction, holding that the Hotels had failed to show a likelihood of success on the merits. The Hotels timely appealed.

II. Standard of Review

Denial of a preliminary injunction is reviewed for abuse of discretion. Alliance for the Wild Rockies v. Cottrell , 632 F.3d 1127, 1131 (9th Cir. 2011)

. A district court abuses its discretion if its analysis is premised on an inaccurate view of the law. Pom Wonderful LLC v. Hubbard , 775 F.3d 1118, 1123 (9th Cir. 2014). In such instances, the court reviews de novo the legal premises underlying the preliminary injunction. Id.

III. Discussion

A. The Wage Ordinance Is a Minimum Labor Standard That Is Not Preempted by the National Labor Relations Act

1. States cannot regulate the mechanics of collective bargaining but may set minimum labor standards

The NLRA—the federal architecture that governs relations between labor and management, for example, union organizing, collective bargaining, and conduct of labor disputes—has no express preemption provision. See 29 U.S.C. §§ 151

–169 ; Chamber of Commerce v. Brown , 554 U.S. 60, 65, 128 S.Ct. 2408, ...