Iowa Ass'n of Bus. & Indus. v. City of Waterloo

• Decision Date: 18 June 2021
• Docket Number: No. 20-0575,20-0575
• Parties: IOWA ASSOCIATION OF BUSINESS AND INDUSTRY, Appellant, v. CITY OF WATERLOO, THE WATERLOO COMMISSION ON HUMAN RIGHTS, and MARTIN M. PETERSON, in His Official Capacity, Appellees.
• Court: United States State Supreme Court of Iowa

IOWA ASSOCIATION OF BUSINESS AND INDUSTRY, Appellant,
v.
CITY OF WATERLOO, THE WATERLOO COMMISSION ON HUMAN RIGHTS,
and MARTIN M. PETERSON, in His Official Capacity, Appellees.

No. 20-0575

SUPREME COURT OF IOWA

Submitted April 14, 2021
June 18, 2021

Appeal from the Iowa District Court for Black Hawk County, John Bauercamper, Senior Judge.

A trade association appeals a declaratory judgment that a city "ban the box" ordinance is not preempted by state law. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Mansfield, J., delivered the opinion of the court, in which Christensen, C.J., and Appel, Waterman, and Oxley, JJ., joined. McDonald, J., filed an opinion concurring in part and dissenting in part. McDermott, J., took no part in the consideration or decision of the case.

Ryan G. Koopmans (argued) of Belin McCormick, P.C., Des Moines, for appellant.

Timothy C. Boller (argued) of Weilein & Boller, P.C., Cedar Falls, for appellees.

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David S. Walker, Windsor Heights, and Russell E. Lovell II, Des Moines, for amicus curiae NAACP.

Shefali Aurora and Rita Bettis Austen, Des Moines, for amicus curiae ACLU of Iowa; Leonard Bates of Newkirk Zwagerman, Des Moines, and Melissa C. Hasso of Sherinian & Hasso Law Firm, Des Moines, for amicus curiae Iowa Chapter of the National Employment Lawyers Association; and Elizabeth L. Avery, Berkeley, California, for amicus curiae National Employment Law Project.

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MANSFIELD, Justice.

Suppose a park had a sign posted at the entrance: "No motorized vehicles allowed, including cars, motorcycles, scooters, and other motorized vehicles." Would we conclude that this sign prohibited a child from pushing her old-fashioned, nonmotorized scooter around the park? We think not.

This case, in our view, presents a similar interpretive problem. In 2017, the legislature adopted a statute that prohibits cities from

adopt[ing], enforce[ing], or otherwise administer[ing] an ordinance, motion, resolution, or amendment providing for any terms or conditions of employment that exceed or conflict with the requirements of federal or state law relating to a minimum or living wage rate, any form of employment leave, hiring practices, employment benefits, scheduling practices, or other terms or conditions of employment.

2017 Iowa Acts ch. 20, § 4 (codified at Iowa Code § 364.3(12)(a) (2018)). Does this statute prohibit cities from independently regulating all hiring practices, or only from regulating those hiring practices that amount to terms and conditions of employment?

The difference matters here because we are asked to decide the impact of the 2017 law on a 2019 Waterloo "ban the box" ordinance. The ordinance regulates the time when an employer can inquire into a prospective employee's criminal history. It also regulates whether an employer can consider the employee's criminal history at all in making a hiring decision. The district court found that no part of the ordinance was preempted. For the reasons discussed herein in more detail, we conclude that the ordinance is preempted to the extent it purports to regulate whether an employer can consider an employee's criminal history at all—i.e., to the extent it regulates a term and condition of employment. However, it is not preempted where it only regulates timing, because that

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is not a term or condition of employment. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.

I. Facts and Procedural Background.

On November 4, 2019, the City of Waterloo (the City) voted to enact Ordinance 5522. This ordinance covers two topics: (1) when an employer can inquire into an applicant's criminal history, and (2) whether the employer can consider that criminal history in making its hiring decisions.¹

Abraham Funchess, the director of the Waterloo Commission on Human Rights (WCHR), submitted an affidavit that provided background information on Waterloo's ordinance. Shortly after taking office in 2010, Funchess began looking at "ban the box" as a way to reduce discrimination within Waterloo. "Ban the box" is the colloquial term for a measure that limits employer inquiries into the criminal histories of prospective employees.

Waterloo has the highest African-American population, at sixteen percent, of any city in the state. African-Americans and other persons of color are disproportionately represented in the criminal justice system, not only in the United States generally but more specifically in Waterloo. Funchess was "concerned that this disparity could lead to discriminatory employment practices when an applicant's criminal history was considered." Funchess had also heard personal anecdotes from persons of color about the difficulty they were encountering in obtaining employment if they had a criminal record.

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The WCHR decided to present a proposed ordinance to the Waterloo city council for consideration. An outside attorney was commissioned to draft the ordinance. He surveyed "ban the box" ordinances that had been adopted in other cities and also received assistance from a national organization.

The proposed Waterloo ordinance was initially presented and discussed at the August 26, 2019 Waterloo city council meeting. It was later amended and received its third reading and final approval by a 4-3 vote on November 4.

As enacted, Ordinance 5522 prohibits all employers in Waterloo from asking about criminal history on a job application. Waterloo, Iowa, Code of Ordinances § 5-3-15(B) (current through June 1, 2020). It also bars employers with fifteen or more employees from making any inquiry into an applicant's criminal history until a conditional offer of employment has been made. Id. § 5-3-15(B)(1). Additionally, Ordinance 5522 prohibits employers with fifteen or more employees from making an adverse hiring decision based solely on arrests or pending criminal charges that have not resulted in a conviction, criminal records that have been expunged or are the subject of a pardon, or criminal records without a "legitimate business reason." Id. § 5-3-15(B)(2)-(4).

The term "legitimate business reason" is defined in detail elsewhere in the ordinance. Id. § 5-3-15(A). It includes: (1) "[s]ituations where the nature of the criminal conduct has a direct and substantial bearing on the fitness or ability to perform the duties or responsibilities of the intended employment," (2) "[s]ituations where the granting of employment would involve unreasonable risk of substantial harm to property or to safety of individuals or the public, or to business reputation or business assets," (3) "[p]ositions working with children, developmentally disabled persons

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and vulnerable adults where the applicant has a conviction record of a crime against children or disabled or vulnerable adults," and (4) "[s]ituations where an employer must comply with any federal or state law or regulation pertaining to background checks and the criminal conduct is relevant to the applicant's fitness for the job." Id. Other than in these four situations, an employer cannot refuse to hire an employee based on the employee's criminal record. Id. § 5-3-15(B)(4).

While Ordinance 5522 was under consideration, but before it had been adopted, the Iowa Association of Business and Industry (ABI) wrote the entire Waterloo city council in October 2019. ABI is the largest statewide business organization with more than 1500 member businesses employing 330,000 Iowans, including thousands in Waterloo. ABI's correspondence maintained that Ordinance 5522 violated Iowa Code section 364.3(12)(a) (2020), which limits the ability of cities to regulate employment terms and conditions.

After the ordinance received its final approval from the city council on November 4, ABI immediately filed suit in the Black Hawk County District Court against the City, the WCHR, and the city attorney in his official capacity. ABI's petition sought injunctive and declaratory relief on the ground that the ordinance violated the aforementioned state law.

The parties submitted cross-motions for summary judgment. On March 27, with the COVID pandemic having descended on our state, the district court conducted a telephonic oral argument on the motions. On April 4, the district court entered its summary judgment ruling.

Preliminarily, the court determined that ABI had associational standing to assert the rights of its members. However, on the merits, the court ruled that the ordinance did not violate Iowa Code section 364.3(12)(a). The district court concluded that ABI's preemption argument

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required it to reconcile section 364.3(12)(a) with another provision of state law—namely, section 216.19(1)(c) of the Iowa Civil Rights Act (ICRA). The court then found that Ordinance 5522 was "consistent with the authority given to cities" by section 216.19(1)(c) to prohibit a broader range of discriminatory practices under local civil rights ordinances. Thus, the court granted the defendants' motion, denied ABI's motion, and upheld the legality of the ordinance.

ABI appealed, and we retained the appeal.

II. Standard of Review.

Generally, we review a district court's ruling on summary judgment on for correction of errors at law. Weizberg v. City of Des Moines, 923 N.W.2d 200, 211 (Iowa 2018). "Summary judgment is appropriate when the record shows no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." Petro v. Palmer Coll. of Chiropractic, 945 N.W.2d 763, 769 (Iowa 2020) (quoting Munger, Reinschmidt & Denne, L.L.P. v. Lienhard Plante, 940 N.W.2d 361, 365 (Iowa 2020)).

III. Legal Analysis.

A. Ordinance 5522 and Iowa Code Section 364.3(12)(a). Waterloo Ordinance 5522 provides in part,

B. Prohibited Use Of Criminal Record Information: In connection with the employment of any person, it shall be an unlawful discriminatory practice for an employer to include a criminal record inquiry on any application. It shall further be an unlawful discriminatory practice for an employer who employs

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