A California appellate court recently ruled that the Walt Disney Co. violated a local minimum wage law in Anaheim, Ca., the location of Disneyland, the company’s original theme park.
A class-action lawsuit representing about 25,000 workers claimed Disney didn’t pay the minimum wage under the local ordinance, known as Measure L, which was passed by Anaheim voters in 2018 to boost pay for Disneyland Resort workers. The lawsuit also alleged failure to pay for overtime hours worked and failure to pay state waiting-time penalties, which are extra sums an employer must pay to a worker for every day it hasn’t paid the worker’s final wages after the employment relationship ends.
The plaintiffs sought back pay and civil penalties under California’s Private Attorneys General Act.
Case Turned on Rebate Question
The local rule established a minimum wage for Anaheim resort companies that have tax rebate agreements with the city. It set the local minimum wage at $19.40 for 2023. The lawsuit cited several workers who were paid $12 per hour. Disney argued that it was not covered under the local rule because it didn’t receive a city subsidy or rebate.
However, the entertainment giant, based in Burbank, Calif., did benefit from a 1996 agreement where the city of Anaheim issued $400 million in municipal bonds to pay for infrastructure improvements and expansions to Disneyland. The city and Disney also signed an agreement under which Disney would make up the shortfall if there was any year in which the city’s tax revenues failed to meet its bond obligations, and later the city would reimburse Disney for those payments. Disney has never had to make a shortfall payment and therefore has never received a reimbursement, according to court documents.
The court concluded the reimbursement agreement gave Disney the right to receive a rebate of occupancy taxes paid by hotel guests, sales taxes paid by consumers and property taxes paid by Disney. Therefore, the local minimum wage rule applied.
“The local wage ordinance does not require an employer to receive a rebate of its own taxes. The local wage ordinance simply requires there be an agreement with the city to receive a rebate of any local taxes identified in the local wage ordinance,” the court stated.
The court “interpreted the law in favor of employee rights,” said Jonathan Judge, attorney with Atkinson, Andelson, Loya, Ruud & Romo in Cerritos, Calif.
The Walt Disney Co. did not respond to a request for comment.
“I think this case has somewhat limited application” because it doesn’t apply to companies outside the hospitality industry, said Jennifer Kearns, an attorney with Duane Morris in San Diego.
Keep Up with Local Laws
It’s fairly common for cities and counties to have employment rules that go beyond what the state legally requires. “The overall message of the case is that employers need to be knowledgeable about specific [local] ordinances which may apply to them,” Kearns said.
In California, that can be quite complicated. “Now there’s close to 40 cities and counties in California that have passed higher minimum wages than the state minimum wage,” which is $15.50, Judge said. “It’s tough to keep track of all that.”
In addition, “employers should keep in mind that the state minimum wage also impacts the minimum wage that has to be paid to exempt employees to be exempt from overtime,” Judge said. Exempt employees must be paid a salary at least twice the state minimum wage.
Paid time off is another example where local laws may be stricter than state laws. “When it comes to state-mandated paid sick leave, several California cities or counties have more-robust requirements than those mandated by the state,” Kearns said.
