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On February 25, 2021, the U.S. District Court for the Central District of California denied a motion for preliminary injunction brought by the California Grocers Association (CGA) against the City of Long Beach. In California Grocers Association v. City of Long Beach, CGA asked the court to stop the city from enforcing its Premium Pay for Grocery Workers Ordinance, one of the many “hero pay” or “hazard pay” ordinances enacted by California localities in the past several weeks.

Long Beach passed its ordinance on January 19, 2021. The ordinance requires that large grocery stores (with at least 300 employees nationwide and 15 employees per store in Long Beach) in the city provide each grocery worker with premium pay of an additional $4.00 per hour for each hour worked for a minimum of 120 days. The next day, CGA filed a lawsuit in federal court to block the city from enforcing the ordinance. The CGA argued that the National Labor Relations Act (NLRA) preempted the ordinance and that the ordinance violated the contract and equal protection clauses of the United States Constitution and the California Constitution. The court ruled that CGA could not establish that it was likely to succeed on these claims, a requirement for winning a preliminary injunction motion.

NLRA Preemption

CGA asserted that the NLRA preempted the ordinance because it “unlawfully alter[ed] the mechanics of collective bargaining.” Specifically, CGA alleged that the ordinance prevented grocery store employers from bargaining and prohibited them from mitigating increased labor costs because of the ordinance’s prohibition on reducing the compensation of grocery workers or limiting their earning capacity in response to the ordinance.

The court disagreed, noting that a statute simply addressing the same topics that parties can bargain over—such as wages—does not support a preemption argument. The court found that the ordinance did not prohibit employers from mitigating costs through collective bargaining. Instead, the ordinance only prevented employers from directly reducing the pay of covered employees to offset the mandated increase in wages. This, combined with a severability clause that would keep the rest of the ordinance in place even if a court found a particular provision unlawful, resulted in the court’s determination that CGA could not make its showing that it was likely to win on its argument that the NLRA preempted the ordinance.

Contract Clause

CGA argued that the ordinance violated the contract clauses of the United States Constitution and California Constitution, which generally prohibit the government from passing laws that interfere with contractual obligations. To succeed on this claim, CGA first had to show that the ordinance represented a “substantial impairment of a contractual relationship.” The court ruled that CGA had “fail[ed] to identify any terms of the allegedly impaired contracts,” making it impossible to determine the severity of the alleged impairment. Accordingly, the court found that CGA had not demonstrated any likelihood of success on its contract clauses claim.

Equal Protection

CGA also alleged that the ordinance’s classification treated certain grocery stores differently from other establishments thereby impinging on their fundamental rights under the contract clauses of the United States Constitution and California Constitution. This, argued CGA, resulted in a violation of those constitutions’ equal protection clauses. Had the court found that fundamental rights were at issue, the court would have had to have applied a “strict scrutiny” standard to reviewing the ordinance. Under a strict scrutiny standard, Long Beach would have had to have shown that it had narrowly tailored the ordinance to address a “compelling governmental interest,” which is a very high bar to clear.

The court rejected what it characterized as a novel argument and applied a “rational basis” instead of a “strict scrutiny” analysis. The court found that Long Beach’s ordinance passed the rational basis test because the ordinance required higher compensation for grocery workers taking on increased risks of contracting COVID-19.

Broader Implications

The court’s order does not completely defeat CGA’s challenge to Long Beach’s ordinance. The court stressed that its decision was limited to whether CGA had “establish[ed] a likelihood of success on any of its claims” that would justify a preliminary injunction. However, because the ordinance is set to expire in 120 days, the controversy may be moot by the time the court considers the lawsuit’s merits.

The court’s decision also may encourage other counties and cities to proceed with their own “hero pay” ordinances, now that they know that Long Beach prevailed at this stage of the litigation.

Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic and will post updates in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.

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