During the pandemic, Culver City passed an ordinance aimed at compensating “essential Hospital Workers for their daily sacrifices and the ongoing risks and burdens they and their families face while providing vital services to the community during the pandemic”. The ordinance required Southern California Healthcare System (SCHCC) to provide covered workers an additional $5.00 per hour for each hour worked on site at the covered location during a three-month period.

The SCHCC challenged the above ordinance. It alleged inter alia: (i) that the ordinance was preempted by the National Labor Relations Act (NLRA) which, as interpreted by federal courts, prevented state and local regulation which would result in an interference between the parties in a collective bargaining relationship (with the ensuing risk of altering their balance); and (ii) that the ordinance substantially impacted the collective bargaining agreements negotiated with labor unions, which included negotiated wage increase and benefit provisions, “supplanting the carefully balanced step increases negotiated under them” (contract clause claim).

The District Court dismissed all plaintiffs’ claims. In respect to the NLRA claim, the Court held that, contrary to plaintiffs’ assertion, the ordinance had not dictated what concession SCHCC would be compelled to make to its employees, but merely enacted a “minimum labor standard” setting the minimum terms that form the backdrop of the bargaining process. In sum, it pertained to wages and did not affect the bargaining process covered by the NLRA. “The mere fact that a state statute pertains to matters over which the parties are free to bargain cannot support a claim of pre-emption, for there is nothing in the NLRA which expressly forecloses all state regulatory power with respect to those issues that may be the subject of collective bargaining”, the Court recalled. With regards to the contract clause claim, the Court highlighted that, according to settled case-law, state regulation constituting a substantial impairment may nonetheless be considered justified when they are based on a significant and legitimate public purpose. The ordinance expressly stated that “by requiring premium hazard pay for their work during the COVID-19 pandemic, the City aim[ed] (1) to protect the health and welfare of its essential Hospital Workers, their families, and their community; (2) to recognize and compensate Hospital Workers for the risks and burdens they face every day and will continue to face in the coming months; (3) support stable incomes among Hospital Workers; and (4) promote job retention by ensuring Hospital Workers are adequately compensated for the substantial risks, efforts, and expenses they are undertaking to provide essential services in a safe and reliable manner”. In the Court’s view, given the above underlying purposes, it was indisputable that the ordinance did not breach the contract clause.

By judgment of 18 January 2023, the Court of Appeals for the Ninth Circuit fully upheld the first-instance decision and definitively dismissed the suit.

Reference: Southern California Healthcare System et al. v. City of Culver City et al., Court of Appeals for the Ninth Circuit, 18 January 2023.

Full text of the decision available at en