You know that state law that prohibits cities in Tennessee from raising the minimum wage? It doesn’t.

By Daniel Horwitz:

“I firmly believe that we should have a wage that reflects what it really requires to live here [in Nashville] and that’s a [$9.51/hour] living wage,” then-candidate Megan Barry proclaimed last January during her campaign for Mayor.  A few months later, her opponent, Bill Freeman, one-upped her.  “I want to increase the minimum wage one dollar at a time, one year at a time, until we reach a $12 per hour minimum wage in Davidson County,” he announced, even airing a TV spot on the issue.  “It’s long past time, and it’s the right thing to do.”

Raising the minimum wage is perhaps the single most popular economic policy proposal that exists in the United States today.  According to recent polling on the issue, fully 92% of Democrats, 73% of Independents, and 53% of Republicans support raising the minimum wage from its current rate of $7.25 per hour to $12.50 per hour by 2020.  Broadly considered: “Americans, regardless of region, socioeconomic status, or demographic distinction, strongly favor a very significant increase in the federal minimum wage,” pollster Guy Molyneux has explained.

In Tennessee, local support for raising the minimum wage is similarly palpable.  As noted, Nashville Mayor Megan Barry has stated that she supports doing so.  So, too, have several local officials in Chattanooga.  Memphis officials have publicly supported a citywide minimum wage increase as well.  Much to their chagrin, however, all agree that one major obstacle prevents them from carrying out their best laid plans: a 2013 state law that prohibits municipalities from raising the minimum wage above the federal baseline.

The unanimity of agreement on this point is striking.  “Tennessee Code Annotated 50-2-112, restricts municipalities from setting a wage minimum above the state and federal minimums for companies with which it contracts,” explains the Times Free Press.  “State law could thwart Councilman Lowery’s effort to boost Memphis minimum wage,” concurs the Commercial Appeal.  And even as a candidate, Bill Freeman conceded the point.  “[T]he Freeman campaign says [raising the minimum wage] would require the repeal of a statute enacted in 2013 that bans cities from requiring that contractors and vendors pay more than what’s required by federal law,” the Tennessean explained.

The only problem with this analysis, however, is that it’s wrong.  In pertinent part, the 2013 law at issue actually provides as follows:

“Notwithstanding any charter, ordinance or resolution to the contrary, no local government, as a condition of doing business within the jurisdictional boundaries of the local government or contracting with the local government, has the authority to require a private employer to pay its employees a [sic] hourly wage in excess of the minimum hourly wage required to be paid by such employer under applicable federal or state law.”[1]

To the discerning reader, this law contains a loophole (bolded above) large enough that a mack truck could drive through it sideways.  Notice, specifically, how the law does not impose a categorical ban on a local minimum wage increase.  Had the legislature intended to accomplish that result, then the law would have looked like this:

“Notwithstanding any charter, ordinance or resolution to the contrary, no local government has the authority to require a private employer to pay its employees an hourly wage in excess of the minimum hourly wage required to be paid by such employer under applicable federal or state law.”

Instead, the restriction contained in Tenn. Code Ann. § 50-2-112(a)(1) is significantly qualified.  Under the express terms of its qualifier, nothing prevents a local government from raising the minimum wage so long as a private employer’s compliance with the local minimum wage increase is not required either: (1) “as a condition of doing business within the jurisdictional boundaries of the local government,” or (2) “as a condition of . . . contracting with the local government.”  Imposing any other condition on a private employer for failing to comply with a minimum wage increase, however, is fair game.  Thus, giving a company the option of either complying with a minimum wage increase or being met with some other type of condition (a higher licensing fee, a monetary penalty, a higher tax assessment, etc.) would not run afoul of Tenn. Code Ann. § 50-2-112(a)(1)’s limitations in any way.

In other words:  if, for example, a company were forced to pay a monetary penalty for failing to comply with a local minimum wage increase—rather than being denied the right to do business or to contract with the local government—then there would be no conflict with Tenn. Code Ann. § 50-2-112(a)(1).  In fact, that’s largely the way that the federal minimum wage law works.  Under the Fair Labor Standards Act—which imposes a $7.25 per hour minimum wage on most businesses—a business that fails to pay its employees a $7.25 per hour minimum wage is (among other things) subject to a civil monetary penalty of up to $1,100 for each violation.[2]

As a result, any city in Tennessee can mandate a local minimum wage increase tomorrow without fear.  So long as the penalty for non-compliance isn’t denial of a business’s right to operate or to contract with the city, a local minimum wage increase would not be preempted.

The propriety of increasing the minimum wage, of course, is a separate issue.  Economists disagree on whether increasing the minimum wage benefits the working poor.[3]  Additionally, legislators have several other proven anti-poverty tools—such as reducing reliance on regressive sales taxes and expanding the Earned Income Tax Credit—available at their disposal that ought to be considered as well.  Whether municipalities in Tennessee are categorically prohibited from enacting a minimum wage law, however, is a far different question.  They are not.

Questions about this article?  Email Daniel Horwitz at daniel.a.horwitz@gmail.com.

Like ScotBlog?  Join our email list or contact us here, or follow along on Twitter @Scot_Blog and facebook at https://www.facebook.com/scotblog.org

[1] Tenn. Code Ann. § 50-2-112(a)(1) (emphasis added).

[2] See 29 U.S.C.A. § 216 (“Any person who repeatedly or willfully violates section 206 or 207, relating to wages, shall be subject to a civil penalty not to exceed $1,100 for each such violation.”).

[3] Compare Economist Statement on the Federal Minimum Wage, Over 600 Economists Sign Letter In Support of $10.10 Minimum Wage, Economic Policy Institute, Jan. 14, 2014, available at http://www.epi.org/minimum-wage-statement/, with Richard V. Burkhauser and Joseph J. Sabia, Why Raising the Minimum Wage Is a Poor Way to Help the Working Poor:  An Analysis of Senators Kerry and Kennedy’s Minimum Wage Proposal, Employment Policies Institute, July 2004, available at https://www.epionline.org/wp-content/studies/burkhauser_07-2004.pdf.