Graco, Inc. v. City of Minneapolis, A18-0593

• Decision Date: 22 January 2020
• Docket Number: A18-0593
• Citation: 937 N.W.2d 756
• Parties: GRACO, INC., Appellant, v. CITY OF MINNEAPOLIS, Respondent.
• Court: Minnesota Supreme Court

937 N.W.2d 756

GRACO, INC., Appellant,

v.CITY OF MINNEAPOLIS, Respondent.

A18-0593

Supreme Court of Minnesota.

Filed: January 22, 2020

Christopher K. Larus, Eric J. Magnuson, George B. Ashenmacher, Robins Kaplan LLP, Minneapolis, Minnesota, for appellant.

Sara J. Lathrop, Sarah C.S. McLaren, Assistant City Attorneys, Minneapolis, Minnesota, for respondents.

Keith Ellison, Attorney General, Rachel Bell-Munger, Jonathan D. Moler, Assistant Attorneys General, Saint Paul, Minnesota, for amicus curiae Commissioner of Labor and Industry.

Susan L. Naughton, Saint Paul, Minnesota, for amicus curiae League of Minnesota Cities.

Bruce D. Nestor, De León & Nestor, LLC, Minneapolis, Minnesota; and Laura Huizar, National Employment Law Project, New York, New York, for amici curiae Centro de Trabajadores Unidos en la Lucha, 15 Now Minnesota, and National Employment Law Project.

OPINION

GILDEA, Chief Justice.

The question presented in this case is whether state law preempts a municipal ordinance. The Minnesota Fair Labor Standards Act (the "MFLSA") establishes the minimum wage Minnesota employers must pay their employees. Minn. Stat. § 177.24 (2018). Respondent City of Minneapolis has enacted an ordinance that requires employers to pay minimum-wage rates that are higher than the rates set forth in the MFLSA. This appeal asks us to determine whether the MFLSA preempts the City’s ordinance. The district court and the court of appeals concluded that the MFLSA does not preempt the City’s ordinance. The district court reasoned that the MFLSA sets a floor, not a ceiling, for minimum-wage rates, thus leaving room for municipal regulation. A divided court of appeals panel agreed. Graco, Inc. v. City of Minneapolis , 925 N.W.2d 262, 265 (Minn. App. 2019). Because employers will comply with the MFLSA when they comply with the City’s ordinance, and because the Legislature provided no indication that it intended to occupy the field of minimum-wage rates, we conclude that the MFLSA does not preempt the ordinance.

FACTS

The MFLSA provides minimum-wage rates, which vary depending on the size of the employer, that employers must pay their employees. Minn. Stat. § 177.24. The MFLSA defines large employers as enterprises with annual revenue of $500,000 or more, and small employers as enterprises with annual revenue of less than $500,000. Id. , subd. 1(a)(1)–(2). As of July 1, 2019, the state minimum-wage rate is $9.86 per hour for large employers and $8.04 per hour for small employers.¹ See id. , subd. 1(b)(1)(iv), (2)(iv).

Effective January 1, 2018, the City of Minneapolis passed its own minimum-wage regulation. See Minneapolis, Minn., Code of Ordinances (MCO) § 40.390 (2019). The City’s ordinance requires large and small employers to pay Minneapolis workers² $15.00 per hour by 2022 and 2024, respectively. MCO § 40.390(b)(6), (c)(7). The ordinance provides a phase-in period for large and small employers between 2018 and 2022. Id. § 40.390(b)–(c). It also defines employers differently than the MFLSA: large employers are those that employ more than 100 persons and small employers are those that employ 100 or fewer persons. MCO § 40.330.

On November 10, 2017, appellant Graco, Inc. sued the City, seeking a declaratory judgment that state law preempts the ordinance and a permanent injunction against its enforcement. Following a court trial, the district court determined that state law does not preempt the ordinance. The court reasoned that the MFLSA sets a floor, not a ceiling, for minimum-wage rates and therefore the MFLSA is not in conflict with the ordinance. The court also determined that the MFLSA leaves room for municipal regulation and accordingly, regulation of minimum-wage rates is not solely a matter of state concern. Based on these determinations, the district court denied Graco’s request for a declaratory judgment and permanent injunction.

A divided court of appeals panel affirmed. Graco, Inc. , 925 N.W.2d 262. The majority rejected Graco’s argument that the ordinance conflicts with state law because it prohibits what the MFLSA expressly permits an employer to pay: the state minimum wage. Id. at 268. Rather, it determined that the MFLSA sets a floor, expressly requiring employers to pay at least the minimum wage and therefore the ordinance operates in harmony with the MFLSA. Id. at 268–69. The majority also concluded that the Legislature did not intend to exclusively regulate the field of minimum-wage rates and the MFLSA accordingly does not preempt the City’s regulation of minimum-wage rates. Id. at 274.

The dissent disagreed, concluding that the MFLSA expressly permits an employer to pay any wage equal to or greater than the state minimum wage. Id. at 277 (Johnson, J., dissenting). Reasoning that the ordinance prohibits what the MFLSA permits—wages between the state minimum wage and the City’s higher minimum wage—the dissent concluded that the ordinance conflicts with the MFLSA. Id. at 278–79.

We granted Graco’s petition for review.

ANALYSIS

We must decide if the MFLSA preempts the Minneapolis minimum-wage ordinance. Whether state law preempts a municipal ordinance is a legal question we review de novo. Bicking v. City of Minneapolis , 891 N.W.2d 304, 312 (Minn. 2017).

Cities have "broad power to legislate in regard to municipal affairs[.]" City of Morris v. Sax Invs., Inc. , 749 N.W.2d 1, 6 (Minn. 2008) (citation omitted) (internal quotation marks omitted). And we will uphold a municipal ordinance "unless it is inconsistent with the Federal or State Constitution or state statute." St. Paul Citizens for Human Rights v. City Council , 289 N.W.2d 402, 405 (Minn. 1979). Cities therefore cannot "regulate in a manner that conflicts with state law or invades subjects that have been preempted by state law." Jennissen v. City of Bloomington , 913 N.W.2d 456, 459 (Minn. 2018) (citing Bicking , 891 N.W.2d at 313 ).

Our precedent recognizes "three types of state preemption of municipal legislative authority: express preemption, conflict preemption, and field preemption." Id. (citing Bicking , 891 N.W.2d at 313 n.8 ). The parties agree that the first form, express preemption, is not at issue in this case. But in urging us to reverse the court of appeals, Graco relies on both conflict preemption and field preemption. A municipal ordinance conflicts with state law "when both the ordinance and the statute contain express or implied terms that are irreconcilable with each other." Mangold Midwest Co. v. Vill. of Richfield , 274 Minn. 347, 143 N.W.2d 813, 816 (1966). And state law occupies the field, thus preempting municipal regulation, when the Legislature has addressed the subject matter in a way that leaves no room for local regulation. See id. at 820.

I.

We turn first to the question of whether the ordinance conflicts with the MFLSA. The foundational case on conflict preemption is Mangold Midwest Co. v. Village of Richfield . In Mangold , we considered whether a local ordinance that permitted some Sunday sales conflicted with a state statute that restricted Sunday retail sales. 143 N.W.2d at 815–16. The state statute prohibited all businesses from selling groceries on Sundays, id. at 817, but the ordinance prohibited only businesses with four or more employees from selling groceries on Sundays, id. at 818. Based on this difference, the plaintiffs asserted that the ordinance permitted what the statute prohibited. Id. We concluded that the ordinance served as a complementary regulation to the statute because the ordinance emphasized a violation of the statute—grocery sales on Sunday by a business with four or more employees—to define a violation of the local ordinance. Id. at 819. We therefore held that the ordinance did not conflict with the statute. Id.

In reaching this conclusion, we said that "[a]s a general rule, conflicts which would render an ordinance invalid exist only when both the ordinance and statute contain express or implied terms that are irreconcilable with each other." Id. at 816 (emphasis added). We then identified three principles for determining whether a municipal regulation and statute are irreconcilable and therefore in conflict. Id. at 816–17. First, a "conflict exists where the ordinance permits what the statute forbids." Id. at 816 (citing Power v. Nordstrom , 150 Minn. 228, 184 N.W. 967, 969 (1921) ). Second, "a conflict exists where the ordinance forbids what the statute expressly permits." Id. (citing Power , 184 N.W. at 969 ). And third, "no conflict exists where the ordinance, though different, is merely additional and complementary to or in aid and furtherance of the statute." Id. at 817.

Graco relies on the second principle, asserting that the ordinance prohibits what the MFLSA expressly permits. The MFLSA requires Minnesota employers to pay minimum wages at a rate established by a formula—a calculation that is made by the Commissioner of Labor and Industry based on the inflation rate. Minn. Stat. § 177.24, subd. 1(b)(1)–(2), (f). Using that calculation for 2019, large and small employers must pay each employee wages "at a rate of at least" $9.86 and $8.04 per hour, respectively. See id. , subd. 1(b). The ordinance, however, requires large and small employers to pay at least $12.25 and $11.00 per hour, respectively, in 2019. MCO § 40.390(b)–(c). Graco contends that, because the MFLSA expressly permits large employers to pay at least $9.86 per hour, which is less than $12.25 per hour, and because the City’s ordinance prohibits large employers from paying wages less than $12.25 per hour, the ordinance impermissibly conflicts with the MFLSA.

Graco’s argument, while not without some initial appeal, ultimately fails. If one focused solely on the specific dollar amounts, the MFLSA could be read to permit employers to pay hourly wages at a rate less than the rate the ordinance requires them to pay. In that limited way, the ordinance would seem to forbid what the statute permits. Mangold Midwest Co. , 143 N.W.2d at 816. But the...