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Holy Minimum Wage, Batman!

The Minneapolis $15 minimum wage is here to stay.

MINNEAPOLIS - Minnesota state law currently requires large employers with an annual revenue of $500,000.00 or more, like Graco, to pay a $9.86 minimum hourly wage. For small employees, the minimum wage is $8.04 per hour. In 2018, the City of Minneapolis (the "City") created a city ordinance that says large and small employers (defined as more than or fewer than 100 employees) will have to pay a $15.00 minimum hourly wage by 2022 and 2024, respectively. Does the state law preempt the municipal ordinance? The Minnesota Supreme Court (the "Court") says it does not. On January 22, 2020, the Court affirmed that the City can have an ordinance that requires the minimum hourly wage to be $15.00 per hour without conflicting with the Minnesota Fair Labor Standards Act (the "MFLSA").

The MFLSA established the minimum hourly wage that employers are required to pay their employees in the state of Minnesota. Minn. Stat. § 177.24 (2018). Subsequently, the City enacted an ordinance that will require employers to pay a higher minimum hourly wage than the MFLSA, both large and small employers will eventually have to pay a $15.00 minimum hourly wage. Graco, a large multinational corporation, sued the City in 2017. Graco argued that the MFLSA preempts the City's municipal ordinance, that both the ordinance and the statute contain conflicting information, express or implied terms that are incompatible with each other, and that state law occupies the field (i.e., an inference that the state law was intended to be pervasive and the legislature did not intend for cities to supplement it). Graco asked for a permanent injunction against enforcement of the ordinance. The district court said that the MFLSA sets a floor, not a ceiling, for minimum-wage rates, thus leaving room for municipal regulation, and the court of appeals panel agreed. Graco, Inc. v. City of Minneapolis, 925 N.W.2d 262, 265 (Minn. App. 2019).

Graco appealed to the Minnesota Supreme Court, again arguing that the MFLSA preempts the City's municipal ordinance. The Court determined that large employers who comply with the City's ordinance when it takes effect in 2022 also will be in compliance with the MFLSA. Its reasoning is simple. If the MFLSA requires Graco to pay a $9.86 per hour minimum wage (the current state minimum wage rate for large employers under the MFLSA), then, for example, Graco still will be in compliance with the City's ordinance if it also pays Minneapolis employees a $15.00 minimum wage (what the minimum wage will be for large employers in Minneapolis by 2022 per MCO § 40.390(b)(6), (c)(7)), because $15.00 is greater than $9.86.

The Court determined that employers can comply with the City's ordinance and the MFLSA, the ordinance and statute are reconcilable and do not conflict, the Legislature did not provide an indication that it intended to occupy the field of minimum wage rates, and, as far as Graco's concern that the MFLSA and the ordinance are irreconcilable, the Court disagrees. The Court concluded that the MFLSA does not preempt the City's ordinance.

The Court's decision is a great step for employees. But, this means it is time for employers to start preparing for this ordinance to take effect. Especially employers who do business in and outside of the City. Call our office today to discuss retaining the firm in an advisory capacity so your company is well prepared for the changes coming in 2022 and 2024. We can help you to avoid future headaches and, potentially, future litigation.

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Engelmeier & Umanah

Minneapolis Office
121 South Eighth Street
Suite 1300
Minneapolis, MN 55402

Phone: 612-455-7720
Fax: 612-455-7740
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St. Cloud Office
1521 Northway Drive Suite 115
St. Cloud, MN 56303

Phone: 320-230-0375
Fax: 320-230-0408
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