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The state's highest court unanimously upheld Minneapolis' $15 minimum wage, handing a victory Wednesday to labor activists and city leaders in a three-year fight over cities' authority to regulate pay.

"The battle over our minimum wage ordinance is over," Mayor Jacob Frey said in a statement after the opinion was released.

But a business group is calling on state lawmakers to stop cities from setting their own minimum wages.

"We believe the decision perpetuates an unsustainable trend by local governments to act outside of their traditional authority," Doug Loon, president of the Minnesota Chamber, said in a statement.

"It is now up to state policymakers to explicitly prohibit these ordinances so employers can spend less time understanding and complying with duplicative or inconsistent laws and devote more time to innovating, growing and hiring new employees."

Minneapolis passed its minimum wage ordinance in 2017. When it did so, it became the first Midwestern city to adopt a $15 per hour minimum wage, which will be phased in through 2024. Similar policies exist in other large cities across the country, such as Seattle, San Francisco and Washington, D.C.

The legal battle in Minneapolis began quickly after its ordinance passed. Graco Inc., an international manufacturing supplies company based in Minneapolis, sued the city in 2017 to try to stop the wage hike from taking effect.

While supporters of the ordinance have argued that it's crucial to maintaining employees' quality of life as the cost of living rises, Graco argued that the city's wage requirement would create an "unworkable patchwork of employee compensation standards."

Graco currently pays all employees who work on its Minneapolis campus at least $15 an hour, with salaries averaging about $85,000 per year, according to spokeswoman Charlotte Boyd. The company moves some employees between its locations in Anoka, Rogers and Minneapolis and was able to do so because the pay and benefits remained consistent in each location, Boyd said.

When cities pass their own labor rules, "it's no longer an option to move employees due to these differences in pay and benefits packages, and no longer a fair system for the affected employees," Boyd said. "Additionally, differing employee compensation standards restrict our staffing flexibility and ability to attract talent, and thus our ability to compete."

Graco argued that the state's minimum wage — currently set at $10 an hour for large businesses — should prevail.

At the heart of its argument was whether the Minnesota Fair Labor Standards Act prevents cities from setting their own, higher minimum wage rates than the state standards.

"Graco's argument, while not without some initial appeal, ultimately fails," Chief Justice Lorie Gildea wrote in an opinion issued on behalf of the court.

Because employers would comply with the lower state rate while paying the higher city-mandated rate, there is no conflict, the court ruled.

"It is clear that the MFLSA establishes ... a minimum-wage floor for employers across the state," Gildea wrote. "But that floor leaves room for municipalities to regulate above."

In its opinion, the court said it did not see any wording in the state law that prohibited cities from enacting their own higher requirements. Instead, it interpreted the law as saying "the Legislature did not intend for minimum wage rates to be a matter solely of state concern."

The Supreme Court's ruling affirms earlier rulings by both a Hennepin County district judge and the Minnesota Court of Appeals.

While Minneapolis was the focus of this case, it could also have implications for St. Paul, which passed a $15 per hour minimum wage requirement in 2018.

"The decision today affirms St. Paul's ability to move forward with our city's minimum wage ordinance, and support workers in our community," St. Paul City Attorney Lyndsey Olson said Wednesday.

It's still too early to fully understand how Minneapolis' minimum wage hike has affected the labor market.

The city has asked the Federal Reserve Bank of Minneapolis to examine the policy as it unfolds. The Federal Reserve's first report, which will cover the year 2018, is due at the end of March.

Through enforcement of the ordinance, Minneapolis has collected more than $28,000 in back wages and "ensured that 230 low-wage workers immediately received raises overdue under the minimum wage ordinance," city spokeswoman Sarah McKenzie said.

Staff writer Emma Nelson contributed to this report.

Liz Navratil • 612-673-4994