Court says State and Local Minimum Wage Standards can Trump Collective Bargaining Agreements

In American Hotels & Lodging Association v. City of Los Angeles, the Court of Appeals for the 9th Circuit rejected the argument that the National Labor Relations Act (NLRA), which governs relations between labor and management (including collective bargaining to set wages and other terms and conditions of employment), preempts local minimum wage ordinances that require higher wages. The 9th Circuit examined the history of Los Angeles ordinances increasing wages for hotel workers, with the current challenge to the most recent ordinance increasing minimum wages for workers at select large hotels throughout the city to $15.37 per hour.

American Hotels argued that Congress, in passing the NLRA left the ultimate decision of wages up for debate in the collective bargaining process. In a similar case, American Hotels had argued that Congress believed employers and employees could make “tactical bargaining decisions … to be controlled by the free play of economic forces,” and that the local minimum wage ordinance was designed to interfere with their labor-management relations and aid the Hotel Workers’ Union’s organizing efforts.

The 9th Circuit did not agree, finding that while state and local governments may not regulate the mechanics of collective bargaining, they can adopt minimum labor standards, such as minimum wages.  The 9th Circuit viewed the ordinance as setting the backdrop of labor negotiations, but not regulating how the negotiations would take place, and therefore it did not run afoul of the NLRA.  Employers operating under a collective bargaining agreement must take heed of the holding in American Hotels & Lodging Association v. City of Los Angeles, and ensure that employees are paid the greater of what is required by the collective bargaining agreement or the state or local minimum wage.  This becomes especially important for those whose employees work in multiple jurisdictions that have adopted local minimum wages, making the employer’s compliance with laws regarding base wages, overtime, and accurate wage statements even more complex.