The recently passed NC state budget contains a provision that would not allow local governments and municipalities to establish minimum wage and other employment-related requirements for private employers.
The text, referred to as the “Wage and Hour Act” in N.C. General Statute § 95-25.1, resurfaces a discussion about the balance of power between the General Assembly and local governments. It explores whether local governments would exceed their legally defined authority if they established wage regulations for private employers unconnected to the state or local government.
The John Locke Foundation’s Senior Vice President of Research Brian Balfour told Carolina Journal in an email that the provision is an appropriate one, as governments should not be allowed to meddle with the employment relationship between private employer and employee.
“This provision is a step in the right direction,” Balfour said. “It is no business of the government—at any level—to interfere in the voluntary labor agreements between workers and employers. Minimum wage laws don’t create a single job. Instead, they prevent low-skilled workers from entering the workforce, and research shows that minorities are disproportionately harmed. Similar prohibitions on wage requirements should also be considered at the state level to help free up our labor market from harmful intervention.”
Under the new law, local governments could still set wage standards for local government employees.
Contextually, North Carolina is not a ‘Home Rule’ state, meaning that local government authority over its own matters is delegated in general terms. Therefore, local governments are often not required to obtain legislative approval to engage in certain activities.
Home Rule states are distinguished from states that follow the ‘Dillon Rule.’ Under the Dillon Rule, first articulated by Iowa Supreme Court Justice John Dillon in the 1868 case City of Clinton v. Cedar Rapids and the Missouri River Railroad Company, local governments are created by the state and function to perform the tasks of the state at the local level.
In practice, the state will issue an enabling statute, which grants the local government specified powers to achieve its objectives as a locality. Under the power granted to the local government by the state, the locality is limited by the authority granted to it by the enabling state statute. In the event that the local government oversteps the authority granted to it, the state may revoke or amend the authority of the local government.
The distinction between whether a state applies the Home Rule or Dillon rule is a murky one, as some have argued in the past that courts have varied interpretations of each rule depending on the jurisdiction and the facts of the case. This explanation leads to a conclusion that North Carolina is neither a Home Rule nor a Dillon Rule state.
Instead, as explained by the North Carolina League of Municipalities Organization, municipalities function under charters granted by the NCGA and have powers and authorities granted to them by state statutes and the state constitution. The state legislature must grant the powers and authority to municipalities and authorize them to perform certain tasks.
Adding to the issue of whether such a statutory prescription is proper regarding how local governments interact with private businesses.
NC House Speaker Tim Moore recently told reporters that the new budget is good for the state.
“A lot of the conversation has been about where the differences of opinion are, but now is a good time to talk about what a good budget this is, what it does; absolutely record investment in rural infrastructure like water sewer and education,” said Moore. “Tax relief for working families, more money for education, pay raises for our hard working state employees, we have probably the greatest budget I’ve ever seen.”
The new budget also garnered praise from experts who agree with Moore’s assessment, citing the tax relief, infrastructure, regulatory, and educational reform provisions as notable successes.