The Power Struggle is Real: Local Minimum Wages Battle State Minimum Wages and How Dillon’s Rule Affects the Playing Field

Municipalities all across the country have dived into the employment arena in the past few years. In an April 2016 publication by the National Employment Law Project, it was reported that 51 municipalities across the country have either passed or currently have pending, proposals to raise the minimum wage. So often, clients ask, what is the DOL going to do about this if we don’t comply? The answer is simply—these ordinances are not state or federal laws and accordingly neither the state DOL nor the federal DOL have the authority to enforce the ordinances resulting in the municipalities need to create enforcement mechanisms. Thus, while we always recommend complying with all applicable statutes and ordinances, it is important to be mindful of the differences in remedies that could be available to employees if the employer fails to comply.

What is increasingly becoming popular in response to these municipal ordinances is the creation of state preemption laws that are applicable to minimum wage ordinances or other ordinances that attempt to provide more employee protection in the employer/employee environment. Twenty states currently have wage preemptions laws: Alabama, Colorado, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, North Carolina, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Utah, and Wisconsin.

So how do states have the authority to pre-empt these municipal ordinances? Under a theory known as “Dillon’s Rule” (named after the Chief Justice of the Iowa Supreme Court, Judge Forest Dillon), which provides that a municipal government has the authority to legislate only if: (1) they are expressly granted the power to act through express words in a statute, private act, or the charter that created the municipality; (2) the power that is being exercised is fairly or necessarily implied or incident to expressly granted powers; or (3) the power is otherwise implied as essential to the declared purpose of the municipality. States are thus finding that minimum wage legislative rights were not expressly granted to municipalities or otherwise available for them to govern, and thus are instituting pre-emption laws.

As mentioned above, Alabama has a wage pre-emption law. In April, a group of fast-food workers in Birmingham sued the state alleging that the pre-emption law (which would thus pre-empt Birmingham from enacting a minimum wage) was racially discriminatory and violated the equal protection clause of the Constitution. As the battle between federal, state, and local minimum wage law continues, it would be surprising if we do not continue to see similar challenges from both sides as more legislation is passed.