Unintentional redlining? Zoning ordinances and the living wage.

AS SOCIETY BECOMES INCREASINGLY MULTICULTURAL, LAWSUITS involving discrimination by race and national origin are likely to become more prevalent. While many such cases are filed under the 14th Amendment Title VII, and Section 1981 of the Civil Rights Act of 1991, other types of discrimination cases may be filed under the Fair Housing Act of 1968, which prohibits discrimination based upon race, color, religion or national origin in the sale or leasing of housing. The Community Reinvestment Act of 1977 outlawed the practice of "redlining" in which lenders and insurers deny loans or insurance on property in certain low-income areas rather than the decision on the applicant's qualifications for their services. Of course, anything that restricts or inhibits the use of property or imposes extra costs on its use will unambiguously reduce the value of the real estate. Mayor Richard M. Daley of Chicago recently opposed a city council proposal to raise the minimum wage for big-box retailers within the city limits as a form of redlining, since the stores and associated jobs would migrate from lower-income sectors to peripheral areas. While the intention to raise wages may be good, the overall effect is the same as redlining, which is so vilified. Thus, this may be considered unintentional redlining. Further, the overall effect may change the social composition of the neighborhood. This paper will review case law in the area.

USE OF ZONING ORDINANCES TO LIMIT BIG-BOX RETAILERS IN THE INNER CITY

If government officials choose to enact zoning ordinances in order to limit big-box retailers in inner cities, they must be prepared to defend their actions legally. The Fifth and 14th Amendments provide that no person shall be deprived "of life, liberty or property without due process of law." Further, under the 14th Amendment, a state may not "deny to any person within its jurisdiction the equal protection of the laws." The U.S. Supreme Court has made the equal protection clause applicable to the federal government through the due process clause of the Fifth Amendment. (1) If government officials appear to be treating big-box retailers differently from other businesses, they may face challenges based on the Equal Protection Clause. To prove a violation of equal protection, the litigating party must show that he or she is "similarly situated" to other applicants in the same time period and is being treated differently.

The test for matters of economic or social welfare under the Equal Protection Clause is the "rational basis test," which requires that the zoning classification be based upon a legitimate governmental interest in these types of zoning. If the ordinance appears to be merely a pretext for reducing competition, it may be challenged as being discriminatory and possibly even compared to a type of redlining. (Mayor Daley made just such a comparison.) Cities passing such ordinances should be prepared to defend their positions with specially commissioned zoning studies showing substantial evidence, e.g., traffic patterns. Such studies are often expensive and time-consuming. The government must show that it is exercising its state police powers through the zoning ordinance--in other words, that it is merely regulating the use of the land, for the health, safety and welfare of its citizens. (2) Most states require that land-use laws be in compliance with a local government's general or long-term plan. Further, most jurisdictions have more specific plans for some areas, such as downtown redevelopment zones. (3) Although the federal government controls only federal lands, it may still be in violation of equal protection for state and city zoning ordinances through the issuance of grants for redevelopment.

Three types of common zoning ordinances are normally used in order to limit expansion of big-box retailers: (4)

1) a ban on superstores that sell groceries,

2) a conditional-use permit (CUP) and

3) an economic impact statement with mitigation.

USE OF WAGE CONTROLS TO LIMIT BIG-BOX RETAILERS IN THE INNER CITY

Labor unions have aligned their interests with those of environmentalists, preservationists and local merchants in order to lobby local governments to enact ordinances concerning wages and benefits and/or location of big-box stores. (5) This is especially true in the union representation of grocery workers as they attempt to compete with stores--for example, Wal-Mart--that merge grocery and retail operations in inner-city areas. (6) Since the National Labor Relations Act (NLRA) has been held to apply to "concerted activity" of non-union workers, (7) even non-union workers should be protected when assisting unionized supermarkets in fighting the competition of Wal-Mart and other big-box super centers by influencing government leaders concerning zoning and wage ordinances.

In Chamber of Commerce of the United States v. Bragdon, (8) the Ninth Circuit found that the NLRA preempts prevailing wage laws made applicable to the private sector, except in the context of government contracting. The Chamber of Commerce of the United States sued Contra Costa County, California, and officials concerning the validity of a prevailing wage ordinance. Most states have enacted prevailing-wage statutes to protect employees from unfair practices regarding pay on state-funded building and highway projects. The Contra Costa County ordinance covered both private construction contracts over $500,000 and government contracts with private companies.

The Ninth Circuit determined that Contra Costa County's prevailing wage ordinance was unenforceable. The court reasoned that the ordinance conflicted with collective bargaining agreements in the construction industry and was preempted by the NLRA. The Court reviewed the U.S. Supreme Court decision in Lodge 76, International Association of Machinists v. Wisconsin Employment Relations Comm'n, (9) and reasoned that this was the type of conduct that the Supreme Court intended to be governed by the market. According to the statutory law, the prevailing wage in Contra Costa County was determined by the director of the Department of Industrial Relations, who considered the terms and conditions agreed upon by workers and employers in the same market. If these conditions were then imposed upon the private construction industry (as the Contra Costa ordinance required), the court found that there would be no free negotiations in the industry and that this would violate the NLRA. The Bragdon court quoted the Lodge 76 Machinists case to the effect that the Supreme Court had found that

state attempts to influence the substantive terms of collective

bargaining agreements are as inconsistent with the federal regulatory

scheme as are such attempts by the NLRB: Since the federal law

operates here, in an area where its authority is paramount, to leave

the parties free, the inconsistent application of state law is

necessarily outside the power of the State. (10)

A proprietor exemption exception to the NLRA exists that allows government to set a prevailing wage. In order for this exemption to apply, the government must be acting in a proprietary capacity instead of a regulatory one. That is, the government must be acting as owner, developer or financial manager of a public project in order to be acting in a proprietary capacity. (11) (This is analogous to the exemption for sovereign immunity when a foreign government is acting as a private company.) This exception is construed liberally by courts. In Metropolitan Milwaukee Ass'n of Commerce v. Milwaukee County, (12) the court determined that the government must show only reasonable evidence that it is acting in a proprietary capacity. The government met the burden in this case by demonstrating it had a reasonable proprietary interest in ensuring that treatment and transportation for elderly or disabled residents was not disrupted by union organization. (13)

In Associated Builders & Contractors of S. Cal, Inc. v. Nunn, (14) the Ninth Circuit found that "living wage laws," unlike prevailing wage laws, are not preempted by the NLRA. The court reasoned that there should be no preemption by the NLRA in the case of minimum or living wage laws enacted by governments, because employers and employees are still able to negotiate. A living wage has been defined as the "minimum hourly wage necessary for a person to achieve some specific standard of living." (15) The exact level of such a wage will vary depending upon the geographic area.

Living wages are not statutory, thus they do not violate the NLRA. If a local government tried to enact a "living wage" ordinance that applied only to big-box retailers, however, this could still be challenged as a violation of the Equal Protection Clause, which provides that the government must treat similarly situated parties in the same manner. Most union and non-union advocates of governmental control over the big-box stores prefer the use of the prevailing wage instead of the living wage because they feel it will more effectively equalize wages between union and non-union workers. (16) The question of whether an ordinance requiring minimum health-care benefits for grocery workers is preempted by the NLRA has not been decided by the courts.

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