In the living wage battle between LAX-area hotels and the city, the next stop is likely to be the courthouse.
The operators of a dozen hotels around Los Angeles International Airport, as well as local business groups, said they are preparing to go to court to stop the city living wage law approved last week from taking effect.
The hotels and businesses contend the ordinance is too similar to an earlier Council measure that had prompted them to qualify a referendum for the ballot in order to ask voters to overturn it.
With this field of litigation relatively untested, one expert said it's unclear who may prevail.
"There is little case law in this area," said Frederic Woocher, election law attorney with the Santa Monica law firm of Strumwasser & Woocher LLP.
The City Council voted 9-3 on Feb. 13 to force the hotels to pay their employees the city's living wage of $9.39 an hour with benefits (and $10.64 without) as of July 1. The ordinance awaits final approval by Council this week and the expected signature of Mayor Antonio Villaraigosa.
The vote came two weeks after the Council agreed to rescind a previous living wage ordinance it passed in November. Hotels and business groups had gathered 103,000 signatures to place that original measure on the ballot as a referendum. Rather than let it go to a vote, a compromise was reached Jan. 31 to pass a replacement ordinance addressing business concerns.
But business leaders were unhappy with how the second ordinance turned out.
"The new ordinance is not substantially different from the original ordinance," said Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce. "It unfairly mandates the wages that specific employers must pay employees and provides no long-term assurances that this unprecedented government control will be limited to these businesses."
In anticipation of filing a lawsuit once Villaraigosa signs the ordinance, the hotels have hired Santa Monica election law attorney Colleen McAndrews. She will join lobbyist and attorney George Kieffer, a partner with Manatt Phelps & Phillips LLP, on the hotel legal team.
In a four-page letter to City Council President Eric Garcetti, Kieffer outlined the hotels' main argument: that the central portion of the original ordinance requiring the hotels to pay a living wage was not substantially altered in the substitute measure and therefore violates the will of the 103,000 voters who signed the petition.
"The City Council may not attempt to 'give life to the dead ordinance by passing it over again, or by passing an ordinance in all essential features like the one against which the petition protested,'" said Kieffer, citing a 1959 California Appeals Court ruling.
Living wage proponents plan to counter this argument with one that centers on Los Angeles being a charter city and therefore exempt from state law requiring that a revised ordinance be substantially different from the original ordinance that has been qualified for the ballot as a referendum.
"Even if it is substantially different, which we believe it is, it doesn't really matter since the city has no rule barring a similar ordinance from being enacted," said James Elmendorf, senior policy analyst with the Los Angeles Alliance for a New Economy.
In deciding this challenge, the key issue for the judge will be to identify the part of the ordinance that was found to be objectionable and prompted the petition drive, Woocher said. Then the judge will have to determine whether the language of that portion of the revised ordinance differs enough.
"You can't just add things on to the ordinance that have no direct bearing on the portion of the ordinance that was found to be objectionable unless they in some way make that portion less objectionable," he said.
While the hotels and business groups point to the portion of the original ordinance pertaining to the living wage as the part they find objectionable, making this case in court may be somewhat difficult, Woocher said. That's because when an aggrieved party places an ordinance on the ballot as a referendum, there can be no accompanying statement of reasons, no ballot argument that can then be cited in court. Making the outcome even more unpredictable is the little case law in the area.
But if the judge does strike down the ordinance, Woocher said the next move would be up to the City Council, which could drop the matter entirely or decide to take the revised ordinance to a vote of the people.
And if the judge upholds the ordinance, the hotels could decide to gather signatures again for another referendum effort, but only if they get a stay from the court to stop the referendum clock, which requires all signatures be gathered within 30 days of the measure being signed into law.
Hotel spokesman and political consultant Harvey Englander said that the hotels would likely seek a court injunction barring the living wage ordinance from taking effect until the merits of their challenge are decided; he did not address the stay on the referendum clock.
Second legal round
Should the hotels and business groups not prevail in court on the election law issue, they could file another lawsuit challenging the underlying issue: whether the city has the authority to expand the living wage law.
Under the current law, only businesses with a contractual relationship with the city either as a contractor, vendor or a lessee can be ordered to pay the living wage. This ordinance would, for the first time, apply the living wage to businesses that do not have any such contractual relationship with the city. As such it would seem to usurp the legal authority of the state and federal government, which are allowed to set minimum wage rates.
In crafting the language for the ordinance, Los Angeles City Attorney Rocky Delgadillo cited precedents in Berkeley and several other cities that allow this because the businesses in question are near a city asset that generates customers for the businesses. In the case of Berkeley, it was a city-owned marina; in Los Angeles, it's the city-owned international airport.
Business groups dispute this entire premise, saying it leads to a slippery slope. Using this line of reasoning, they say, a business that's next to a police or fire station could be subject to the living wage because those facilities create a safer environment that allows for customers to enter.
In an attempt to address these concerns, Tom Saenz, Villaraigosa's chief negotiator in the talks late last month, inserted language that bans the living wage from being applied to business just because they are located next to common city assets. The business must be next to an extraordinary asset like an airport or harbor or convention center that generates a huge amount of business in its immediate vicinity.
Should this challenge come before a judge, a key issue will likely be "the nexus between the jobs generated and the public safety of the city," said Gary Blasi, law professor at the University of California Los Angeles School of Law and acting director of the UCLA Institute of Industrial Relations.
"Under appropriate circumstances, cities especially cities with an operating charter like Los Angeles can regulate beyond people they contract with. The basic test of this authority is, 'Can the city link what happens to the workers to the things over which the city does have the authority?'"
Blasi said that if the city could demonstrate that having low-paid workers at the hotels leads to consequences such as gang crime or reliance on city services, it could be enough to justify the application of the living wage.
If the hotels and business groups were to pursue this second legal avenue, the legal costs could begin to mount. At that point, it might just be less costly for the hotels to drop the challenge and pay the living wage.
"We're a long way from any decisions on that point. Right now, we're focused on the election law issue," Englander said.
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