Court Opinion

ID: 4027612
Source: CourtListenerOpinion
Date Created: 2016-08-23 19:01:20.459668+00
Date Added: 2024-06-11T07:45:06.915935
License: Public Domain

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.

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