In May 2016, the City of Minneapolis passed a highly-publicized ordinance requiring most employers to provide paid sick and safe leave for many employees. The ordinance resurfaced in Minnesota headlines this week when a Hennepin County judge prevented the City from enforcing the ordinance against nonresident employers when it goes into effect in July.
Recap: The ordinance
Minneapolis Ordinance No. 2016-040 requires employers to provide their employees with 1 hour of paid sick/safe leave for every 30 hours worked, with annual caps and some rollover. Leave can be used for various illness- or safety-related events, including illness of an employee or family member and school closings. The effective date is July 1, 2017.
The ordinance’s most controversial provision was its expansive scope. Paid leave was mandated for all employees who worked at least 80 hours in Minneapolis per calendar year. In practice, this provision included vast numbers of nonresident, out-of-state, and even foreign businesses.
Lawsuit and request for injunction
In October 2013, a coalition including the Minneapolis Chamber of Commerce and several businesses sued the City of Minneapolis. The coalition sought to invalidate No. 2016-040, arguing that the ordinance was preempted by state law and overreached municipal power. The case is currently pending in Hennepin County. In the meantime, the coalition requested an injunction to prevent the City from enforcing the ordinance against employers until final resolution of the case, which could take months or even years.
The decision on the injunction
On Thursday, January 19, the Court granted a partial injunction. The injunction forbids the City to enforce the ordinance against employers who don’t reside within City boundaries. In other words, the court agreed with the coalition that the ordinance overreached municipal power with regards to nonresident employers. However, the order doesn’t apply to resident employers.
The Court’s analysis: Why the ordinance only applies to Minneapolis employers
Traditionally, cities can’t regulate things outside their boundaries.1 Ordinances that violate this rule are “extraterritorial.” The test for whether an ordinance is extraterritorial involves whether the ordinance attempts to prevent a harm that would occur within the municipality’s borders.
In this case, the Court found that the harm to be prevented was the public health threat posed by employees who show up sick to work. However, that harm could occur virtually anywhere – nothing in the ordinance ensures that the employee’s workplace is in Minneapolis. Per the Court, this lack of nexus to Minneapolis gave the ordinance an “extraordinary reach” unjustified by Minnesota law.
The Court acknowledged that within the City’s boundaries, the ordinance was a valid regulation to minimize the spread of disease. Accordingly, the ordinance can be enforced against employers who reside in Minneapolis.
No finding of preemption
The Court rejected the preemption arguments, finding that the ordinance did not conflict with current state law and that state law did not so fully occupy the field of private-employer-provided paid leave as to evince an intent to foreclose municipal regulation in this area.
What the decision means
For Minneapolis-resident employers, the ordinance will still be effective July 1, 2017. For nonresident employers, the ordinance can’t be enforced for now. When the case reaches final resolution, the ordinance may be upheld, overturned, or modified.
This ruling could spell trouble for the City of St. Paul, which enacted a virtually-identical ordinance in September 2016, including purported applicability to all employees who work 80 hours per calendar year in St. Paul. Based on the Minneapolis ruling, there may be challenges posed to the St. Paul ordinance in the near future.