Evolving Interpretation Of The Minimum Wage Amendment In Nevada
LGC Staff
Tue May 2, 2017
4:56 AM UTC

By Jennifer DelCarmen

In 2006, Nevada voters passed Question 6, which for the second time successfully amended the Nevada Constitution to add Article 15, Section 16, known as the Minimum Wage Amendment (“MWA”).  Under the MWA, employers can choose to pay an hourly minimum wage (currently) of $7.25 per hour if the employer provides health benefits at a total cost to the employee of not more than 10% of the income earned by the employee from the employer.  Alternatively, employers can choose to pay employees $8.25 per hour if the employer chooses not to provide health benefits.

In late 2016, the Nevada Supreme Court decided three cases clarifying certain provisions of the MWA.  In MDC Rest., LLC v. Eighth Jud. Dist. Crt., 132 Nev. Adv. Op. No. 76 (2016), the Nevada Supreme Court held that it is inconsequential whether the employee enrolled in the provided health program.  Rather, if an employer offered qualifying health benefits, the employer could legally pay the employee the lower wage of $7.25 per hour.  The Nevada Supreme Court further determined that tip income cannot be included in calculating whether the offered health benefits total 10% or less of the employees’ total income.

On the same day as the MDC case was decided, the Nevada Supreme Court also addressed related statute of limitations issues in Perry v. Terrible Herbst, Inc., 132 Nev. Adv. Op. No. 75 (2016).  There, the Court ruled that the two-year statute of limitations under NRS 608.260 applies to claims brought by an employee against an employer to remedy any violation of the MWA.

The last of the three decisions, Nevada Yellow Cab v. Eighth Jud. Dist. Crt., 132 Nev. Adv. Op. No. 77 (2016), was based in part on a prior decision in Thomas v. Nevada Yellow Cab Corp., 120 Nev. Adv. Op. 52 (2014), which held that the MWA impliedly repealed NRS 608.250(2)(e)’s exemption for taxi cab drivers.  Under the Thomas ruling, the Court ruled that the MWA applies to taxi cab drivers, and thus the drivers must be paid minimum wage in accord with the MWA.  Following Thomas, class actions were filed by taxi cab drivers seeking past unpaid minimum wages from the effective date of the MWA.  Taxi companies responded by arguing that the Thomas decision should only apply prospectively.  Ultimately, the Nevada Supreme Court agreed with the taxi cab drivers and held in Nevada Yellow Cab that the Thomas decision applies retroactively because the Nevada Supreme Court was merely declaring what the law was as opposed to creating new law.

This year, the Nevada Supreme Court has again issued a decision regarding the MWA, this time upholding the MWA in the face of constitutional challenges in Western Cab Comp. v. Eighth Jud. Dist. Crt., 133 Nev. Adv. Op. 10 (2017).  In 2012, Western Cab, a taxi company, began making drivers pay for their own fuel costs directly as opposed to deducting the costs from the drivers’ paychecks.  The drivers filed a Complaint alleging that once the fuel costs are considered, the drivers were making less than the minimum wage prescribed by the MWA.  Western Cab moved to dismiss the Complaint, arguing that the MWA is invalid because it is preempted by the National Labor Relations Act (“NLRA”), is preempted by the Employee Retirement Income Security Act of 1974 (“ERISA”), and is unconstitutionally vague.  The district court denied Western Cab’s Motion and Western Cab filed a Writ with the Nevada Supreme Court.

The Nevada Supreme Court held that that neither the NLRA nor ERISA preempts the MWA.  In regards to the NLRA, the Nevada Supreme Court noted that the NLRA does not contain a specific preemption clause.  However, the NLRA could still impliedly preempt the MWA under the Garmon or Machinists preemption.  The Garmon preemption protects the National Labor Board’s priority right to determine what is regulated by the NLRA, while the Marchinists preemption prohibits states from regulating “conduct Congress intended to leave open for the free markets to determine.”  Here, because the Complaint could not be brought to the NLRA and the Supreme Court allows states to the set minimal employment standards that do not conflict with the goals of the NLRA, the MWA is not preempted by Garmon.  Moreover, because the Supreme Court previously found that minimum wage laws are squarely within the police powers of the state, the MWA is not preempted by Machinists.

Unlike the NLRA, ERISA contains a preemption clause that “makes clear the regulation of employee benefit plans must remain an exclusively federal matter.”  Over the years, the Supreme Court has ruled that in determining whether ERISA preempts a state law, courts should look to the objectives of ERISA.  Based on precedent of Cervantes v. Health Plan of Nev., Inc., 127 Nev. 789 (2011), the Nevada Supreme Court concluded that the MWA does not connect with ERISA plans, and because the MWA has no effect on ERISA plans, the MWA is not preempted by ERISA.

The Nevada Supreme Court then addressed Western Cab’s argument that the MWA should be void for vagueness.  Under the two-part test set forth in Carrigan v. Comm’s on Ehtics, 129 Nev. 894 (2013), a law is unconstitutionally vague if it “(1) fails to provide a person of ordinary intelligence fair notice as to what is prohibited or (2) if it is so standardless that it authorizes or encourages serious discriminatory enforcement.”  Western Cab argued that it cannot understand what conduct is prohibited because the term “health benefits” is vague.  In disagreeing with Western Cab, the Nevada Supreme Court found that the MWA defines health benefits as “making health insurance available to the employee for the employee and the employee’s dependents at a total cost to the employee for premiums of not more than 10% of the employee’s gross taxable income.”  Health Insurance is defined in the Nevada Administrative Code 608.102(1).  Thus, a person of ordinary intelligence can determine what health benefits it needs to provide to pay the lower minimum wage contained in the MWA.

Ultimately, the Nevada Supreme Court declined to address whether the fuel costs should be taken into account when calculating minimum wage compliance.  The Nevada Supreme Court found that this determination was fact dependent and that such facts were not yet in the record.  However, the Nevada Supreme Court did uphold the MWA against preemption and vagueness challenges, meaning the litigation over compliance with the MVA will continue in the district court.

For more information about the MWA or other employment law issues, please contact Jennifer DelCarmen in LGC’s Las Vegas office.

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