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Nevada Supreme Court Upholds The State’s Minimum Wage Amendment

Western Cab Company v. Eighth Judicial District Court of Nevada, No. 69408 (Nev. March 16, 2017).

Background:

Former employees of Petitioner Western Cab Company (“Western Cab”) filed a lawsuit against Western Cab, alleging that the company violated the Minimum Wage Amendment (WMA) of the Nevada Constitution (Article 15, Section 16). The MWA establishes a minimum wage for Nevada employees. However, the MWA also provides an employer may pay its employees an even lower minimum wage if the employer also provides health benefits to those employees. The MWA also has an exception to these two minimum wage options, in which an employer may pay its employees even less than if the wage is the product of a collective bargaining agreement.
In the present case, Western Cab required “its drivers to pay for fuel directly instead of deducting fuel costs from the drivers’ paychecks.” The former employees alleged when the cost of fuel is taken into account, Western Cab paid its drivers less than the two-established minimum wages in the MWA. Western Cab denied the allegation and filed a motion to dismiss the former employees’ complaint, arguing: (1) the MWA is federally preempted by the National Labor Relations Act (NLRA), (2) the MWA is federally preempted by the Employee Retirement Income Security Act of 1974 (ERISA), and (3) the MWA is unconstitutionally vague. The district court denied Western Cab’s motion, which led to an appeal to the Nevada Supreme Court.

The Court’s Analysis:

The Court analyzed each of Western Cab’s three arguments and addressed the former employees’ argument regarding the fuel-payment issue. The Court first addressed Western Cab’s NLRA argument. The company argued the MWA “violates the equitable bargaining process protected by the NLRA” because “the purpose of the MWA is to help unions and unionized employers compete with nonunionized employers.” Western Cab argued this results in NLRA preemption.

The Court disagreed with Western Cab. In reaching its ruling, the Court performed a preemption analysis. The NLRA does not have an express preemption clause, so the Court looked at the two types implied preemption outlined by the U.S. Supreme Court: Garmon and Machinists.

Garmon preemption “protects the Labor Board’s priority right to initially determine what is or is not regulated under the NLRA.” Under Garmon, if a controversy arising from a state law that is presented to a state court is “identical to…that which could have been, but was not, presented to the Labor Board” for a determination, that law is preempted under Garmon. The Court held since “the MWA neither requires nor prohibits collective bargaining or any other activities protected under the NLRA, we conclude that the MWA is not preempted under Garmon.”

Machinists preemption “prohibits states from regulating conduct that Congress intended to leave open for the free market to determine,” such as through collective bargaining. The Court determined because “minimum wage laws are an authorized use of a state’s police power,” and the MWA’s minimum employment standard is “not inconsistent with the general legislative goals of the NLRA,” the MWA does not conflict with the NLRA and is not preempted. Furthermore, the MWA explicitly allows employers and employees to “bargain around the minimum wage requirements.”

The Court also disagreed with Western Cab’s ERISA argument. ERISA essentially protects those employees who are employee benefit plan participants. Unlike NLRA, ERISA has an explicit preemption clause that “makes clear that regulation of employee benefit plans must remain an exclusively federal matter.” Under U.S. Supreme Court precedent, a state law does not run afoul of ERISA for purposes of preemption if “they merely ‘mention a covered employee welfare benefit plan’ or if the law’s ‘text includes the word ERISA.’” To be preempted, the state law would have to act “immediately and exclusively upon ERISA plans…or where the existence of ERISA plans is essential to the law’s operation.”

The Court in this case began its analysis by explaining under U.S. Supreme Court precedent, “when starting an ERISA preemption analysis, courts should presume that Congress did not intend to supplant state law.” The Court then held since the “MWA does not affect the types of benefits an employer must provide or force employers to provide benefits at all,” ERISA does not preempt the MWA. The Court also noted although the MWA does not, a “minimum wage law could, however, be preempted by ERISA if the law ‘refers to, or has a connection with, employee welfare benefit plans.’”

The Court also rejected Western Cab’s argument the MWA was unconstitutionally vague. “The void-for-vagueness doctrine is rooted in the Due Process Clauses of the Fifth and Fourteenth Amendments” of the Constitutions. Western Cab argued a person of ordinary intelligence could not understand what is prohibited or required because the terms “health benefits” and “health insurance” are so vague. However, the Court found the MWA already defined the term “health benefits,” and “health insurance” is defined in Nevada’s Administrative Code (NAC 608.102(1)). Therefore, a person of ordinary intelligence can understand the MWA and the MWA is not unconstitutionally vague.

Lastly, the Court declined to rule on the fuel-payment issue. There was insufficient information in the record to determine whether the drivers’ wages and fuel-payment requirements were the product of a collective bargaining agreement, which would full under the MWA exception. Consequently, the Court remanded this issue to the district court.

Significance:

The Court’s decision affirms the constitutionality of Nevada’s Minimum Wage Amendment and puts employers on notice it is not preempted by the NLRA or ERISA. Therefore, employers in Nevada must follow the MWA’s minimum wage requirements. Furthermore, this case provides further guidance on the MWA’s exception to the two minimum wage paths, affirming a wage that falls below the minimum wage is legal if it is the product of collective bargaining.

ABOUT THE AUTHOR: Chris Lund is an Associate in the Las Vegas, NV office. Mr. Lund specializes in insurance defense, personal injury, professional liability, and general civil litigation. Contact him at (702)724-2648 or clund@tysonmendes.com.