13 Nov Portland, Maine’s new Minimum Wage and Emergency Minimum Wage
The latest referendum passed by Portland voters related to minimum wages and emergency wages has caused much confusion.
Here’s what we know:
1. The referendum’s language increases the City’s minimum wage in a tiered fashion starting 1/1/2022.
2. The referendum did not, however, specifically state on what date the emergency 1.5x wage provision kicks in. (But did it need to?)
3. On Nov. 10, the City Council determined they will not enforce the emergency wage provision until Jan 1, 2022.
4. The group that led the referendum has stated they will actively try to find businesses that are following the City’s guidelines (not using the emergency wage measure until 1/1/22), and attempt to sue them on behalf of the employees to get back pay plus penalties, which is permitted under the ordinance, and you can bet there are lawyers similarly anxious to do so.
This is scary because a lawsuit, besides being very expensive, time intensive, and emotionally draining, puts the interpretation of the ordinance and the timing of that provision in the hands of a state court, and out of the hands of the City’s elected officials. There could also be lawsuits against businesses that don’t pay according to the law, and against the City itself. If the City’s interpretation of the ordinance as stated on November 10 is called into question by such a lawsuit, the court could do a few things:
- The court would likely be asked if the City’s interpretation of the ordinance is arbitrary and capricious, which is the standard of review applied to the judicial review of an agency determination. The City Council’s action would be considered an agency determination. If found arbitrary or capricious, then the court could: (i) interpret the provision of the ordinance such that it doesn’t need a start date (it is merely just a new part of the ordinance), and thus it takes effect when all referenda take effect (30 days after the election, i.e. December 3. 2020), (ii) legislate from the bench and determine what date the emergency wage provision kicks in. Either way, people will have to deal with that result, or (iii) the court could send the matter back to the City Council to establish a date that was not arbitrary, and thus was in line with the rationale and public policy behind the referendum in the first place (essentially, institute the timing of (i) or (ii) above.
- If the court finds that the City Council acted reasonably, then the official kick-in date would be 1/1/22.
So, following the directive of the City will produce uncertain results, at best.
What is absolutely certain in the event your business is sued by one or more of your employees for not following the labor laws is how expensive litigation will be. If you win, you still pay all your legal fees, and the disruption to your business during the lawsuit is hard to measure. Ouch! If you lose, you pay your legal fees, the winner’s legal fees, back-pay to the employees, and penalties (plus the business disruption). Quadruple ouch!
So the big picture here is that it’s entirely unclear right now, and very scary for any Portland business that pays any of its employees less than $18 per hour. All this uncertainty also makes it fairly impossible for our firm to give clear advice right now on this issue, other than to remind any business in this position that it has to make a business decision here and now in light of the legal realities as they are right now. I think the question for any business comes down to its appetite for risk. We do hope that in the near future the Maine Department of Labor will weigh in with an interpretation, or that a court has cause to render a decision helping to clarify things for Portland employers. But in the meantime, it may be wise to simply pay the increased minimum wage as of December 5 and figure out how to overcome the unintended expenses.
Maybe those holiday bonuses are coming early this year, and are actually mandated by the Portland voters …
[UPDATE 11/17/20] Some clarifications and insights gleaned from the helpful (11/17/20) webinar hosted by the Portland Chamber of Commerce on this issue.
- The emergency wage does not need to be paid to anyone already earning more than $18/hour.
- For non-Portland based businesses, merely sending your employees into Portland to do work does not subject you to having to pay them the emergency wage.
- It would be a potential anti-trust violation for employers to communicate/band together and agree not to pay their employees the emergency wage.
The panelist attorneys Jim Cohen, of Verrill, Mary Costigan of Bernstein Shur, and Jim Erwin of Pierce Atwood added that in addition to a lawsuit against an employer by an employee [lengthy process], some other paths to gain clarity here could be:
- An employer group seeking a Declaratory Judgment on this issue directly from the Superior Court. [Lengthy process]
- Portland Council deciding to hold a special election to change this ordinance (the council can’t change the wage law for 5 years on their own, but they can make changes sooner if approved by voters). [Unlikely]
Unfortunately, this doesn’t brighten our outlook for employers…
[UPDATE 12/3/30] Big news! The Portland Chamber and 5 Portland businesses are suing to request the Superior Court to clear this mess up!
This is great news, because one way or another, businesses need to know what to do and what to plan for. And while the nature of the Chamber’s declaratory judgment lawsuit is certainly different from what I estimated might happen, we hope the result will be the same: some level of clarity for Portland businesses on this issue. (A request for a declaratory judgment is just what it sounds like: “Hey Court, we don’t know what to do. Please declare what is the law here, one way or another, so we can move on with our lives.”)
Specifically the Chamber, et al, is asking the Court to declare that the referendum in question is not permitted by Maine’s Constitution because only referenda regarding municipal affairs are permitted, and, the lawsuit alleges, this referendum goes beyond that, citing the definition of “municipal affairs” as those “affairs that are exclusively municipal in character and that the State does not share any concurrent authority over.” Here, the complaint suggests, the referendum covers subject matter (specifically the emergency wage provision) that is not exclusive to the City of Portland. If the referendum question is not authorized by the Maine Constitution, it must be voided.
Additionally and alternatively, the lawsuit argues that the City of Portland’s Code prohibits this referendum ordinance as well because the Portland Code confines “the scope of municipal voters’ constitutional right to exercise legislative powers via direct initiative to legislative matters on municipal affairs.” Here, it is argued that the emergency wage provision is not a legislative matter but rather an executive function because it is temporary in nature and dictates the effect of a Governor-issued emergency proclamation.
Finally, the suit argues that even if the emergency wage provision is not deemed to exceed the authority given the voters by the Maine Constitution or the Portland City Code, it should not take effect until January 1, 2022 because, essentially, of poor drafting (the complaint would argue). Here is the excerpt:
Anyway, the plaintiffs have requested emergency review of this lawsuit, given that December 5 is when Portland employers should start paying the $18 minimum wage, if effective. Let’s hope we hear from the court in the next few days… stay tuned!