Excluding employers from California’s minimum wage safe harbor may violate equal protection

By Dave Strausfeld, J.D. — The Ninth Circuit revived the claims of two agricultural employers that alleged their equal protection rights were violated when the California legislature inserted provisions into Assembly Bill (AB) 1513 which prevented them from benefitting from a newly enacted safe harbor against minimum-wage liability.

According to the employers, the legislature added the carve-outs solely to obtain the support of the farmworkers’ union, which was suing the employers and did not want the new law to interfere with the pending suits. Because such a justification for the carve-outs “would not survive even rational basis scrutiny,” the employers plausibly pleaded an equal protection violation, held the appeals court, reversing in relevant part and remanding in an opinion that supplies the reasoning behind a December 9 order (Fowler Packing Co., Inc. v. Lanier, December 20, 2016, Gould, R.).

The employers were sued separately by the United Farm Workers (UFW) in class actions commenced on February 3, 2014, and March 17, 2015, respectively. Roughly six months after the second suit was filed, California passed AB 1513. The legislation was enacted in response to recent state appeals court decisions that exposed employers to significant and unexpected minimum-wage liability. Among other things, the legislation created a “safe harbor” that gives employers an affirmative defense against new minimum-wage claims under certain conditions, so long as the employer makes back payments. In other words, the safe harbor lets employers avoid the costs and statutory penalties they would otherwise face as a result of underpayment litigation.

However, AB 1513 also included specific “carve-outs” that would disallow three or four particular employers, including the plaintiffs, from taking advantage of the safe harbor in then-pending litigation against them. The plaintiffs brought suit against California officials arguing that the carve-outs violated their federal equal protection rights.

A gift to the UFW? The employers maintained that the sole purpose of the carve-out provisions was merely to obtain the UFW’s political backing for the legislation. The employers attached to their complaint, in fact, an article published in the Sacramento Bee stating that the UFW demanded the carve-outs as necessary conditions to obtain the union’s support for the safe-harbor provision. The employers insisted that such a justification for the carve-outs could not survive constitutional scrutiny, and as such, the carve-outs violated the Equal Protection Clause.

Plausible violation. The Ninth Circuit agreed the employers stated a plausible equal protection claim. “[W]e can conceive of no other reason why the California legislature would choose to carve out these three employers other than to respond to the demands of a political constituent,” the appeals court stated. “Because that justification would not survive even rational basis scrutiny,” the employers plausibly pleaded that the carve-outs violated their right to equal protection.

The language of one of the carve-out provisions in particular was “perplexing,” and made sense only if it was “tailored” to exclude the three employers from relying on the safe harbor while keeping “other employers from being carved out.” Especially suspicious was that the cutoff dates in the carve-out provisions corresponded “within a matter of weeks (or even a matter of days)” to the corresponding filing dates of the union’s suits against the three employers.

California’s argument. The state countered that the carve-outs were designed to protect expectations developed as a result of already-pending litigation. “We need not question the legitimacy of such a justification,” the appeals court replied. However, “legislatures may not draw lines for the purpose of arbitrarily excluding individuals,” and this is “exactly what AB 1513″ does, according to the plausible allegations in this case.

Not a bill of attainder. On the other hand, the employers did not state a viable claim that the carve-outs violated the U.S. Constitution’s proscription on bills of attainder. Even assuming that corporations may seek the protection of this clause—”a proposition not yet endorsed by this circuit”—the carve-outs did not breach this constitutional provision because they “do not impose punishment.” Any liability the employers face in the class action suits currently being pursued against them is a result of judicial interpretations of pre-existing California law, not the passage of AB 1513. “Because punishment is a necessary element of a bill of attainder, the district court properly dismissed this claim,” the appeals court ruled.

Source: Employment Law Daily Newsfeed