On March 16, 2017, the Nevada Supreme Court issued yet another 6-0 en banc decision regarding the Nevada Constitution’s oft-litigated Minimum Wage Amendment, Nev. Cost. art. XV § 16 (“MWA” or the “Amendment”).  The issues before the Court in Western Cab Co. v. Eighth Jud. Dist. Court, 133 Nev. Adv. Op. 10 (Mar. 16, 2017), were twofold: (1) whether the MWA is federally preempted by the National Relations Act (NLRA) or the Employee Retirement Income Security Act of 1974 (ERISA); and (2) whether the MWA is unconstitutionally vague due to lack of clarity on what “health benefits” are required by the Amendment.  The Court held in the negative on both issues. Quite significantly, however, as part of its ruling on vagueness, the Court expressly held that the MWA itself and NAC 608.102(1) define health benefits and health insurance respectively, as they are relevant to evaluating what tier minimum wage applies to Nevada employees. 

For background, the MWA establishes a two tier minimum wage in Nevada.  The lower-tier is equal to the applicable federal minimum wage rate and applies if qualifying health benefits are offered. The higher-tier is a dollar more per hour and applies if such benefits are not offered.  The Amendment further defines “health benefits” as benefits that are “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 percent of the employee’s gross taxable income from the employer.”

Further, the Nevada Labor Commissioner in enacting NAC 608.102(1), defined “health insurance” pursuant to the MWA as plans that covers “those categories of health care expenses that are generally deductible by an employee on his individual federal income tax return pursuant to 26 U.S.C. § 213” or benefits offered pursuant to a Taft-Hartley.

Plaintiffs’ counsel in several lawsuits currently pending in various Nevada courts has argued that NAC 608.102(1) conflicts with the MWA therefore does not apply and/or that other statutes, legislation, scholarly articles, or “expert opinions” must also be evaluated in deciding the definition of “health insurance” under the MWA.  Western Cab has rejected this interpretation of the MWA and NAC 608.102(1).

The MWA is Not Unconstitutionally Vague Because Health Benefits Are Defined Within the Text of the Amendment

Western Cab argued that the MWA is void for vagueness because a person of ordinary intelligence cannot understand what health benefits must be provided in order to pay the lower tier minimum wage.  The Court fully rejected this argument and, in doing so, expressly held that the Nevada Constitution itself and NAC 608.102(1) define health benefits and health insurance. Specifically, it held:

"health benefits" is defined in the text of the MWA itself. 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 percent of the employee's gross taxable income from the employer." Nev. Const. art. 15, § 16(A).

"Health insurance," while not explicitly defined in the text of the MWA, is defined in the applicable portions of the Nevada Administrative Code. See NAC 608.102(1).

Western Cab Company v.  Laksiri Perera et al., 133 Nev., Adv. Op. 10 (2017).  Thus, attempts to have other definitions for “health insurance” or “health benefits” not listed in the MWA or NAC 608.102(1) read into the MWA may be rejected in light of this new Nevada Supreme Court holding.

MWA Not Preempted by the NLRA or ERISA

Consistent with its holding that the MWA and NAC 608.102(1) define “health benefits,” the Court also held that NLRA and ERISA preemption do not apply.  The key basis for the ruling was that the MWA does not mandate any specific set of benefits that an employer must provide.

Regarding NLRA preemption, Western Cab asserted that the purpose of the MWA is to help unions and unionized employees compete with nonunionized employers, and therefore, it violated the equitable bargaining process protected by the NLRA, resulting in NLRA preemption. The Court expressly rejected this reasoning and found that the MWA neither requires nor prohibits collective bargaining or any other activities protected by the NLRA.  Accordingly, it held NLRA preemption did not apply.

Western Cab also argued that the MWA was designed to cover the field of employee benefits and was therefore preempted by ERISA as state regulation of benefits.  The Court disagreed finding that “the MWA does not affect the types of benefits an employer must provide or force employers to provide benefits at all.”  The Court explained that the MWA does not refer to employee welfare benefit plans for the purpose of the ERISA preemption and, additionally, even if an employer “chooses to offer benefits and chooses to offer those benefits consistent with ERISA plans, the MWA does not alter what the ERISA plan offers.”  As such, the MWA is not preempted by ERISA.

Implications

Western Cab is part of a series of Nevada Supreme Court cases which seek to bring clarity to the highly-litigated Amendment. Indeed, this decision comes just four months after the Court’s decisions in MDC Restaurants, LLC et al v. The Eighth Judicial Dist. Court, 132 Nev. Op. 76 (October 27, 2016) and Perry v. Terrible Herbst, Inc., 132 Nev. Advance Op. 75 (October 27, 2016) wherein the Court held that: (1) the MWA’s direction to “provide” health insurance requires employers to offer health insurance, not enroll employees in that insurance; (2) a two-year statute of limitations applies to the MWA; and (3) when calculating the cost of insurance premiums for employees, employers may not factor in the employees’ tip income.  

The precise issue of what type of “health insurance” must be offered under the MWA is currently pending before the Nevada Supreme Court in a petition for writ by MDC Restaurants.  However, it is unclear what impact Western Cab may have on the pending writ in MDC Restaurants as the decision appears to have already considered the definition of health insurance under the MWA.