Minimum wage applies to charter cities and all counties

In Marquez v. City of Long Beach, 244 Cal. Rptr. 3d 57 (2019), the Court of Appeal held that California's state minimum wage applies to all public employers, including charter cities and all counties. As the minimum wage increases in California, it will impact numerous employees, even those paid above the minimum wage. This decision clarifies an important issue for these employers.

Known as the "home rule doctrine," charter cities and all 58 counties are authorized by the California Constitution to govern themselves as to those matters deemed "municipal affairs." However, despite the home rule doctrine, the Legislature may regulate as to "matters of statewide concern" even if it impinges to a limited extent on powers the Constitution reserved to charter cities and counties.

There have been a number of California Supreme Court cases analyzing what qualifies as a "municipal affair" and what is a "matter of statewide concern." See, e.g., State Building & Construction Trades Council of California v. City of Vista, 54 Cal. 4th 547 (2012) (prevailing wage law, requiring certain minimum wage levels to be paid to contract workers constructing public works, is a municipal affair); Baggett v. Gates, 32 Cal. 3d 128 (1982) (an act setting forth a list of rights which public entities must afford all peace officers may constitutionally be applied to charter cities because it does not deprive local governments of the right to manage and control their police departments); Sonoma County Organization of Public Employees v. County of Sonoma, 23 Cal. 3d 296 (1979) (the determination of wages paid to employees of charter cities as well as charter counties is a matter of local rather than statewide concern); Healy v. Industrial Acc. Commission, 41 Cal. 2d 118 (1953) (the workers' compensation system is a subject of statewide concern).

In Marquez the court held that the Legislature may constitutionally exercise authority over the minimum wage despite the constitutional reservation of authority in charter cities to legislate as to their municipal affairs. The court recognized that the California Constitution limits the Legislature's authority to determine the wages of charter city employees, to cap those wages, and to outsource the authority to determine employee wages. "However, the Legislature may enact laws of broad general application that impact charter city compensation where the state law's infringement on local authority is reasonably related to an important statewide concern."

Under the framework set forth by the California Supreme Court in State Building & Construction, the Marquez court proceeded to determine whether: (1) the ordinance at issue regulates an activity that can be characterized as a "municipal affair"; (2) the case presents an actual conflict between local and state law; (3) the state law addresses a matter of "statewide concern"; and (4) the law is reasonably related to resolution of that concern and narrowly tailored to avoid unnecessary interference in local government.

Applying this test, the Marquez court concluded: (1) Compensation of charter city employees is a municipal affair; (2) the state minimum wage law conflicts with the City Charter; (3) the minimum wage for California workers is a matter of statewide concern; and (4) the minimum wage is appropriately tailored to address the statewide concern in the health and safety of workers.

On the third issue, the Marquez court gave "great weight" to the Legislature's view that those employed in California should be paid a wage sufficient to provide for their health and well-being. It also noted the minimum wage requirement was of broad general application, in contrast to narrowly tailored and particularized laws which the Supreme Court has invalidated under the home rule doctrine. The Marquez court recognized that the Supreme Court has typically approved of procedural laws encroaching on local authority more readily than substantive measures like minimum wage. However, it found the distinction between substantive and procedural measures is not dispositive. Although minimum wage requirements are substantive regulations that directly implicate municipal interests in employee compensation, they serve the fundamental purpose of protecting workers' health and welfare. The court also found that prevailing wage regulations are substantially different from minimum wage statutes because the prevailing wage law is effectively a salary setting statute whereas the minimum wage requirement merely sets a floor. Ultimately, the court concluded that "the Legislature may constitutionally exercise authority over minimum wages, despite the constitutional reservation of authority in charter cities to legislate as to their municipal affairs."

The impacts of Marquez are significant for at least two reasons. First, because charter city and county employers must now ensure that their employees are earning the minimum wage. As of Jan. 1, 2019, the minimum wage for employers with 25 or fewer employees is $11 per hour, which will increase $1 each year until maxing out at $15 in 2023. For employers with 26 or more employees, the minimum wage is currently $12 per hour, which will increase $1 per year through 2022 when it reaches $15 per hour.

Second, and perhaps more important, is that increasing minimum wage will not only be felt by charter cities and counties, but by all public agencies. Public agencies typically pay their employees per a salary schedule that sets forth the salary of each agency job classification. Compensation placement on the salary schedule is typically determined by market conditions (i.e., what the work performed is paid in the marketplace) as well as the importance of the duties and its relationship to other classifications in the agency.

The increasing minimum wage will cause increases to those classifications typically at the bottom of the salary schedule. The result will be that to maintain the relationships between the classifications on the salary schedule, employees or their representatives (e.g., labor associations and unions) will seek increases for employees whose salaries are above the minimum wage. This is already playing out at some public agencies and will continue to do so as the minimum wage increases over the next few years.