United States: Airline Industry Alert: Court Finds Airline Deregulation Act Does Not Preempt Miami-Dade County's Living Wage Ordinance

Executive Summary:  On September 21, 2015, the U.S. Court of Appeals for the Eleventh Circuit held that the Airline Deregulation Act (ADA) does not preempt Miami-Dade County's Living Wage Ordinance (LWO).  Amerijet Int'l, Inc. v. Miami-Dade Cnty., No. 14-11401 (11th Cir. Sept. 21, 2015).   This means that airlines that use the facilities of the Miami International Airport will have to comply with the LWO with regard to those employees who perform "covered services" for other airlines.  The LWO remains inapplicable to airlines providing such services on their own behalf, however.  The Eleventh Circuit joins the Ninth Circuit in interpreting the ADA's definition of "services" narrowly, perhaps setting the stage for Supreme Court review.

Background

In 1999, Miami-Dade County enacted the LWO, which requires certain entities that conduct business with the county or use the facilities of Miami International Airport to pay wages higher than the federally mandated minimum wage to all employees providing "covered services," defined to include typical airline ground handling services, aircraft fueling and cleaning, catering, and cargo services. The county initiated an investigation into Amerijet's alleged violations of the LWO, asserting that the LWO covered employees performing the cargo handling services Amerijet provided to another airline.  Amerijet challenged the LWO in federal court.  The district court ruled that federal law did not preclude the county from applying the LWO to Amerijet.  Amerijet appealed, and the Eleventh Circuit affirmed in an unpublished per curiam decision.

The Eleventh Circuit's Decision

The court rejected Amerijet's primary argument, that the ADA preempts the LWO. It first noted that the LWO does not single out or target airlines, and thus resembles a law of "general application" rather than one that was designed to regulate the airline industry.  The court then stated that the "service" at issue – providing cargo services to other airlines – was not the type that implicates ADA preemption under Eleventh Circuit precedent that the "bargained-for exchange must be between an air carrier and its consumers."  (Emphasis added.)   The court held that "cargo handling, when performed by one airline for another" fails to satisfy that requirement.  Negotiations over such cargo handling occurred between Amerijet and other airlines, the court concluded, and thus did not implicate the airline-customer relationship. The court stressed that the county had never construed the LWO as applying to an airline when it handles cargo for its own consumers and had, in fact, consistently stated that the LWO was not applicable in such circumstances. 

Amerijet also argued that the LWO was preempted by the ADA because it had a significant impact on the services of an air carrier by virtue of its record-keeping requirements and because the airline would have to segregate its workforce into two groups depending on for whom they performed services.  The court rejected that contention, finding that the LWO did not have a significant effect on services because it did not dictate the types of services a carrier must provide or prevent a carrier from providing cargo handling services.  Finally, the court held that even if the LWO could increase an air carrier's cargo handling costs and thus raise the prices of the carrier's services, such indirect economic influences were insufficient to trigger ADA preemption. 

Amerijet separately argued that application of the LWO to air carriers violated the Commerce Clause because it was intended to favor local, non-airline service providers, such as general aviation companies.  The court rejected that argument as well, finding that the LWO merely permitted the general service companies to compete on the same terms as the airlines. 

The Bottom Line:

The direct impact of the decision is that all airlines at Miami International Airport must comply with the LWO for any employees performing "covered services" for other airlines.  However, airlines need not comply with the LWO for employees providing services for the airline itself.  More broadly, this decision continues the split among the Circuits with respect to the definition of "services" under the ADA and could lead to efforts to seek Supreme Court review of that issue. We will continue to monitor any developments regarding this issue. 

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