FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS AUG 23 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
AMERICAN HOTEL AND LODGING No. 15-55909
ASSOCIATION; ASIAN AMERICAN
HOTEL OWNERS ASSOCIATION, D.C. No.
2:14-cv-09603-AB-SS
Plaintiffs - Appellants,
v. OPINION
CITY OF LOS ANGELES,
Defendant - Appellee,
and
UNITE HERE LOCAL 11,
Intervenor-Defendant –
Appellee.
Appeal from the United States District Court
for the Central District of California
Andre Birotte, Jr., District Judge, Presiding
Argued and Submitted February 1, 2016
Pasadena, California
Before: Harry Pregerson, Kim McLane Wardlaw, and Andrew D. Hurwitz, Circuit
Judges.
Opinion by Judge Pregerson, Senior Circuit Judge:
The American Hotel & Lodging Association and Asian American Hotel
Owners Association (“the Hotels”) appeal the denial of their motion to
preliminarily enjoin the City of Los Angeles (“the City”) from enforcing the
Citywide Hotel Worker Minimum Wage Ordinance (“the Wage Ordinance”). The
Hotels argue that the entire Wage Ordinance is preempted by federal labor law,
referred to as Machinists preemption, because the Ordinance interferes with labor–
management relations. The Hotels also argue that the opt-out provision for
collective bargaining agreements is independently preempted.
The district court concluded that preemption was inapplicable and denied the
Hotels’ motion for preliminary injunctive relief. We have jurisdiction pursuant to
28 U.S.C. § 1291. We affirm.
I. Background
At issue in this case is the Citywide Hotel Worker Minimum Wage
Ordinance (“the Wage Ordinance”), adopted by the Los Angeles City Council on
October 1, 2014. The Wage Ordinance provides, among other provisions, an
increased minimum wage for workers at select hotels—large hotels citywide with
more than 150 rooms and some smaller hotels near the Los Angeles International
airport (“LAX”) that are already covered by another wage ordinance. An opt-out
provision allows hotels covered by a collective bargaining agreement to waive the
requirements of the Ordinance, and a hardship waiver allows those hotels whose
2
viability might be threatened by the Ordinance to postpone implementation for one
year.
A. Earlier Wage-Related Ordinances
The Wage Ordinance and its specific provisions follow a long history of
minimum-wage ordinances that have been adopted by the City of Los Angeles
(“the City”) and subsequently contested by employers.
In 1997, the City adopted one of the country’s first “living wage” ordinances
(“Airport LWO”), mandating increased minimum wages and compensated time off
for airport workers and certain contract employees working near LAX. See L.A.
Admin. Code §§ 10.37 et seq. The Airport LWO contains a heightened minimum
wage (a total cash minimum wage of $15.37 per hour as of 2013) and an opt-out
for workers covered by collective bargaining agreements. In 2012, an LAX
contractor sued the City, asserting that the Airport LWO was preempted by federal
law, including the Railway Labor Act. The district court rejected the plaintiff’s
preemption theory and granted summary judgment for the City, Calop Bus. Sys.,
Inc. v. City of Los Angeles, 984 F. Supp. 2d 981 (C.D. Cal. 2013), and we affirmed,
Calop Bus. Sys., Inc. v. City of Los Angeles, 614 F. App’x 867, 870 (9th Cir. 2015)
(“The Act does not preempt state and local laws that, like the [Airport] LWO,
impose minimum substantive requirements while permitting employers and unions
to bargain around them.”).
3
In 2006 and 2007, the City adopted two ordinances to regulate wages at
hotels near LAX. The City had determined that hotel customers—believing that
workers already received a portion of the “service charges” added to their bills—
reduced or eliminated tips to hotel workers. In 2006, the City adopted the Hotel
Service Charge Reform Ordinance (“Service Charge Ordinance”), Ordinance No.
178084, which required hotels to pass along service charges to the employees who
rendered the actual services.
In 2007, the City passed the Airport Hospitality Enhancement Zone
Ordinance (“AHEZ Ordinance”), Ordinance No. 178432, to provide a living wage
for employees of hotels with 50 or more rooms in the LAX area. The AHEZ
Ordinance contains a heightened minimum wage (a total cash minimum wage of
$12.28 per hour as of 2014), provides an opt-out for hotels covered by a collective
bargaining agreement, and contains a hardship waiver for hotel employers. In
2008, the AHEZ Ordinance was challenged by an airport hotel, which argued that
the ordinance was preempted by the National Labor Relations Act (“NLRA”). The
district court disagreed, noting that “the employer will have the opportunity to
negotiate a collective bargaining agreement whose rates could be higher or lower
than the living wage.” Fortuna Enters., L.P. v. City of Los Angeles, 673 F. Supp.
2d 1000, 1010 (C.D. Cal. 2008). The subsequent appeal was voluntarily dismissed.
B. The Present Wage Ordinance
4
Finding that the AHEZ Ordinance “has resulted in higher pay and real
benefits for low-income families, and the hotels around LAX have thrived,” the
City sought to extend the benefits of increased minimum wages to large hotels
citywide. Before reaching a decision, the City received input from economists and
consultants; the public; advocacy organizations such as the Los Angeles Alliance
for a New Economy (“LAANE”); and Appellee-in-Intervention, UNITE HERE
Local 11 (“Local 11”). 1 Based on this input, the City Council passed the Wage
Ordinance on October 1, 2014, extending a “fair wage” of $15.37 to hotels with
150 or more rooms, which the Council determined were in a better position to
absorb the cost of paying a living wage without layoffs.2 The Wage Ordinance also
replaces the 2007 AHEZ Ordinance governing hotels with 50 or more rooms close
to LAX.
The official purpose of the Wage Ordinance is to promote “an employment
environment that protects government resources,” and “the health, safety and
welfare of thousands of hotel workers by ensuring they receive decent
compensation for the work they perform.” Indeed, Los Angeles hotel workers are
among the lowest paid in the nation. To achieve these goals, the final ordinance
includes the following provisions:
1
Local 11, affiliated with LAANE, is currently the only union representative for
hotel workers in Los Angeles.
2
An hourly rate of $15.37 equates to an annual salary close to $32,000.
5
• Minimum Wage: Minimum wages of $15.37 per hour for workers at covered
hotels (exclusive of gratuities, service charge distributions, and bonuses),
with staggered implementation (beginning first for hotels with 300 rooms or
more and subsequently for hotels with 150 or more);
• Compensated Time and Sick Leave: 96 hours of compensated time off and
an additional 80 hours of uncompensated sick leave for full-time hotel
workers;
• Service-Charge Pass-Through: A requirement that service charges be
distributed to the non-supervisory workers who provide the service to the
customer;
• Enforcement: A private cause of action for back pay, attorneys’ fees, and
treble damages for willful violations;
• Exemption for Collective Bargaining Agreements: An opt-out for workers
covered by a bona fide, non-expired collective bargaining agreement, if the
waiver is set forth in that agreement in clear and unambiguous terms. (No
exemptions are available for terms unilaterally implemented by the parties.)
• One-Year Hardship Waiver: A one-year waiver available to employers if
necessary to avoid bankruptcy, shutdown, reduction in workforce by more
than 20 percent, or reduction in workers’ total hours by more than 30
percent.
Many of these provisions are identical to those in previous City ordinances that
have been upheld by the courts.3
C. Procedural History
On December 16, 2014, a few months after the Wage Ordinance was
adopted, American Hotel & Lodging Association and Asian American Hotel
Owners Association (“the Hotels”) sued the City, 4 arguing that “[u]nder the guise
3
For example, the collective bargaining agreement exemption, is identical to that
in the Airport LWO; the Service Charge Ordinance; and the AHEZ Ordinance.
Likewise, the language for the one-year hardship waiver, closely matches the
language used in the AHEZ Ordinance.
4
Local 11 was granted status as Intervenor-Defendant on March 25, 2015.
6
of an ordinance purporting to require that a ‘fair wage’ be paid to hotel workers,
the City has constructed . . . an insidious mechanism that improperly aids the Hotel
Workers’ Union . . . in its efforts to organize employees.” On January 26, 2015, the
Hotels filed a motion for preliminary injunction, arguing that the Wage Ordinance
is preempted by federal labor law (so-called Machinists preemption) because it
interferes with labor–management relations. On May 13, 2015, District Court
Judge André Birotte, Jr., denied the Hotels’ motion for a preliminary injunction,
holding that the Hotels had failed to show a likelihood of success on the merits.
The Hotels timely appealed.
II. Standard of Review
Denial of a preliminary injunction is reviewed for abuse of discretion.
Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011). A
district court abuses its discretion if its analysis is premised on an inaccurate view
of the law. Pom Wonderful LLC v. Hubbard, 775 F.3d 1118, 1123 (9th Cir. 2014).
In such instances, the court reviews de novo the legal premises underlying the
preliminary injunction. Id.
III. Discussion
A. The Wage Ordinance Is a Minimum Labor Standard
That Is Not Preempted by the National Labor Relations Act
1. States cannot regulate the mechanics of collective bargaining but may set
minimum labor standards
7
The NLRA—the federal architecture that governs relations between labor
and management, for example, union organizing, collective bargaining, and
conduct of labor disputes—has no express preemption provision. See 29 U.S.C. §§
151–169; Chamber of Commerce v. Brown, 554 U.S. 60, 65 (2008). Nonetheless,
the Supreme Court has recognized two implicit preemption mandates: Garmon
preemption and Machinists preemption. Brown, 554 U.S. at 65. Garmon
preemption, not at issue in this case, forbids states from regulating activity that
Congress (arguably) expected the NLRA to protect or prohibit. San Diego Bldg.
Trades Council v. Garmon, 359 U.S. 236, 245 (1959).
Under Machinists preemption, at issue here, the NLRA prohibits states from
restricting a “weapon of self-help,” such as a strike or lock-out. Int’l Ass’n of
Machinists v. Wis. Emp’t Relations Comm’n (“Machinists”), 427 U.S. 132, 146
(1976) (internal quotations omitted). Congress left these self-help tools unregulated
to allow tactical bargaining decisions “to be controlled by the free play of
economic forces.” Id. at 140 (internal quotations omitted). In Machinists, a union
refused to work overtime. When Wisconsin attempted to enforce a cease and desist
order, the Supreme Court held the order preempted. Id. at 155. By interfering with
the union’s bargaining tactic, Wisconsin interfered with “activity which must be
free of regulation by the States if the congressional intent in enacting the
comprehensive federal law of labor relations is not to be frustrated.” Id.
8
Minimum labor standards, such as minimum wages, are not subject to
Machinists preemption. Metro. Life Ins. Co. v. Massachusetts (“Metropolitan
Life”), 471 U.S. 724, 755 (1985). Such minimum labor standards affect union and
nonunion employees equally, neither encouraging nor discouraging the collective
bargaining processes covered by the NLRA. Id. Minimum labor standards do
technically interfere with labor–management relations and may impact labor or
management unequally, much in the same way that California’s at-will
employment may favor employers over employees. Nevertheless, these standards
are not preempted, because they do not “regulate the mechanics of labor dispute
resolution.” Concerned Home Care Providers, Inc. v. Cuomo, 783 F.3d 77, 86 (2d
Cir. 2015). Rather, these standards merely provide the “backdrop” for negotiations.
Metropolitan Life, 471 U.S. at 757 (internal quotations omitted). Such standards
are a valid exercise of states’ police power to protect workers. Fort Halifax
Packing Co. v. Coyne (“Fort Halifax”), 482 U.S. 1, 21–22 (1987).
The Supreme Court clarified the distinction between nonpreempted
employment standards and preempted regulation of the collective bargaining
process in Metropolitan Life and Fort Halifax. In Metropolitan Life, the Court was
faced with a Massachusetts law requiring general insurance policies and health
care plans to provide specific mental-health care benefits. 471 U.S. at 727. The
employer argued that the requirement was preempted because it imposed a contract
9
term that otherwise would be the subject of collective bargaining. Id. at 733. The
Court was not persuaded. It held that “Massachusetts’ mandated-benefit law is an
insurance regulation designed to implement the Commonwealth’s policy on
mental-health care, and as such is a valid and unexceptional exercise of the
Commonwealth’s police power.” Id. at 758. The Court determined that the
mandated-benefit law, “like many laws affecting terms of employment, potentially
limits an employee’s right to choose one thing by requiring that he be provided
with something else, [but] it does not limit the rights of self-organization or
collective bargaining protected by the NLRA, and is not preempted by that Act.”
Id. (emphasis added).
In Fort Halifax, the Court reiterated the distinction between minimum labor
standards and laws that intrude into the process of collective bargaining. 482 U.S.
at 19–22. The Court was faced with a Maine law that required employers to
provide a one-time severance payment to employees affected by plant closures,
unless the employment contract dealt with severance pay. Id. at 1. When the
employer argued that the law was preempted because it intruded into the collective
bargaining process, the Court underscored the critical role of the state in regulating
employment conditions:
It is true that the Maine statute gives employees something for which
they otherwise might have to bargain. That is true, however, with regard
to any state law that substantively regulates employment conditions.
Both employers and employees come to the bargaining table with rights
10
under state law that form a “backdrop” for their negotiations. Absent a
collective bargaining agreement, for instance, state common law
generally permits an employer to run the workplace as it wishes. The
employer enjoys this authority without having to bargain for it.
Id. at 21 (internal citation omitted). In other words, minimum labor standards set
the stage for labor–management engagement. See also Livadas v. Bradshaw, 512
U.S. 107, 132 & n.26 (1994) (noting that “familiar and narrowly drawn opt-out
provisions” for collective bargaining agreements are valid because they do not
impact rights to collective bargaining).
As Metropolitan Life and Fort Halifax clarify, state action that intrudes on
the mechanics of collective bargaining is preempted, but state action that sets the
stage for such bargaining is not. Compare Metropolitan Life and Fort Halifax with,
for example, Golden State Transit Corp. v. City of Los Angeles, 475 U.S. 608, 618
(1986) (preempting renewal of a taxicab franchise because it was conditioned on
the settlement of a strike), Brown, 554 U.S. at 68 (preempting state provisions
prohibiting employers from using funds “to assist, promote or deter union
organizing” because of the “explicit direction from Congress to leave [such]
noncoercive speech unregulated”), and even Machinists itself, 427 U.S. at 155
(preempting an order requiring union workers to work overtime). It is no surprise,
then, that “state minimum benefit protections have repeatedly survived Machinists
preemption challenges,” because they do not alter the process of collective
bargaining. Assoc’d Builders & Contractors of S. Cal., Inc. v. Nunn, 356 F.3d 979,
11
989 (9th Cir. 2004), as amended, No. 02-56735, 2004 WL 292128 (9th Cir. Feb.
17, 2004) (internal quotations omitted).
2. The Wage Ordinance is a minimum labor standard that is not preempted by
federal labor law
The district court did not err in finding the Wage Ordinance to be the kind of
minimum labor standard that falls within the ambit of state power. By providing a
basic minimum wage and time-off compensation, the Wage Ordinance alters the
backdrop of negotiations, not the mechanics of collective bargaining. Its many
provisions, including the opt-out for collective bargaining (see Section B below),
are valid. As such, the Wage Ordinance is not preempted.5
B. The Exemption for Collective
Bargaining Agreements Does Not Warrant Preemption
5
The Hotels argue that Bragdon should govern the preemption analysis. See
Chamber of Commerce v. Bragdon, 64 F.3d 497, 501 (9th Cir. 1995) (“Viewed in
the extreme, the substantive requirements could be so restrictive as to virtually
dictate the results of the contract.”). In Bragdon, we struck down a county
ordinance requiring employers to pay “prevailing wages” on private construction
projects costing over $500,000. Id. at 498. The prevailing wages were defined as
the per diem wages set by the state for public works projects, which in turn were
based on the wages in local collective bargaining agreements, effectively forcing
nonunion employers to pay what amounted to a union wage. Id. at 498–99, 502–
03. As such, we held that this ordinance interfered with the collective bargaining
process governed by the NLRA. Id. at 504. As we noted in Nunn, “[i]n invalidating
[the] prevailing wage ordinance [in Bragdon], we carefully distinguished, for
purposes of preemption, state established minimum wage regulations, which we
acknowledged to be lawful.” 356 F.3d at 991 n.8. The Wage Ordinance before us
is like the minimum wage upheld in Nunn, not the prevailing wage struck down in
Bragdon.
12
The Hotels also argue that the Wage Ordinance’s opt-out provision for
collective bargaining independently warrants preemption. The Supreme Court has
made clear, however, that the NLRA “cast[s] no shadow on the validity of these
familiar and narrowly drawn opt-out provisions.” Livadas, 512 U.S. at 132; see
also id. at 132 n.26 (“Nor does it seem plausible to suggest that Congress meant to
preempt 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.”).6
IV. Conclusion
6
The Hotels also contend that the opt-out for collective bargaining is preempted
because employers cannot unilaterally implement terms and conditions of
employment—and still be eligible for a waiver—once a collective bargaining
agreement has expired. Once a collective bargaining agreement expires, the Wage
Ordinance controls, and the employer is required to comply with the Wage
Ordinance; the employer cannot unilaterally reinstate the terms of the expired
agreement. The Wage Ordinance, in effect, has changed the bargaining conditions.
The Hotels argue that such interference in labor–management relations after the
collective bargaining agreement has expired warrants preemption.
We have previously rejected this argument. See Nat’l Broad. Co. v.
Bradshaw, 70 F.3d 69, 72 (9th Cir. 1995) as amended on denial of reh’g, No. 92-
56178, 1995 WL 708163 (9th Cir. Dec. 4, 1995). In National Broadcasting, an
employer brought a Machinists challenge to a state overtime law that exempted
employers covered by collective bargaining agreements. 70 F.3d at 69-70. The
employer argued that its ability to bargain was limited after an agreement expired
because it was forced to pay state minimum wages or negotiate a retroactive
overtime provision. Id. at 72. This court held that these effects were “without
consequence in federal labor law.” Id. Relying on Fort Halifax, the court noted that
minimum labor standards always form the “backdrop” of negotiations and so
default to this backdrop was not grounds for preemption. Id.
13
The district court did not abuse its discretion by denying the Hotels’ motion
for a preliminary injunction to stop enforcement of the City’s Wage Ordinance,
because the Hotels failed to show a likelihood of success on the merits. We have
consistently held that minimum labor standards do not implicate Machinists
preemption. The Wage Ordinance is no different.
AFFIRMED.
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COUNSEL LISTING
Michael Starr (argued) and Katherine Healy Marques, Holland & Knight LLP, New
York, New York; Kristina S. Azlin and John A. Canale, Holland & Knight LLP, Los
Angeles, California; for Plaintiffs-Appellants.
Sara Ugaz (argued), Ronald S. Whitaker, Thomas H. Peters, and James P. Clark,
Deputy City Attorneys; Michael N. Feuer, City Attorney; Office of the Los Angeles
City Attorney, Los Angeles, California; for Defendant-Appellee.
Paul L. More (argued), Yuval Miller, Andrew J. Kahn, and Richard G. McCracken;
Davis, Cowell & Bowe, LLP, San Francisco, California; for Intervenor-Defendant-
Appellee.
H. Christopher Bartolomucci and D. Zachary Hudson, Bancroft PLLC, Washington,
D.C., for Amici Curiae Chamber of Commerce of the United States of America and
Coalition for a Democratic Workplace.
15