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With ‘Preemption’ Laws, States Seek to Stem the Tide of City Minimum Wage Hikes

Tuesday August 30th 2016

Minimum-WageThe federal minimum wage has remained at $7.25 per hour since 2009, and it’s unlikely that workers will see it rise anytime soon. Some states have a higher minimum wage but most of them are capped at $10 per hour. As a result, many city and local governments have taken matters into their own hands and passed higher minimum wage laws for their workers.

There are currently 34 cities with a minimum wage that’s higher than their state’s minimum wage, according to Bloomberg BNA data. And 18 of those cities are in California alone.

While the majority of workers support a higher minimum wage, some states are far less supportive of these laws. City and local minimum wage advocates argue that a higher minimum wage is necessary—particularly in cities with a higher cost of living.

Opponents argue that too much variation between federal, state and city minimum wage requirements creates too many regulations with which employers must comply. It is also a financial burden, which can force businesses to close and move to other cities with lower minimum wages or move to states with minimum wage preemption laws in place.

State Preemption Laws

In response to these city and local wage laws, some states have started passing preemption laws—effectively banning cities and locals from implementing higher minimum wages.

The legal standard known as Dillon’s Rule makes it possible for states to preempt city and local minimum wage laws. Put simply, Dillon’s Rule says that passing laws at the local level is not a legislative right expressly granted to municipalities.

Preemption allows state laws to take precedence over local laws that conflict with state requirements. When a state preempts a city or local minimum wage law, that new (likely higher) minimum wage cannot be enforced.

In 2011, Indiana became the first state to pass a preemption law prohibiting localities from establishing minimum wages higher than federal or state requirements. Since then, 20 other states have passed similar laws, including Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Kansas, Louisiana, Michigan, Mississippi, Missouri, North Carolina, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Utah and Wisconsin.

Challenging State Preemption Laws

Despite the legal hurdle that Dillon’s Rule creates for cities and locals looking to challenge state bans on local laws, some cities are challenging their states’ preemption laws anyway. For example:

  • Birmingham, Alabama passed a minimum wage law set to take effect this year but the law was voided by a state preemption law signed by the governor the day after the wage law took effect. A worker advocacy group is challenging the law in court on civil rights grounds.
  • A Missouri court stopped St. Louis from implementing its minimum wage law. The case is currently under appeal, with the Missouri Supreme Court set to hear it in October 2016.
  • Finally, Miami Beach plans to proceed with a challenge to Florida’s ban on local wages when the city’s minimum wage takes effect in 2018.

What Happens Now?

There is no end in sight to cities and locals passing minimum wage laws—and to states preempting such laws. Employers should closely monitor the states and cities they operate in to ensure they’re in compliance with local wage laws and are aware of any state challenges to those laws.

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