Subject: RE: Local Minimum Wage Summary

Summary:

On October 28, 2014, City Council received a memo from the NC Justice Center proposing that local governments can take action to enforce a living wage in the following ways: 1) by imposing civil penalties on private employers who violate employment laws; 2) by giving priority to bidders of government contracts that pay a living wage; and/or 3) requiring employers who receive local economic development incentives to pay a living wage. Staff was asked to review the memo and determine whether the proposals were legally valid.

In 2007, City Council adopted a living wage for all of its full and part­time employees. In 2011, 2012, and 2013, City Council expanded its living wage requirements to contract employees working on general service contracts. However, in August of 2013, HB 74 was enacted which prohibits cities and counties from requiring a private contractor to abide by a restriction that local governments cannot impose on all employers in its respective borders, such as paying minimum wage or providing paid sick leave to its employees, as a condition of bidding on a contract. In response, the City revised its purchasing and contracting policy and removed the requirement for a bidder to provide a living wage in order to bid on a City general services contract. However, the City currently provides a living wage for all of its full and part­time employees.

In reviewing the above proposals asserted in the memo, I have analyzed the following portions of the NC Constitution and NC General Statutes: 1) NC constitution ­prohibits the General Assembly from passing enabling legislation allowing local governments to enact a local, private or special act or resolution regulating labor, trade, mining or manufacturing); 2) NCGS 160­20.1­ prohibits cities from making bids on public contracts subject to conditions that they can't impose on all employers within its territory such as paying minimum wage; 3) NCGS 160A­174­authorizes cities the power to enact ordinances that define, regulate, prohibit or abate acts, omissions or conditions detrimental to the health, safety or welfare of its citizens; 4) NCGS 160A­175(c)­authorizes cities to impose penalties for ordinance violations.

In addition to the above, I have also analyzed the following case law: 1) Williams v. BCBS 357 NC 170 (2003)­court held that employment discrimination ordinance and enabling legislation were unconstitutional because it regulated covered employers and had the effect of regulating labor and trade as forbidden by the state's constitution and further held that County did not have ability under its police powers to create a new way for citizens to sue their employers; and 2) King v. Chapel Hill 758 S.E.2d 364 (NC 2014)­Court held that town had the authority under its police power to regulate some aspects of towing that are rationally related to the protection of citizen health, safety or welfare but invalidated fee caps portion of the ordinance in that it impaired the ability of towing companies to make a profit and suggested it violated the rights of persons under the NC Constitution to enjoy the fruits of their labor.

Based on a review of the NC Constitution, relevant NC general statutes and case law stated above, it is my opinion the first two proposals are not legally valid options. Faculty from the School of Government specializing in these areas have confirmed the same.

The third option is a legally valid option as it is permissible to require a company receiving an incentive to pay a certain wage in an economic development incentive agreement. In regards to economic development activities, NCGS 158­7.1(d) requires a local government to make findings about wages to be paid to workers and NCGS 158­7.1(d2) involves minimum wage requirements. A faculty member from the School of Government specializing in this area confirmed the same. Currently, the City's economic development policy requires companies to pay wages that exceed the County's average wage in order to receive economic incentives from the City.