HONORABLE ANDRÉ BIROTTE, JR., UNITED STATES DISTRICT COURT JUDGE.
Plaintiffs American Hotel & Lodging Association and Asian American Hotel Owners Association ("Hotel Associations" or "Hotels" or "Plaintiffs") have filed a motion for a preliminary injunction (Dkt. No. 23), seeking an order staying the effective date and enjoining the enforcement of a Los Angeles minimum wage ordinance on the ground that it is preempted by the National Labor Relations Act.
There has been no shortage of briefing on this motion. Defendant City of Los Angeles ("City") and Defendant-in-Intervention UNITE HERE Local 11 ("Local 11") (collectively "Defendants") filed opposition briefs, as well as a supplemental brief to notify the Court of a recently decided case from the Second Circuit on a similar issue. (Dkt. Nos. 56, 76, 82.) Plaintiffs filed reply briefs, including an objection and response to Defendants' supplemental brief. (Dkt. No. 71, 81, 84.) The United States Chamber of Commerce and the Coalition for a Democratic Workplace filed a brief as amici curiae in support of Plaintiff' preliminary injunction motion. (Dkt. No. 78.)
Separately, the City filed objections to the evidence submitted in support of Plaintiffs' pending motion (Dkt. No. 60), as well as a motion to strike the same evidence addressed in the objections. (Dkt. No. 62.) Plaintiffs filed a response to the objections (Dkt. No. 72) and a brief in opposition to the City's motion to strike. (Dkt. No. 68.) The City filed a reply brief in support of its motion to strike. (Dkt. No. 70.)
A lengthy hearing was held on April 6, 2015. Having considered the materials and argument submitted by the parties, and for the reasons indicated below, the Court hereby
At issue in this case is Los Angeles Ordinance No. 183241, Citywide Hotel Worker Minimum Wage Ordinance ("Wage Ordinance"), which the City passed in October 2014. (Dkt. No. 24, Azlin Decl., ¶ 2, Exhibit 1 ("WO").) The Wage Ordinance provides minimum wage and compensated time off protections for workers at large hotels (hotels with more than 150 rooms) in Los Angeles.
The Wage Ordinance is not the first of its kind. In 1997, the City adopted a "living wage" ordinance, which mandates, among other things, that employers who employ airport workers and perform certain contract or subcontract work for the City pay their employees a minimum living wage (hereinafter referred to as the "Airport LWO") above and beyond that required by the then-state minimum wage. See L.A. Admin Code § 10.37 et seq.; see also Dkt. No. 57 City's Request for Judicial Notice ("City's RJN"), Exhibits 1-2.
In 2006 and 2007, the City adopted two ordinances regulating large hotels in the "LAX Corridor," a stretch of Century Boulevard near the Los Angeles International Airport.
In 2007, the City passed the Airport Hospitality Zone Enhancement Ordinance ("AHZE Ordinance"), Ordinance No. 178432, which included a living-wage provision that established minimum wages for employees of covered hotels. (City's RJN, Exhibits 5-6.) As of 2013, the AHZE Ordinance living wage was $11.03 per hour if the employer provided fringe benefits valued at $1.25 per hour, or $12.28 per hour if the employer provided no fringe benefits.
On February 18, 2014, several Los Angeles City councilmembers made a motion to secure a study and provide for public input of the Citywide economic impacts of imposing a living wage of $15.37 per hour for hotel employees at hotels with more than 100 rooms. (Dkt. No. 58, Dickinson Decl., ¶ 5, Exhibit 2.)
The City commissioned Blue Sky Consulting Group to conduct the study, which was completed and delivered to the City in June 2014. (Id. at ¶ 6, Exhibit 3.) Blue Sky's executive summary explained that while an increased minimum wage would increase hotel workers' wages, only a fraction of those increased wages would be spent within city limits (thereby benefitting
(Id.) The City also received several reports and comment letters from members of the public and interested parties regarding the proposed minimum wage, many of which expressed strong opposition to the proposal. (Id. at ¶ 7, Exhibit 4.) These reports and letters were submitted to the City before Blue Sky completed its report, and Blue Sky considered them in its analysis. (Id.)
The City then asked three economist firms — PFK Consulting, Economic Roundtable, and Beacon Economics — to analyze the economic impact of the proposed hotel workers minimum wage. In September 2014, the City Economic Development Committee prepared a report, summarizing the firms' findings. (Id. at ¶ 10, Exhibit 7.) PFK Consulting concluded that while the minimum wage increase would positively impact hotel employees, there would be a negative impact on hotels that would have to compensate for the higher wages by cutting costs and reducing operations and a negative impact on hotel employees who might, as a result, be laid off or have their hours reduced. Beacon Economics concluded that the minimum wage ordinance would result in job losses and questioned whether the proposed wage ordinance was the appropriate method for improving wages. Economic Roundtable concluded that the minimum wage ordinance is a prudent method to raise wages for hotel workers, who are some of the lowest paid workers in Los Angeles. The City Economic Development Committee's report also summarized the public comments on the proposed minimum wage ordinance, which included concerns that the minimum wage ordinance would disproportionately affect smaller hotels, that food and beverage operators within hotels would be at a competitive disadvantage to similar operations outside of hotels, and that hotels and hotel employees would be negatively impacted by reduced operations, employee layoffs, and possible closure as a result of absorbing the higher wage costs. Despite these negative concerns, the Economic Development Committee recommended that the City adopt the Wage Ordinance (subject to an amendment that the ordinance only apply to hotels with 150 rooms or more), largely because the increased wage rate would positively affect thousands of hotel employees and their families. (Id.)
Having considered the input from the public and interested parties, as well as the various consulting and economist firms, the City Council adopted the Wage Ordinance and signed the final version into law in October 2014. (Id. at ¶ 11, Exhibit 8.)
Currently, Local 11 is the only union representative for hotel workers in Los
Local 11 concededly lobbied for the passage of the Wage Ordinance. (Dkt. No. 76, Local 11 Opp. at 2-3; see also Dkt. No. 25, Mohrfeld Decl. ¶¶ 12-13.)
The City's official stated purpose for passing the Wage Ordinance is to promote "an employment environment that protects government resources," and to promote "the health, safety and welfare of thousands of hotel workers by ensuring they receive decent compensation for the work they perform." (WO at 1-2.) Specifically, the Wage Ordinance provides:
(Id.)
The Wage Ordinance contains the following definitions that are relevant to the Court's analysis:
(Id. at 3-4.)
The substantive terms of the Wage Ordinance relevant to the instant motion are the minimum wage and service-charge pass-through provisions, as well as the exemption and waiver provisions for collective bargaining agreements.
(Id. at 8.)
The Hotel Associations seek an order staying the effective date and enjoining the enforcement of the Wage Ordinance on the sole ground that it is preempted by the National Labor Relations Act. According to Plaintiffs, the ordinance interferes with collective bargaining, union organizing, and labor relations at all Los Angeles hotels subject to the ordinance by "improperly aid[ing]" Local 11 in its efforts to organize employees at non-union hotels, and disrupting the balance of economic power between Local 11 and unionized hotels by giving the union an economic weapon for which it would otherwise have to bargain. Thus, Plaintiffs argue, the Wage Ordinance is preempted because it improperly regulates a zone of activity that Congress intended to leave unregulated and subject to the free play of economic forces. (Dkt. No. 23, Mot. at 1.)
"A preliminary injunction is an extraordinary and drastic remedy." Pom Wonderful LLC v. Hubbard, 775 F.3d 1118, 1124 (9th Cir.2014) (quoting Munaf v. Geren, 553 U.S. 674, 689, 128 S.Ct. 2207, 171 L.Ed.2d 1 (2008)). To obtain a preliminary injunction, a plaintiff "must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of hardships tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res. Defense Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008); Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 877 (9th Cir.2009). The Winter factors are considered in conjunction with the Ninth Circuit's "sliding scale" approach, which provides that "the elements of the preliminary injunction test are balanced, so that a stronger showing of one element may offset a weaker showing of another." Vanguard Outdoor, LLC v. City of Los Angeles, 648 F.3d 737, 739 (9th Cir.2011).
"In one version of the `sliding scale,' a preliminary injunction could issue where the likelihood of success is such that serious questions going to the merits were raised and the balance of hardships tips sharply in [plaintiff's] favor." Id. at 740 (internal quotation marks omitted; brackets in original) (noting that the "serious questions" test survives Winter). Therefore, "serious questions going to the merits and a hardship balance that tips sharply in the plaintiff's favor can support issuance of an injunction, so long as the plaintiff also shows a likelihood of irreparable injury and that the injunction is in the public interest." Id. (internal quotation marks omitted).
The City objected to and moved to strike nearly every aspect of every piece of evidence submitted by the Plaintiffs in support of the pending motion. (Dkt. Nos. 60, 62.) The objections generally concern standard evidentiary issues, such as hearsay, foundation, improper opinion, personal knowledge, speculation, and relevance. To cover their bases, Plaintiffs submitted lengthy responses, spanning hundreds of pages, to the City's objections and motion to strike. (Dkt. Nos. 68, 72.)
It is well established that trial courts can consider otherwise inadmissible evidence in deciding whether to issue a preliminary injunction. See Univ. of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981) ("[A] preliminary injunction is customarily
The Court has reviewed each of the City's objections and Plaintiffs' responses. The Court finds the City's objections largely to be "boilerplate recitations of evidentiary principles or blanket objections without analysis." Capitol Records, LLC v. BlueBeat, Inc., 765 F.Supp.2d 1198, 1200 n. 1 (C.D.Cal.2010). Thus, it would be both "unnecessary and impractical" for the Court "to methodically scrutinize each objection and give a full analysis of each argument raised." Id. Accordingly, and in light of the relaxed evidentiary standard at this stage in the proceedings, the Court summarily holds that evidentiary objections inconsistent with this ruling and/or not discussed in the text of this order are
The Court now turns to the substance of Plaintiffs' motion for a preliminary injunction.
Two preemption doctrines carry out the federal labor policy that Congress created when it passed the National Labor Relations Act ("NLRA"). The first doctrine is known as Garmon preemption, see San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959), which "is intended to preclude state interference with the National Labor Relations Board's interpretation and active enforcement of the integrated scheme of regulation established by the NLRA." Golden State Transit Corp. v. City of Los Angeles, 475 U.S. 608, 613, 106 S.Ct. 1395, 89 L.Ed.2d 616 (1986) (quotations omitted); Dillingham Const. N.A., Inc. v. County of Sonoma, 190 F.3d 1034, 1041 (9th Cir. 1999) ("[Garmon] preempts state laws that attempt to regulate conduct [that] is either arguably protected or prohibited by the NLRA.").
The second doctrine, Machinists preemption, is at issue in this case. See Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132, 140, 96 S.Ct. 2548, 49 L.Ed.2d 396 (1976). Machinists prohibits states from regulating conduct that Congress intended to be "controlled by the free play of economic forces." Id. ("[In enacting the NLRA], Congress struck a balance of protection, prohibition, and laissez-faire in respect to
Plaintiffs argue that — with one exception — the Wage Ordinance is preempted not because of any single provision but based on how various provisions of the ordinance interact with one another. In summary fashion, Plaintiffs argue the following provisions and their effects render the Wage Ordinance preempted.
At the April 6, 2015 hearing, the Plaintiffs again emphasized that the Court should not conduct the Machinists preemption analysis by looking at the Wage
The parties agree that minimum labor standards are not subject to Machinists preemption, so long as they are laws of general applicability (affecting union and non-union employees alike), and they neither encourage nor discourage collective bargaining or self-organizing. (Mot. at 21; City Opp. at 10-12; Local 11 Opp. at 7.) The general principle that governments can pass minimum labor standards pursuant to their police power without running afoul of federal labor law was established in Metropolitan Life Ins. Co. v. Massachusetts ("Metropolitan Life"), 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), and affirmed in Fort Halifax Packing Co. v. Coyne ("Fort Halifax"), 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). The Ninth Circuit has since held that in extreme cases, "substantive requirements could be so restrictive as to virtually dictate the results of the [collective bargaining and self-organizing process]." Chamber of Commerce of U.S. v. Bragdon ("Bragdon"), 64 F.3d 497, 501 (9th Cir. 1995).
The instant motion for a preliminary injunction begs the obvious question that the Ninth Circuit left open in Bragdon: where does the Court draw the line for "extreme" cases? When does a substantive minimum labor standard — in this case, a minimum wage provision — become so onerous and restrictive that it dictates what otherwise would be the result of the free-play of economic forces?
To answer this question, the Court turns to the basic principle of feasible economic alternatives and — to put a finer point on the guidance of Bragdon — holds that a minimum wage standard is not preempted so long as (1) paying the minimum wage and (2) entering into a collective bargaining agreement are both economically feasible, such that the parties have a meaningful choice as between the two alternatives. Under these circumstances, the substantive dollar amount of a minimum wage provision is not so onerous and extreme so as to virtually dictate what would otherwise be the result of the free-play of economic forces. Said another way — and at the risk of mixing metaphors — a minimum labor standard that simply "alters the playing field" does not compel preemption; but when a minimum labor standard not only "alters the playing field" but also "forces the hand" of one or both parties, then Machinists preemption applies. As articulated below, the Plaintiffs have failed to meet their burden that the Wage Ordinance's $15.37 per hour minimum wage is economically unfeasible, such that it deprives Hotel Employers from having a meaningful choice as between paying the minimum wage and entering into a collective bargaining agreement, thereby forcing the hand of non-union hotels to unionize.
Because the facts of Metropolitan Life and its progeny are central to the analysis, the Court begins with a review of the pertinent case law and then addresses Plaintiffs' various arguments.
In Metropolitan Life, the Supreme Court considered whether federal labor law preempted a Massachusetts law that required specific minimum mental-health care benefits to be provided under general insurance policies and employee healthcare plans. 471 U.S. at 727, 105 S.Ct. 2380. The Massachusetts Attorney General brought an enforcement action against an insurance company. The insurance company argued as a defense that the state law was preempted because "welfare benefits are a mandatory subject of bargaining" under federal labor law, and the law at issue would affect the terms of subsequent collective bargaining agreements between employers and employees. Id. at 751-52, 105 S.Ct. 2380. The Supreme Court rejected the defendant's argument and held that regulations "establishing minimum terms of employment" are not preempted under Machinists. Id. at 754, 105 S.Ct. 2380. The Supreme Court explained:
Id. at 754-55, 105 S.Ct. 2380. Thus, because the Massachusetts law affected union and non-union employees equally and neither encouraged nor discouraged collective bargaining and the right to self-organization, the Supreme Court held that the Massachusetts law survived Machinists preemption. Id. at 755, 105 S.Ct. 2380.
Two years after deciding Metropolitan Life, the Supreme Court again considered the issue in Fort Halifax, 482 U.S. 1, 107 S.Ct. 2211 (1987). Fort Halifax involved a Maine statute that required employers to provide a one-time severance payment to processing plant employees when a subject plant closed in the state. Id. at 4, 107 S.Ct. 2211. Subject employers were exempt from the statute's severance requirements if an affected employee was covered by an "express contract providing for severance pay." Id. at 4 n. 1, 107 S.Ct. 2211. In defending an enforcement suit by former employees and state officials, the defendant processing plant argued that the severance statute was preempted on the grounds that the law "intrudes on the bargaining activities of the parties because the prospect of a statutory obligation undercuts an employer's ability to withstand a union's demand for severance pay." Id. at 20, 107 S.Ct. 2211. The Supreme Court again rejected this preemption argument:
Id. at 20-21, 107 S.Ct. 2211 (citations omitted) (emphasis added). The Supreme Court explained that employers and employees come to the bargaining table with state law rights that form a "backdrop" for their negotiations. Id. at 21, 107 S.Ct. 2211. Absent a collective-bargaining
The Fort Halifax defendant sought, unsuccessfully, to distinguish the Maine severance statute from the Massachusetts mental-health care insurance statute in Metropolitan Life, arguing that the severance statute was not a "genuine minimum labor standard" because it only applied in the absence of an agreement covering severance pay. Id. at 22, 107 S.Ct. 2211. The Supreme Court flatly rejected this argument:
Id. (emphasis added). Thus, the Supreme Court held, the severance statute was not preempted but a "valid and unexceptional exercise of the State's police power." Id.
In this case, the Hotel Associations argue that the statutes at issue in Metropolitan Life (mental-health care benefits) and Fort Halifax (severance pay) were upheld not because they were minimum labor standards but rather because, as a result of their being minimal requirements, they did not actually interfere with collective bargaining. (Mot. at 20-24; Reply to City's Opp. at 11.) Here, in contrast (the Plaintiffs' argument goes), the wage provision is 70% higher than the current California minimum wage of $9 per hour, and therefore it is not the type of "minimum" standard contemplated by Metropolitan Life and Fort Halifax. (Mot. at 14.) To support their argument, the Hotel Associations direct the Court to Bragdon, 64 F.3d 497 (9th Cir.1995).
In Bragdon, the Ninth Circuit held that the Machinists doctrine preempted a Contra Costa County ordinance that required construction employers to pay "prevailing wages" on certain private industrial construction projects. Id. at 498. The prevailing wage determination was made "by reference to established collective-bargaining agreements within the locality in which the public work [was] to be performed." Id. In analyzing whether the prevailing wage ordinance was "incompatible with the goals of the NLRA," the Ninth Circuit noted that while "minimal substantive requirements" are not subject to Machinists preemption (citing Metropolitan Life), more onerous substantive requirements could affect the collective bargaining process:
Id. at 501. In this context, the Ninth Circuit held that the prevailing wage ordinance was preempted because it "does much more than the type of state regulation that has previously been held not preempted." Id. Unlike minimum wage statutes, the prevailing wage concept was "derived from the combined collective bargaining of third parties in a particular locality." Id. at 502. The prevailing wage was neither a fixed statutory or regulatory minimum nor "the result of the bargaining of those employers and employees actually involved in the selected construction projects." Id. In this regard, the prevailing wage left employers with a false choice: in either scenario, employers could only ever pay a union bargained-for wage, and they were deprived of the freedom to choose something different.
Defendants argue that the Wage Ordinance is not an extreme case and direct the Court to the 2008 district court decision in Fortuna, which considered the applicability of Bragdon to the City's AHZE Ordinance, a regulation nearly identical to the Wage Ordinance at issue here. Fortuna, 673 F.Supp.2d 1000 (C.D.Cal.2008). As mentioned above (see supra note 4), the AHZE Ordinance established a minimum wage for Hotel Workers in the LAX Corridor. In analyzing Bragdon, the Fortuna district court noted that "[f]irst, and most importantly," the AHZE Ordinance was distinguishable from the one at issue in Bragdon because the AHZE Ordinance was not a prevailing wage statute; "that is to say, it is not tied to collective bargaining agreements entered into by third parties." Id. at 1009. The Fortuna district court went on to explain:
Id. The AHZE Ordinance, in contrast, "is a fixed number that is not tied in any way to collective bargaining agreements between third parties. As a result, an employer can choose to pay the living wage, or it can enter into a collective bargaining agreement." Id. at 1010. The critical distinction from Bragdon is that in Fortuna, "the parties had the opportunity to negotiate freely," and thus "the substantive requirements of the [AHZE] Ordinance are not so `restrictive as to virtually dictate the results of the contract,' as was the case in Bragdon." Id.
The Fortuna district court, while distinguishing Bragdon in substance, accepted the premise that there are "legitimate concerns" that employees and unions will petition the local government for localized ordinances in order to target individual businesses, which, in extreme cases, could result in ordinances "with such onerous terms that business owners are virtually forced to enter into a collective bargaining agreement in order to pay lower wages." Id. (quoting Bragdon, 64 F.3d at 504). The Fortuna district court held that the AHZE Ordinance was not such an extreme case because the minimum wage
The only difference between the text of the AHZE Ordinance,
A key point of Plaintiffs' preemption argument is that the $15.37 per hour wage provision is not the type of "minimum" standard contemplated by Metropolitan Life and Fort Halifax because the wage is so high. This necessarily requires the Court to consider the substantive dollar amount of the minimum wage provision and whether that dollar amount presents Hotel Employers with an economically feasible alternative to union organizing in order to determine how high is too high for purposes of NLRA preemption. By directing the Court's attention away from this critical question, Plaintiffs attempt to obfuscate the issue. Notably, Plaintiffs cannot identify a single case where any court held that a minimum labor standard was so onerous that it rendered the statute preempted.
For reasons similar to those articulated in the Fortuna decision, the Court finds that Plaintiffs have failed to satisfy their burden in establishing that the Wage Ordinance's $15.37 per hour minimum wage is so onerous that it is inconsistent with the legislative goals and purposes of the NLRA and therefore preempted. As with the AHZE Ordinance, the Wage Ordinance minimum wage provision is not tied in any way to third party agreements, and so a Hotel Employer can choose to pay the minimum wage, or it can enter into a collective bargaining agreement. Either way, the parties can "negotiate freely." Fortuna, 673 F.Supp.2d at 1010. That the Wage Ordinance changes the backdrop for the negotiations is not significant because that would be the case with respect to any change in the minimum wage dollar amount. See Fort Halifax, 482 U.S. at 21, 107 S.Ct. 2211. Additionally, as with the AHZE Ordinance, the economic hardship exemption allows Hotel Employers to obtain relief from the Wage Ordinance if implementation of its terms would result in a 20% reduction of workforce or a 30% curtail in workers' hours, bankruptcy, or shut down. The hardship exemption, in essence, operates to give non-union Hotel Employers the necessary "out" before their compliance with $15.37 per hour minimum wage becomes so economically unfeasible as to compel preemption.
The Plaintiffs' own evidence disproves its preemption argument with respect to the Wage Ordinance's minimum wage provision. For example, in the declaration of Michael Wlodkowski — general manager for the Renaissance LAX, a non-union hotel in the LAX Corridor — Mr. Wlodkowski explains the economic impact of the hotel's prior compliance with the AHZE Ordinance beginning in 2007, as well as the anticipated economic impact of the hotel's compliance with the Wage Ordinance come July 1, 2015. (Dkt. No. 37, Wlodkowski Decl.) Because the Renaissance LAX does not have a collective bargaining relationship with any union, it was not and is not eligible for a waiver from the AHZE and Wage Ordinance's minimum wage provisions. Mr. Wlodkowski explains that the Renaissance LAX's estimated cost of compliance with the Wage Ordinance will be approximately $260,000 per year. (Id. at ¶¶ 14, 19.) This additional cost of compliance may put Renaissance LAX at a competitive disadvantage as compared to union hotels that are eligible for a waiver. (Id. at ¶¶ 17-20.) Critically, Mr. Wlodkowski's declaration suggests that Renaissance LAX will opt to absorb the economic cost of compliance rather than yield to Local 11 demands for card-check recognition and neutrality agreements. (Id.) Were Renaissance LAX to yield to Local 11's demands, the hotel would have a likely chance of unionizing (see generally Eigen Decl. ¶ 46), which in turn would make the hotel eligible for a Wage Ordinance waiver. Other declarations by representatives of nonunion Hotel Employers provide accounts that are similar to that of Renaissance LAX, i.e., they concede that compliance with the Wage Ordinance's $15.37 per hour minimum wage, though undesirable, is economically feasible. (See, e.g., Dkt. No. 29, Hannigan Decl. re Palomar Westwood; Dkt. No 30, Hsu Decl. re Hilton LAX Towers; Dkt. No. 32, Mora Decl. re LAX Courtyard Marriott; Dkt. No. 33, Roberts Decl. re Beverly Hills Crowne Plaza; Dkt. No. 34, Robey Decl. re Holiday Inn Torrance; Dkt. No. 35, Rowling Decl. re Omni Los Angeles; Dkt. No. 36, Stigter Decl. re Four Seasons; Dkt. No. 38, Zen Decl. re Holiday Inn Torrance.) Notably, none of the declarations provide that, as a result of the Wage Ordinance, any given non-union Hotel Employer will be forced to (i.e., it
Plaintiff's biggest concern with the $15.37 per hour minimum wage provision is that it is bad economic policy.
The Hotel Associations argue that this case is distinguishable from Fortuna because in Fortuna the plaintiff asserted only a facial challenge to the AHZE Ordinance and conceded that state minimum labor standards are not subject to preemption; whereas here the Plaintiffs have provided the Court with a detailed factual record and make no "ill-advised concession as to blanket immunity from Machinists preemption...." (Reply to City's Opp. at 15 n.7.) The Court does not see the logic in this argument. As an initial matter, the Court does not read Fortuna to suggest that the plaintiff made any sort of concession that minimum labor standards have blanket immunity from Machinists preemption. More importantly, however, any attempt to distinguish Fortuna as a "facial" challenge is a red herring. The nomenclature of a facial challenge — versus an as-applied one — simply implicates the two ways a court may declare a statute unconstitutional, i.e.: (1) the court may declare a statute invalid on its face, such that a state may not enforce it under any circumstance; or (2) the court may find the statute unconstitutional as applied to a particular set of circumstances, allowing the state to enforce the statute in other circumstances. See generally, Michael C. Dorf, Facial Challenges to State and Federal Statutes, 46 STAN. L. REV. 235, 236 (1994). Here, the Plaintiffs' seek an order enjoining the City from implementing and enforcing the Wage Ordinance under any circumstance, and therefore they indisputably assert a facial challenge against the Wage Ordinance.
That Plaintiffs submitted myriad declarations and other evidence in support of the instant motion (see Dkt. Nos. 24-38) does not change the analysis. To the extent these declarations are relevant to the analysis, they do not speak to the legal issue before the Court. For example, and as discussed above, each of the declarations provide detailed accounts of how implementation of the $15.37 per hour minimum wage will increase salary costs and may require the non-union Hotels to offset those costs — including by passing the costs on to customers through higher prices — in ways that make the non-union Hotels less competitive as compared to neighboring hotels that are either unionized (and therefore eligible for a waiver) or located outside the city limits (and therefore not subject to the Wage Ordinance). As a result, the declarants provide, any given non-union Hotel "could face economic pressure to strike a deal with the Union to obtain a waiver that will allow it to remain competitive in its market." (See, e.g., Dkt No. 29, Hannigan Decl. ¶ 29.)
The Hotel Associations also attempt to capitalize on Bragdon's warning that employees and unions may "seek to set minimum wage and benefit packages with political bodies," substituting "the free-play of political forces for the free-play of economic forces that was intended by the NLRA." Bragdon, 64 F.3d at 504 (9th Cir.1995). (See Reply to Local 11's Opp. at 8.) Plaintiffs make much of the fact that Local 11 lobbied the City Council in passing the Wage Ordinance, and that the Hotel Associations (and other third parties with aligned interests) were not given equal access during the legislative process. (See, e.g., Mot. at 4.) To support their argument that Local 11's lobbying efforts are relevant to the preemption analysis, Plaintiffs direct the Court to the dissent in Chamber of Commerce of U.S. v. Lockyer ("Lockyer"), 463 F.3d 1076, 1098 (9th Cir. 2006) rev'd sub nom. Chamber of Commerce of U.S. v. Brown, 554 U.S. 60, 128 S.Ct. 2408, 171 L.Ed.2d 264 (2008). The Ninth Circuit's Lockyer dissent suggested that the entire assembly bill at issue (AB 1889) was preempted because it was "sponsored by the California Labor Federation, ALF-CIO, and supported by a phalanx of labor unions." Id. at 1102 (Beezer, J. dissenting). Plaintiff's reliance on the Lockyer dissent is misplaced for at least three reasons. First (and most obviously), the Lockyer dissent is just that, a dissent, and therefore it is not now, and never has been, controlling authority on this Court. Second, as the Ninth Circuit's Lockyer majority pointed out, evidence of union sponsorship is an "irrelevant" consideration because it is "not up to [the courts] to impugn the California's legislature's motives." Id. at 1097 n. 21; see also Livadas, 512 U.S. at 120, 114 S.Ct. 2068 (citing Golden State Transit Corp., 475 U.S. at 613, 106 S.Ct. 1395 (noting that the City's desire to remain "neutral" in labor dispute does not determine pre-emption)).
Accordingly, because Plaintiffs have not satisfied their burden that the $15.37 per hour minimum wage is anything but a valid exercise of the City's police power, the substantive dollar amount of the minimum wage provision, on its face, does not support a finding of Machinists preemption.
In conjunction with their arguments regarding the Wage Ordinance's $15.37 per hour minimum wage, Plaintiffs make much of the fact that the ordinance fails to distinguish between tipped and non-tipped employees and does not permit Hotel Employers to include gratuities or Service Charges to the minimum wage calculation. (Mot. at 5, 14 (citing Dkt. No. 29, Hannigan Decl. ¶¶ 16-22; Dkt No. 35, Rowling Decl. ¶¶ 21-22.) Plaintiffs state that typically in the hotel industry (and presumably in other service industries), tipped employees receive lower hourly wages because, as a result of their tips, they are often the highest paid employees at hotels. In order to maintain this pay structure once the Wage Ordinance goes into effect, Hotel Employers may have to raise non-tipped employees' hourly wages significantly higher than the $15.37 per hour minimum wage, which in turn will result in "exceedingly costly compensation schemes inconsistent with hotel economies." (Mot. at 14.)
The response to this argument is simple. The California Labor Code prohibits the state and municipalities from establishing minimum wages that distinguish between tipped and non-tipped workers. Cal. Labor Code § 351; see also Henning v. Industrial Welfare Commission, 46 Cal.3d 1262, 1279, 252 Cal.Rptr. 278, 762 P.2d 442 (1988) (holding that a two-tier minimum wage provision is invalid because it "purports to allow an employer to pay a tipped employee a wage lower than he would be obligated to pay if the employee did not receive tips"). Plaintiffs do not dispute that California law prohibits the City from making such a distinction in setting minimum wages. Thus, Plaintiffs' argument here is really a nuanced version of Plaintiffs' argument discussed above, i.e., that the dollar amount of the $15.37 per hour minimum wage is so onerous that it is not the type of minimum labor standard contemplated by Metropolitan Life and Fort Halifax. For the reasons articulated above (the Court will not repeat them here), this argument is without merit.
The Hotel Associations next argue that giving unions the "exclusive" power to grant waivers of the Wage Ordinance's terms disrupts the balance of power between labor and management because it gives unions an "economic weapon" that the union would not otherwise have. (Mot. at 14.) The Hotel Associations further argue that because the ordinance does not automatically exempt hotels with collective bargaining agreements but instead requires parties to renegotiate their existing agreements to include the waiver, the ordinance
Plaintiffs' arguments regarding the waiver provision fall short. Exemptions for collective bargaining agreements with respect to any minimum labor standard are par for the course, as they are nearly guaranteed to be present in any labor-related statute. Plaintiffs' counsel conceded as much at the April 6, 2015 hearing. The Supreme Court has made clear that the NLRA "cast[s] no doubt on the validity of these familiar and narrowly drawn opt-out provisions." Livadas, 512 U.S. at 132, 114 S.Ct. 2068. It is simply "[not] plausible to suggest that Congress meant to pre-empt such opt-out laws as `burdening' the statutory right of employees not to join unions by denying nonrepresented employees the `benefit' of being able to `contract out' of such standards. Id. at 132 n. 26, 114 S.Ct. 2068; see also Babler Bros., Inc. v. Roberts, 995 F.2d 911, 915 (9th Cir.1993) (applying the reasoning in Fort Halifax to find that a statute was not preempted where it exempted union employers from paying overtime wages). Further, the Ninth Circuit has rejected the argument that a collective bargaining agreement waiver is preempted simply because it may incentivize non-union employers to unionize. See Viceroy Gold Corp. v. Aubry, 75 F.3d 482 (9th Cir.1996).
At issue in Viceroy was California Labor Code § 750 et seq., which set a maximum workday of eight hours for persons engaged in mining and smelting, unless the workers were covered by a valid collective bargaining agreement that "expressly provides for the wages, hours of work, and working conditions of the employees." Id. at 486. The employer, which operated a non-union facility, argued that the labor code was preempted because it put the facility "at a competitive disadvantage relative to union mines and that `operational efficiency, safety and employee morale are all adversely impacted" by the interpretation and enforcement of the statute." Id. The district court found that the opt-out provision was preempted under Machinists because "[a]ny attempt to characterize the eight-hour shift limitation as a `minimum-benefit' for mine workers is disingenuous in light of the overwhelming evidence that the prohibition is highly onerous to [non-union] employees and employers of the mining industry." Id. at 489. The Ninth Circuit reversed, holding that while the eight-hour work day requirement may be "burdensome," the statute "undoubtedly provides some minimum protection to non-union mine workers, while permitting a longer work day through the protections provided by the collective bargaining or the [union] election process...." Id. at 489-90.
The Hotel Associations attempt to distinguish Viceroy on the grounds that California Labor Code § 750 does not require the waiver to be "clear and unambiguous" like the Wage Ordinance at issue here; and that the Viceroy opt-out provision was not exclusive to collective bargaining agreements, as it allowed employees to waive the labor code requirements if a two-thirds majority of the affected employees of a particular employer voted to adopt an alternative policy (subject to certain restrictions). (See Reply to City Opp. at 17 n.10; Reply to Local 11 Opp. at 7.) Plaintiffs' arguments are not persuasive. The Supreme Court has already held that collective bargaining agreement waivers need to be "clear and unmistakable" to be given effect. See Livadas, 512 U.S. at 125, 114 S.Ct. 2068. And this makes perfect sense. The right to $15.37 per hour minimum wage belongs to the affected hotel workers. Thus, because California law requires that "the valid waiver of a right presupposes an actual and demonstrable knowledge of the very right being waived,"
Plaintiffs' argument that the waiver provision gives unions an "economic weapon" that it would not otherwise have is equally unpersuasive. As Local 11 pointed out at the April 6, 2015 hearing, there is no evidence before the Court with respect to which party (the employer or the union) has the upper hand in bargaining power. California has enacted a vast array of regulations governing labor standards that form the "backdrop" of employee and employer state law labor rights. Some of these regulations ostensibly favor employers. For example, California law presumes all employees are at-will employees absent contract terms specifying otherwise. Guz v. Bechtel Nat. Inc., 24 Cal.4th 317, 335, 100 Cal.Rptr.2d 352, 8 P.3d 1089 (2000) (citing Cal. Labor Code § 2922) ("An at-will employment may be ended by either party `at any time without cause,' for any or no reason, and subject to no procedure except the statutory requirement of notice."). Typically, collective bargaining agreements contract around California's at-will employment policy and contain for-cause termination clauses. Plaintiffs' argument with respect to the waiver provision is akin to a union arguing that California's at-will employment policy (or any other seemingly pro-employer regulation) is subject to Machinists preemption because it provides employers with an economic weapon for which it might otherwise have to bargain. The Court assumes no party to this litigation would suggest that to be the case. Thus — reminding Plaintiffs that "any state [or local] law that substantively regulates employment conditions" gives one party or the other something for which it otherwise might have to bargain, Fort Halifax, 482 U.S. at 21, 107 S.Ct. 2211 (emphasis added) — the Court finds that the Wage Ordinance's waiver provision and its effects are consistent with the NLRA's legislative goals and purposes and do not implicate Machinists preemption.
The Hotel Associations' waiver arguments are part and parcel of their arguments regarding the so-called ban on unilateral implementation. To review, the Wage Ordinance provides that "[u]nilateral implementation of terms and conditions of employment by either party to a collective bargaining relationship shall not constitute or be permitted as a waiver of all or any part of the provisions of this article." (WO at 8.) The Hotel Associations argue that this provision provides an independent basis for preemption because unilateral implementation is "an integral part of the bargaining process" in labor management relations, and requiring hotels to
Plaintiffs rely on Barnes v. Stone Container Corporation, 942 F.2d 689 (9th Cir. 1991) to support their argument. (See Mot. at 19.) In Barnes, the collective bargaining agreement between Barnes' employer and his union had expired. After several months of unsuccessful negotiations, the parties reached an impasse. Following the expiration of the collective bargaining agreement but before the parties reached an impasse, the employer fired Barnes for harassment after he sprayed two replacement employees with water when they crossed the picket line. The union filed an unfair labor practice charge on Barnes' behalf, asserting that the stated reason for his discharge was pretextual and that the employer fired him for his union activity. The NLRB investigated and found no basis for the retaliation charge, and the union withdrew the complaint. Barnes then filed a state law action under the Montana wrongful discharge act ("WDA"), which provides that an employee discharge is "wrongful" if the termination is not for "good cause," except when the employee is covered by a collective bargaining agreement. The employer moved for summary judgment, arguing that Barnes' wrongful discharge lawsuit was preempted under Machinists because it "would impose a just cause term where one did not exist (i.e., under the expired CBA), thus affecting the relations between employer and its represented employees after contract-termination and prior to impasse," a time period during which "the NLRA contemplates relations free of state interference." Id. at 691. The district court denied summary judgment, but the Ninth Circuit — relying on a Second Circuit case, Derrico v. Sheehan Emergency Hosp., 844 F.2d 22 (2d Cir.1988) — reversed.
In Derrico, the plaintiff — who was also discharged after expiration of the collective bargaining agreement but before the union and employer had bargained to impasse — filed a state court action, alleging that he had been fired without just cause. His theory was that the expired bargaining agreement contained a just cause provision which, after contract expiration and prior to impasse, resulted in an implied contract between each union employee and the employer that there would be no discharge without cause. The Second Circuit affirmed the district court's dismissal of the plaintiff's case under Machinists, explaining that the theory of an implied contract resulting from an expired collective bargaining agreement created "substantial potential for friction" with the "delicate machinery of the NLRA," and permitting the plaintiff's lawsuit would "artificially limit" the parties' post-expiration options. Id. at 28. The Second Circuit explained:
Id. at 29 (internal citations omitted).
Relying on the Second Circuit's reasoning in Derrico, the Ninth Circuit panel in Barnes found that the plaintiff's state law wrongful discharge lawsuit was preempted under Machinists:
Id. at 693.
There are two unique aspects of Barnes that render its reasoning inapplicable to the facts in this case. First, the Ninth Circuit acknowledged that the Montana WDA is a substantive minimum labor standard different in kind than the minimum labor standards at issue in, for example, Metropolitan Life and Fort Halifax,
Plaintiffs reliance on Brown v. Pro Football, Inc. ("Pro Football"), 518 U.S. 231, 116 S.Ct. 2116, 135 L.Ed.2d 521 (1996) (see Mot. at 19-20), does not change the analysis. Pro Football involved the extent to which the non-statutory labor exemption to antitrust laws shielded the National Football League ("NFL") club owners' unilateral implementation of new salary caps ($1,000 per week) for developmental squad players after the league's collective bargaining agreement with the players union had expired and negotiations had reached an impasse. It was undisputed that the club owners' unilateral implementation — absent the labor exemption — would have constituted an unlawful restraint of trade. In holding that the exemption applied to the club owners' conduct at issue in the case — i.e., their post-impasse imposition of a proposed employment term concerning a mandatory subject of bargaining — the Supreme Court explained that "[a]s a matter of logic, it would be difficult, if not impossible, to require groups of employers and employees to bargain together, but at the same time to forbid them to make among themselves or with each other any of the competition-restricting agreements potentially necessary to make the process work or its results mutually acceptable." Id. at 237, 116 S.Ct. 2116 (emphasis in original); see id. at 242, 116 S.Ct. 2116 ("All this is to say that to permit antitrust liability here threatens to introduce instability and uncertainty into the collective-bargaining process, for antitrust law often forbids or discourages the kind of joint discussions and behavior that the collective-bargaining process invites or requires.").
The Hotel Associations finally argue that because (1) non-union Hotels must enter into collective bargaining agreements as a statutory predicate to receive a waiver, and (2) Local 11 is the only union for hotel workers in Los Angeles and organizes exclusively through card-check/neutrality agreements, then Hotel Employers are effectively required to acquiesce to Local 11's neutrality demand to be eligible for a waiver. Thus, the Plaintiffs argue, "the City has doubly rejiggered the economic calculus as to whether or not to acquiesce to the Union's demand for card-check recognition," which in turn compels Machinists preemption. (Mot. at 12-14; Reply to City's Opp. at 11.) This argument is not persuasive.
As discussed in detail above, the Wage Ordinance's minimum wage and waiver provisions do not interfere with collective bargaining and labor relations, and they do not otherwise conflict with the NLRA's legislative goals and purposes. Nothing in the Wage Ordinance requires any Hotel Employer to unionize, enter into a card-check/neutrality agreement,
In summary, the Plaintiffs have failed to show any likelihood of success on the merits. As stated at the beginning of this analysis, the whole of the Wage Ordinance is no greater than the sum of its parts. On its face, the Wage Ordinance is a minimum labor standard that neither encourages nor discourages collective bargaining. The minimum wage provision operates simply as part of the backdrop for collective bargaining negotiations — to the extent the parties opt to partake in such negotiations — and it is otherwise part of the minimum labor standard landscape that provides state law rights that the parties enjoy without having to bargain for them. Nothing about the waiver provision (including the ban on unilateral implementation) warrants preemption: the Supreme Court and Ninth Circuit have held that such opt-out provisions are valid and that union employees are entitled to the full protections of minimum standards absent a valid collective bargaining agreement for something different, including during any gap periods between such agreements.
Because Plaintiffs have not shown any likelihood of success on the merits, they cannot make the necessary showing of irreparable harm. Thus, under any version of the sliding scale approach, Plaintiffs have not satisfied their high burden for the
Plaintiffs seek a preliminary injunction staying the effective date and enjoining enforcement of the City's Wage Ordinance, mandating a $15.37 per hour minimum wage for Hotel Workers at large Hotels in Los Angeles, which is scheduled to go into effect on July 1, 2015. Plaintiffs argue that the Wage Ordinance is preempted under the NLRA. A review of Plaintiffs' arguments and evidence, however, make clear that Plaintiffs' biggest concern with the Wage Ordinance is that it is bad economic policy. However, it is not the role of the Court to interject into matters of legislative economic policy under the guise of NLRA preemption. When Plaintiffs' arguments and evidence are considered against the backdrop of the NLRA preemption legal standard, Plaintiffs have not satisfied their high burden for the extraordinary and drastic remedy of preliminary injunctive relief.
Metropolitan Life and its progeny provide that, under Machinists preemption, minimum labor standards are presumptively valid, so long as they are laws of general applicability and neither encourage nor discourage collective bargaining or self-organizing. While the Ninth Circuit has recognized that in an extreme case, the substantive requirements of a minimum labor standard could be so restrictive as to virtually dictate the results of the collective bargaining and self-organizing process, this occurs only where one or both parties are deprived of a meaningful choice as between complying with the substantive requirements and entering into a collective bargaining agreement. Here, Plaintiffs have failed to meet their burden that the Wage Ordinance's $15.37 per hour minimum wage is so onerous that it is economically unfeasible and therefore forces the hand of non-union hotels to unionize. Plaintiffs' own evidence establishes that Hotel Employers have a meaningful choice as between paying the $15.37 per hour minimum wage and entering into collective bargaining agreements, and so the Wage Ordinance's minimum wage provision does not compel preemption. Similarly, Plaintiffs have failed to meet their burden that the Wage Ordinance's waiver provision interferes with collective bargaining and labor relations or is otherwise inconsistent with the NLRA's legislative goals and purposes. Union opt-out provisions are also presumptively valid, and union employees are entitled to the full protections of minimum labor standards absent a collective bargaining agreement for something different, including during any gap periods between such agreements. Accordingly, the Hotel Associations have failed to show any likelihood of success on the merits of their NLRA preemption claim, and their motion for a preliminary injunction staying the effective date and enjoining enforcement of the Wage Ordinance is
The City's motion to strike (Dkt. No. 62) is
