New Orleans: Minimum wage increase's scope stirs up legal debate
Which businesses are exempt is at issue

By Stewart Yerton
Business writer/The Times-Picayune

As the Louisiana Supreme Court considers the constitutionality of a law that would raise the pay of thousands of low-wage workers in New Orleans, the two sides of the issue are debating a finer but essential question: To what businesses would the local minimum wage increase apply?

The high court on Monday heard arguments on the so-called living wage amendment to the City Charter, which voters approved by a 63 percent margin this year. If it survives the legal challenge, the measure will raise the hourly minimum wage to $6.15, $1 above the federal level for workers in New Orleans.

The central legal issue is whether the city has the right to enact the ordinance. The practical issue is which employers would be exempt.

Opponents, led by a consortium of associations called the Small Business Coalition to Save Jobs, say the ordinance would affect significantly more businesses than the federal minimum wage. The federal Fair Labor Standards Act, which establishes the federal wage, provides exemptions for companies with an annual "dollar volume" of less than $500,000.

The opponents say the New Orleans ordinance fails to provide such an exemption and that the wage ordinance therefore would apply even to companies that are exempt from the federal minimum wage.

Proponents of the ordinance say this is far from clear. One supporter says the ordinance is meant to follow the federal minimum wage and that the local wage thus would not apply to firms exempt from the federal wage law. Attorneys fighting to uphold the wage increase say the matter is one that the courts probably will have to decide.

"The law clearly says it's for work done in Orleans Parish and does not say that there's an exemption" for companies with revenue of less than $500,000, said Tom Weatherly of the Small Business Coalition to Save Jobs.

"They're right, there's no specific language in the act," said William Quigley, a Loyola School of Law professor who represents the New Orleans Campaign for a Living Wage, which supports the ordinance. "But this is something the courts will have to decide."

That, Quigley said, is because of language near the beginning of the ordinance. Although the ordinance clearly states an exemption for government workers, it makes no mention of employees of firms earning less than $500,000. Instead, the ordinance says simply that it "is intended to follow the scheme for calculating wages for the different types of employees as set forth in the Fair Labor Standards Act of 1938."

Quigley said this language could allow employers to argue the ordinance does not apply to those exempt under the Fair Labor Standards Act. According to the U.S. Department of Labor's "Small Business Handbook," these include companies with annual volume of less than $500,000.

Quigley said he personally believes the wage should apply to all workers in New Orleans. But he also said, "I think that it's unclear" that it would do so.

Louis Robein, Quigley's co-counsel, said a lawyer could use the ordinance's language to argue that certain employers are in fact exempt. But Robein said, "There is a matter of interpretation."

The ordinance also does not provide a specific exemption for nonprofit corporations. Whether they are in fact exempt would be a matter most likely resolved by a court, Robein and Quigley said.

Ed Harold, an attorney for the Small Business Coalition, takes issue with this. Harold noted that the ordinance spells out some specific exemptions, including government workers, and makes reference to other types of employees exempt under the Fair Labor Standards Act.

"The bottom line is this: They include some but not all of the exemptions in the Fair Labor Standards Act," he said.

Harold also cited a revised impact study conducted by the wage proponents' expert, University of Massachusetts economist Robert Pollin. An original 1999 study did not account for workers now exempt from the federal minimum wage, Pollin wrote.

"But we have been informed by attorneys on the case that the ordinance is likely to cover at least some significant part of the current pool" of workers exempt from the federal minimum wage, Pollin wrote.

Weatherly said the issue is critical because it determines how many employers the law will affect. Several cities have adopted local minimum wage laws, but these typically apply only to jobs associated with government contracts. The New Orleans wage is the most sweeping enacted to date, Weatherly said, and the failure to provide exemptions for businesses exempt from the federal minimum wage is a serious flaw.

"This is the first time where they have tried to do a more expanded approach," he said, "and they are trying to do it in the most expanded way possible."

The dispute has created an unlikely situation: The employer group most likely to include a small business seeking to avoid prosecution under the ordinance says such a business would in fact be under the law's jurisdiction. Meanwhile, proponents of the ordinance say it's unclear the law would apply to such small businesses.

Wade Rathke, a union organizer and longtime local living wage supporter, noted the irony. Rathke said the ordinance was meant to provide an exemption for small companies that are exempt under the federal law. But he said that if the Small Business Coalition wants to expand the interpretation to include all employers, he would gladly support that interpretation.

Robein said the debate about exemptions is beside the point: The state Supreme Court is deciding whether New Orleans has the right to enact a local minimum wage, not whether the ordinance clearly defined the employers and employees that would be covered. The exemption issue, he said, is a red herring.

"If that's what they're saying, then they're worried," Robein said. "They're worried that this is a close case."

Weatherly said the Small Business Coalition is simply trying to inform its members that they might be affected.

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Stewart Yerton can be reached at (504) 826-3495 or at