Wage Law

On Monday, the U.S. Supreme Court decided against hearing a challenge to the City of Berkeley's living-wage ordinance. The court's decision (RUI One Corp. v. City of Berkeley, 2005 DJDAR 291) means that a Ninth Circuit Court of Appeals opinion upholding Berkeley's ordinance will stand.

The 9th Circuit's 2-1 decision held that Skates on the Bay at the Berkeley Marina, a restaurant owned by appellant RUI One Corp., which leased its premises from the City of Berkeley, must pay its employees the living wage enacted by the city, even though the restaurant had signed a lease with the city before the living wage law was passed. RUI had challenged the October 2000 law which extended living-wage obligations to all businesses that leased property from the city, including all of the tenants located in the popular marina. Employers will five or fewer employees, or with gross annual sales of less than $350,000 are exempt.

California minimum wage is $6.75 per hour, well above the federal minimum, but the Berkeley Living Wage Law requires affected employers to pay their workers $9.75 per hour, plus health benefits, or $11.37 per hour without health benefits.

RUI, represented by the Los Angeles office of Gibson, Dunn & Crutcher, claimed that the law violated the Contract Clause and the Equal Protection Clause. The Equal Protection Clause protects persons, including corporations, from arbitrary and capricious government action. The Contract Clause prevents the government from illegally administering its contracts with private persons or entities. The Ninth Circuit rejected both claims. The Contract Clause was not violated because the new law did not impair any terms of the agreement, and the contract expressly required RUI to comply with any city ordinances. The Equal Protection Clause was never violated because the ordinance passed the "rational basis test."

While the Supreme Court's decision against reviewing the Circuit Court's opinion does not, in itself, create a precedent, the decision leaves the Ninth Circuit's ruling as a binding precedent in all District Courts in the Ninth Circuit, including California, where several cities -- most prominently, Santa Monica -- are considering similar laws.