NY’s Wage-Parity Scheme Survives Appeal

MANHATTAN (CN) - Driving up wages in a bid to improve New York's Medicaid workforce does not run afoul of federal law, the 2nd Circuit ruled Friday.

State lawmakers passed the Wage Parity Law in 2011 as part of an overhaul of Medicaid, the state-federal program that provides health care to the poor. The law set the minimum total compensation that employers in New York City, Long Island and Westchester County must pay home care aides, if they want reimbursement for services under Medicaid.

The state licenses home care agencies to provide the services. Home care aides - categorized by their duties as home health aides or personal care aides - help clients with daily tasks such as personal hygiene and housekeeping.

Additional training allows home health aides to offer services more directly tied to a client's medical needs, but studies have found that their pay lagged personal care aides despite that extra training.

The study attributed this to the fact that the latter group tended to be represented by a union or to be employed by a municipality, such as New York City, which mandates an hourly "living" wage that is higher than the state minimum wage.

When the state group working on Medicaid reform learned about the wage gap, it recommended a pay scheme tied to local "living" wages to improve recruitment and retention of high-quality workers.

A handful of affected home care agencies and their trade association challenged the law in 2012, claiming that either the National Labor Relations Act or the Employee Retirement Income Security Act pre-empted it.

They also contended that the law violated the due process and equal protection clauses of the 14th Amendment.

A federal judge in Syracuse rejected the NLRA pre-emption claim, as well as the constitutional claims, but set aside part of the law as infringing on certain provisions of ERISA.

A three-judge panel with the 2nd Circuit affirmed Friday.

"We conclude that the Wage Parity Law is neither pre-empted nor unconstitutional," Judge Debra Ann Livingston wrote for the court

The 32-page decision notes there is no express pre-emption provision in the NLRA, which guarantees the right of employees to organize and bargain with management.

A provision of the act known as the "Machinists pre-emption" forbids states and localities, however, from intruding on labor-management negotiations. The Supreme Court has interpreted that to mean that, while government cannot regulate the bargaining process, states still can set labor standards as part of their broad police powers.

Since such standards affect union and nonunion workers alike, they don't trample the collective-bargaining process that the NLRA governs, according the ruling.

New York's law similarly does not distinguish between workers, nor treat employers differently based on whether they have unionized workers, Livingston said, calling the law "a valid exercise of New York's authority to set minimum labor standards."

Stabilizing minimum wages for "hundreds of thousands" of home care workers in the New York City metro area "is an unexceptional exercise of that traditional power," she added.

The law established a timetable under which pay would rise over several years until it met local living-wage benchmarks or came close to the unionized wages paid by the largest union for home care workers in effect on Jan. 1, 2011.

Although the plaintiffs argued the latter provision interfered with their ability to bargain future wage rates, Livingston found the contention "unpersuasive."

Unions, individual employees and employers can still negotiate wages and benefits from that Jan. 1 base, she wrote.

"The Wage Parity Law's use of the largest collective bargain agreement to set the 'prevailing rate of total compensation' has no more of an effect on incentives to bargain collectively than if the Legislature wrote a rate directly into the statute," the court found.

Claims that the law could force employers to re-evaluate and possibly enhance their benefits package under ERISA also failed to trigger pre-emption concerns, the court found.

Livingston noted that the Supreme Court and the 2nd Circuit have determined that a regulation having an indirect economic effect on ERISA does not trigger pre-emption.

"Only statutes that 'mandate[] employee benefit structures or their administration' have impermissible 'connection[s] with' ERISA plans," she wrote, citing precedent.

Since the Wage Parity Law "is agnostic as to the mix of wages and benefits that employers provide," how agencies decide to meet the statute's compensation levels is up to them, the ruling states.

Livingston also pointed out that nothing in the law's provisions require that employers match the benefits offered by health workers' union SEIU 1199, whose Jan. 1, 2011, collective-bargaining agreement was the reference point for the compensation plan.

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